Telcom law maven Harold Feld shows how FCC Loopholes resulting from VOIP exceptions are destroying one of the central requirements of voice calls:

Increasing numbers of rural communities are reporting problems with incoming phone calls. Outgoing calls work fine, but when someone tries to call one of these rural communities from an urban area, the connection doesn’t go through.

Though the phone never rings in the rural community, the urban caller might hear a “false ringback” in his earpiece, inserted so he will think there’s simply no answer and won’t complain about the lack of service.

This “rural call completion” problem, which also includes connections with very bad sound quality, is getting scrutiny from the Federal Communications Commission.
The problem “causes rural businesses to lose customers, cuts families off from their relatives in rural areas, and creates potential for dangerous delays in public safety communications in rural areas,” according to the FCC.

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In the last several years, businesses called “least cost routing” companies have sprung up. These companies promise phone networks to find the least expensive way to route their phone calls. The phone companies themselves don’t know how the least cost routing companies are routing the phone calls. They just trust them to do it.

Since completing calls to rural areas is expensive, least cost routers generally try to find long, complicated routes that will minimize the termination fees and other charges by making the call look like it comes from someplace with lower fees. This introduces something called “latency.” The lengthy routes mess up the IP-based phone call, causing long breaks in the signal that the traditional phone network (operated by a rural phone company) interprets as dead air or a disconnect.

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The FCC refuses to classify IP-based services as “telephone” services (although it has the authority to do so). As a result, it can only regulate IP-providers indirectly with something called “ancillary authority.” Whether “ancillary authority” allows the FCC to regulate IP-based providers, such as least cost routers, remains to be seen.

The problem here is one of philosophy: the Washington consensus that deregulation always leads to innovation is a dangerous delusion.

We need only to compare the performance of our lightly regulated telcos to those of more highly regulated places like, Japan, France, or Korea, to see that consumers pay more, and get less, both in terms of performance and reliability.

Deregulation makes it easier to collect monopoly rents, and it is easier, and more lucrative to seek those rents than it is to succeed for innovation or evolutionary product improvement.

Every one gets screwed but the incumbent phone and cable companies, and it strangles real innovation.