The Pros and Cons of Deregulating VoIP Phone Service / Technology / Last Modified: February 22, 2017

Since the rise of VoIP phone service in the mid '90s, government at the state and federal level has struggled with how to regulate...

Since the rise of VoIP phone service in the mid '90s, government at the state and federal level has struggled with how to regulate it.

Although it looks and acts an awful like traditional phone service, the federal government is hesitant to impose traditional telecom rules on the industry out of concern for quashing innovation.

However, at the state level, lawmakers are concerned about their ability to protect consumer rights and ensure access.

Nationwide regulation of VoIP has been slow to catch on as the regulating body at the federal level -- the FCC -- and state governments have been in a power struggle.

The United States isn't alone when it comes to the murky definitions of VoIP. Governments around the globe are struggling with how best to regulate this exploding industry.

Current VoIP regulations The FCC needs to decide whether to treat VoIP as an "information service," which would make it essentially regulation free or a "telecommunications service," which would hold it to the same scrutiny as regular telephone companies.

Currently, the FCC classifies the broadband cable modem service through which VoIP operates as an "information service," which means that VoIP should remain unregulated, according to an article on

Despite this classification, the FCC has attempted to apply certain regulations to VoIP using "ancillary jurisdiction," according to an article on These include:

  • Privacy requirements: Providers must offer safeguards for "customer proprietary network information."
  • Discontinuation of service: Providers must get a certificate from the FCC before discontinuing service; this is especially important to areas where the service provider is the only carrier.
  • Disability Access Requirements: Providers must makes services readily available to people with disabilities (ie: making sure the sight and/or hearing-impaired have access to "speech-to-speech," captioned phone service, and 711 abbreviated dialing.
  • Local Number and Portability Requirements: Customers must be allowed to port their telephone number from carrier to carrier.
  • Emergency Dialing Requirements: Providers of interconnected VoIP service must provide customers with enhanced 911 capabilities.

While beneficial to consumers, these regulations have faced increased legal scrutiny after the ruling in Comcast v. FCC, which found that the FCC did not provide adequate evidence of its authority to regulate Comcast's internet traffic management practices, according to

Additional FCC Requirements The FCC also requires that VoIP providers contribute to the Universal Service Fund, a federal program which helps pay for phone service for low-income households in rural areas -- as well as internet access to schools, libraries and rural health care -- and comply with the Communications Assistance for Law Enforcement Act (CALEA) of 1994.

State Regulation of VoIP While the FCC and Congress have favored a more hands-off approach to VoIP, at the state level, officials favor more regulation  because they would like some legal jurisdiction over broadband transmission.

Local governments are concerned about under-regulated VoIP  as it relates to law enforcement, emergency services and wire-tapping.

States have taken different approaches to VoIP regulation. As of 2007, 23 states had taxed or regulated VoIP service and several more were considering legislation to expand oversight of the industry, according to a presentation at the Internet and Telephony Conference and Expo. However, it should be noted that Congress and the FCC have preempted substantial state regulation with support from the courts -- so state-level regulation doesn't always survive.

Pros and Cons of Deregulation In the coming weeks, the New York state legislature will vote on whether to give up the ability to regulate VoIP service under pressure from Verizon Fios and other cable companies, according to the, a decision that will not doubt be scrutinized by other state legislators.

As with all contentious issues, there are positive and negative aspects to decreased regulation of the service.

Cons of Deregulation

  • Consumers would no longer be able to bring service complaints to the Public Service Commission.
  • The state would not be able to set standards for service in underserved regions, leaving consumers in these areas with enormously high rates or no service at all.
  • Deregulation of traditional land lines has resulted in increased rates for most consumers.
  • VoIP providers do not have to pay into funds that support lifeline access to the elderly and disabled the same way traditional phone companies have to.

Pros of Deregulation

  • Since VoIP is still such a new technology, reducing the number of regulations on it would potentially allow for more innovation.
  • Less regulation makes it easier for VoIP start-ups and service providers to launch, making for increased competition -- a benefit to consumers when it comes to prices.


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