Introduction
For much of the 20th century, states played important roles in regulating basic telephony, the provision of which was considered and treated as a natural monopoly service. Among other things, states helped to ensure that the telephone company delivered quality service at affordable rates to every person regardless of where they lived. Allocating regulatory authority among state and federal actors vis-à-vis “plain old telephone service” (POTS) was relatively simple: local POTS, whose traffic stayed within a state, fell into the regulatory purview of state public utility commissions (PUCs); long-distance service, whose traffic traversed state borders, was overseen by the Federal Communications Commission (FCC). Notwithstanding occasional territorial squabbles between state PUCs and the FCC, the federal-state balance in regulating POTS was fairly stable, due in large part to the basic–and largely unchanged–nature of the underlying service. Although numerous technical advancements occurred behind the scenes, basic telephony remained that–basic–for nearly a century.
In theory, this federal-state balance in the regulation of communications services should be self-calibrating. As new communications platforms with fewer or no distinct intrastate characteristics emerge, the balance of regulatory federalism should tip towards a larger role for the FCC, leaving states with less jurisdiction, or no role at all. In practice, however, this has rarely been the case.
As discussed in this article, when new communications platforms have emerged, states have generally sought to regulate those services like POTS. When these attempts have been stymied, states have fought to preserve at least some role in overseeing new services. This dynamic has been evident for decades. For example, when cable television and wireless telephony emerged in the latter half of the 20th century, states attempted to extend regulatory authority over these services. In each case, these attempts were initially rebuffed by the FCC and then, eventually, by Congress. Both the FCC and Congress made clear that these more advanced offerings were to be regulated at the national level with more clearly defined–and limited–roles for states and localities.
With the relatively recent advent of Voice over Internet Protocol (VoIP) and broadband internet access service, the first part of this dynamic has repeated itself. For much of the 21st century, states have attempted to extend POTS-like regulation to these more advanced “borderless” communications services. The record of FCC attempts to rebuff these regulatory efforts, though, has been mixed, due primarily to the inability of Congress to clearly state how these services should be treated. Instead, these services remain governed by a statute whose last comprehensive update occurred in 1996 and which has been described as a “model of ambiguity.” With the Supreme Court having eliminated deference to administrative agencies’ interpretation of ambiguous statutes like the Communications Act, it is unclear whether the FCC can stop states from regulating VoIP, broadband, or other advanced communications services in the absence of clear instructions from Congress.
Why does this matter? Regulatory uncertainty imposes costs on service providers, their customers, and the wider marketplace. Competition might suffer if companies elect to leave a market rather than accede to new regulations. Prices might go up if service providers pass along compliance costs to their customers. Use of a service might dip as a result, and innovation might slow in response to tepid demand.
To prevent undue harm to the competitive dynamics of the modern telecommunications marketplace, Congress must act to clarify the appropriate regulatory treatment of broadband, VoIP, and any other advanced services that might emerge. Indeed, the inability of Congress to act in a timely matter on other issues in the broader technology sector has given rise to a patchwork of state- level rules for data privacy and artificial intelligence. This article underscores the need for Congress to act immediately to clarify the appropriate regulatory framework for advanced communications services. Short of that, states must take up the mantle of regulatory modernization by rolling back outdated rules and prohibiting their PUCs from trying to extend POTS rules to advanced communications services. Modern communications networks and the innovative services that are transmitted over them require modern rules that reflect modern market characteristics.