Regulation Policy

Marching Toward Internet Regulation?

Observers warn that the Internet's days as an unregulated industry could soon be over. Federal regulators and some members of Congress are considering steps that would place Internet service providers (ISPs) under some of the same rules as traditional phone companies.

One possible move would be to make ISPs pay into the federal "universal service fund," which subsidizes the cost of providing phone service to rural areas -- and, more recently, Net access for schools and libraries.

Some market researchers predict the Internet could grow to $12 billion in consumer sales by 2002 -- from $200 million in 1996.

Analysts say three factors are responsible for propelling the debate over whether to regulate.

  • One involves making phone calls over the Net -- thus competing with regulated phone companies.

  • Another is the attempt by regional Bell companies to exempt their new data networks from regulation.

  • The third is how to pay for an expanded universal service fund that provides Net access to schools and libraries.

Voice quality on the Net has improved and Net calls are cheap because they are exempt from fees long-distance companies must pay local carriers for network access -- which phone companies protest is unfair.

Yet the regional Bells are entering the ISP business themselves and they argue that relaxed regulations would encourage investment in high-speed data networks.

Advocates of increased competition warn against resorting to heavy-handed regulation, which has plagued the communications industry for seven decades. Instead, they argue in favor of a laissez-faire approach.

Source: Reinhardt Krause, "Internet: A Regulated Utility?" Investor's Business Daily, April 3, 1998.

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