Channel Insider content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.

PALO ALTO, Calif.—By trying to fit companies into old regulatory categories, the U.S. government is picking winners and losers in the telecommunications industry, said the country’s top communications regulator here on Tuesday.

The Federal Communications Commission must follow laws that categorize companies based on the various types of telecommunications pipes—from the wireline phone network to coaxial cable—even though the companies increasingly are blurring the distinctions, said FCC Chairman Michael Powell.

“The courage we need is to throw it out,” Powell told a packed crowd of Silicon Valley executives and venture capitalists at the opening of the AlwaysOn 2004 conference being held at Stanford University.

“We need to stop having government so involved. We do pick winners and losers right now, very heavily.”

Too often, companies will be regulated based on “from whence they came,” such as a cable company falling under rules that apply to providers of cable TV, even though they also are offering data and telecom services. Those classifications affect how much it costs companies to offer services and the types of laws and social obligations they must follow, Powell said.

Powell answered questions ranging from concerns about broadband penetration in the United States to tougher broadcast indecency enforcement. He was joined on stage by Steve Jurvetson, managing partner at venture capital firm Draper Fisher Jurvetson, and Stanford Law Professor Lawrence Lessig.

The FCC chairman also received praise for joining the world of Weblogging. Last week, he posted his first entry on his new blog on the AlwaysOn Network and opened himself to thousands of comments, often critical of FCC policies.

Lessig, noting that U.S. broadband penetration has fallen from the highest in the world to about 12th since 2000, asked Powell why the country has fallen behind and whether it should be more involved in building out broadband infrastructure.

Powell said part of the solution lies in pushing state and federal legislators and leaders to address broadband policy, which is often hampered by vested interests. The United States, unlike some other countries, also has a more competitive broadband landscape with multiple providers, be them DSL, cable or satellite providers, he said.

“This country is more committed to broadband broadly,” Powell said.

As to the government funding the build out of broadband infrastructure, Powell said that private industry is handling that fairly well and that neither the federal nor individual state governments could afford to fund such an effort.

“Most of the problem in the United States is not access,” he said. “We have infrastructure in most of the country.”

The government could do more to “aggregate demand,” by bringing more of its services online and making the need for broadband more clear so that “consumers see an application that is worthy of another 40 to 50 bucks a month,” Powell said.

One of the biggest battlegrounds facing the FCC is whether voice-over-IP services should be forced to follow similar regulations as traditional telephony services, such as providing 911 emergency call access.

The growth of companies such as Vonage Holdings Corp., with its telephony service over broadband connections, and Skype Technologies S.A., with its peer-to-peer application for free voice and video calls over the Internet, has helped spur interest in VOIP policy.

Powell said he expect VOIP regulation to become more clear over the next year or so as legislation pending in Congress moves ahead and the FCC reviews how to apply its rule to the field.

“All of them are up in the bullpen,” he said, but challenges remain. “You still have politicians trying to understand what it (IP) is.”

Check out’s VOIP & Telephony Center at for the latest news, views and analysis on voice over IP and telephony.