If it looks like a duck…

One day in early June, Joe Polard had an almost philosophical discussion about telephone technology with two of his fellow workers at Accounts Recovery Corp. (ARC), a collection agency headquartered in Victoria. The three colleagues came to an interesting conclusion about the nature of an emerging communication model.

Polard, ARC’s general manager, says the talk was about Voice over IP (VoIP), a connection method that puts phone calls onto data networks, essentially converging voice and data onto a single, Internet Protocol (IP)-based communication infrastructure. ARC’s own phone platform works like this. It’s an IP private branch exchange (PBX) system by 3Com Corp.

Polard, his brother Jamie and Travis Davies (the last two gents work in ARC’s IT department) talked about the 3Com device and how it works, with a question in mind: if VoIP brings voice and data together, is VoIP a data application that happens to terminate at phone-like network nodes? Or is VoIP a new iteration of plain old telephone service (POTS) that happens to travel via data links? Is VoIP voice or data?

The ARC crew’s decision: VoIP is data. It acts like data. It traverses the same paths that would a data stream. The only difference is that data usually comes to and from computers, while VoIP often begins and terminates at a phone. Or perhaps more accurately, VoIP starts and stops at a phone-like network end-point. “I say, technically that’s not a telephone,” Polard says of IP phones. “That’s a network device.”

Tough question

VoIP as voice or VoIP as data. It’s the stuff government rules are made of. The Canadian Radio-television and Telecommunications Commission (CRTC) is wrestling with this question, among others, as it tries to suss out how to regulate carriers that offer VoIP services.

Earlier this year the CRTC opened the discussion by laying its cards on the table, explaining in a Public Notice that it thinks VoIP, in some cases, is more like POTS than a retail data service. VoIP is voice.

The Commission said VoIP that uses phone numbers, and connects VoIP users with people whose phones aren’t VoIP enabled, is similar to POTS. Therefore, the CRTC said, VoIP service should be regulated like POTS. That means Canada’s major telecom providers like Telus Corp. and Bell Canada (both companies are known as incumbent local exchange carriers or ILECs) have to file prices and terms with the Commission before offering up local VoIP service for public consumption.

The CRTC’s preliminary VoIP view has engendered no short order of debate among industry insiders and observers. Some fear that undue regulation could hinder investment in and development of novel communication technologies like VoIP. “Give a window for things to grow,” says Melville, N.Y.-based tech pundit Jeff Pulver, advocating a regulation-free future for VoIP.

Others think the CRTC’s opinion ensures a viable competitive landscape for the telecom sector, a prerequisite for innovation to blossom. “You have far quicker development and to some extent deployment of these things than you would otherwise have,” says Chris Peirce, senior vice-president, regulatory and government affairs at Allstream Corp., a competitive local exchange carrier (CLEC) known for its IP services portfolio.

If Peirce is right, VoIP regulation a la POTS is good news for businesses. It helps guarantee that emerging technologies see the light of day. But if Pulver’s right, VoIP regulation could stem the flow of novel telecom ideas and leave enterprises with fewer technologies to choose from.

Many opinions

Either way, the fallout from VoIP regulation could affect corporations as they investigate the various communication platforms available to them. What follows is an indication of who’s saying what about VoIP rules, to help businesses decide which side they’re on.

Here’s an example of just how contentious this subject can be:

At a communication-tech conference in Toronto last month, Ken Engelhart, vice-president, regulatory at Rogers Communications Inc., a cable television, wireless and broadband service provider, presented his view that ILECs want the CRTC to absolve VoIP of regulation for competitive reasons. The Teluses of the world want to make voice-service prices so low that other providers wouldn’t be able to compete, Engelhart argued. Rogers, for one, wants to compete against the ILECs; the firm plans to have its own VoIP service available in 2005.

When Engelhart concluded his presentation, Ted Woodhead, a member of Telus’s regulatory team, took the podium and turned to Engelhart with a question: cable television service, the likes of which Rogers offers, is not regulated, Woodhead said. Why shouldn’t VoIP be free from regulation too?

Engelhart said cable prices are kept in check because of healthy competition among service providers. He suggested that the telecom arena operates on no such even keel.

Woodhead retorted: if market forces help stabilize competition in cable, why wouldn’t it do the same in telecom?

Engelhart, shaking his head: “Would you be happy with market forces controlling the price of your home phone?” suggesting it’s dangerous to leave something so important as phone service in the hands of a laissez-faire circumstance.

It’s hard to believe such heated public exchanges coincide with so small a document: the CRTC’s Telecom Public Notice 2004-2, which sports all of 11 pages. Published in April, it says the Commission seeks comments from interested parties to help formulate VoIP policy. The paper also outlines the CRTC’s preliminary VoIP opinion: if it employs telephone numbers and connects people across the public-switched telephone network (PSTN), just like POTS does, the service should be regulated like POTS.

According to the Public Notice, Internet-only VoIP, such as the peer-to-peer Skype service, would not face regulation. The Commission figures since Skype never touches the PSTN, it’s more of a retail data offering than a POTS contender. The CRTC doesn’t regulate retail data products.

“This is not a case of us going out and looking for something new to regulate,” says David Colville, vice-chairman, telecommunications at the CRTC, talking about the proposed VoIP rules. “Our approach to this whole issue is technology-neutral, that we regulate service, not technologies. If it’s telephone service, it’s telephone service, and our regulatory framework as it exists today would apply.

“Largely that framework is: If you’re a new entrant you’re generally unregulated,” Colville continues. “If you’re an incumbent, you are regulated under our current price cap scheme, regardless of the technology used to provide the service.”

Lawrence Surtees, a telecom industry analyst at IDC Canada Ltd. in Toronto, says the CRTC’s preliminary view is right. “To quote [CRTC Chairman] Charles Dalfen, ‘If it quacks like a duck, it’s a duck.’ If it’s in some way tied to the public-switched network, if it has characteristics functionally the same as circuit-switched voice, they’re going to regulate it like circuit-switched voice. It’s a duck.”

Allstream applauds the CRTC’s opinion. “We think the regulator is largely on the right track in seeing its role as regulating services and not technology,” Peirce says.

The IP element

But Roberta Fox of Fox Group Consulting, a network advisory firm in Markham, Ont., says the CRTC cannot ignore the technological differences between VoIP and POTS. She notes that IP, VoIP’s digital skeleton, spans a range of services. IP carries voice, video, data, and perhaps a host of new offerings not yet discovered. She wonders how the Commission can link so flexible a protocol as IP to a sole service, voice.

“They don’t get it,” Fox says of the CRTC, imploring the Commission to mind the tech. At press time she was putting together a document to the CRTC about this.

Janet Yale, vice-president of government and regulatory affairs at Burnaby, B.C.-based Telus, figures her company, an ILEC, should be as unbound from VoIP regulation as are non-ILEC VoIP service providers like Primus Telecommunications Canada Inc. and Vonage Holdings Corp.

“It seems to me there shouldn’t be rules that prevent particular providers from playing in that sandbox,” Yale says. Telus also planned to submit a document to the CRTC on VoIP rules.

The Commission did ask for comments to help it decide what to do about VoIP. At press time it had received 20 letters from groups as varied as Bell Canada, the Communications and Paperworkers Union of Canada and the Public Interest Advocacy Centre, mostly about the short timeframe that the CRTC created for the discussion.

Originally the Commission said the deadline for submissions would be April 28, but after receiving a volley of missives that the process was too short, it pushed the deadline to June 18, and delayed a public consultation until Sept. 21.

South of the border, the U.S. Federal Communications Commission (FCC) is somewhat further along in its VoIP discussion, an equally important topic there as it is here. Although it’s happening in a different country, the Stateside proceeding seems to be informing people’s arguments in Canada.

Some point to comments from FCC Chairman Michael Powell as a signal that the CRTC has VoIP all wrong. Powell suggested that heavy rules could stunt the new technology’s growth.

“I believe that IP-based services such as VoIP should evolve in a regulation-free zone,” Powell said in a statement before a VoIP forum last year.

But do Powell’s comments dictate U.S. telecom regulation? Not necessarily, argues Engelhart from Rogers. He implores FCC watchers to read between the lines to see where U.S. policy is really headed.

Engelhart points out that the U.S. VoIP review includes the same “tests” that the CRTC is using to flesh out Canada’s rules. Does it connect to the PSTN? If so, the FCC might decide VoIP is a telecommunications service; VoIP is voice. It “suggests that VoIP might be regulated very similarly” in both countries, Engelhart says.

As the FCC mulls U.S. policy, Canadian telecom observers make their cases for and against regulation. While it’s too soon to say how this debate will shape the communications landscape, it’s fair to suggest the CRTC has its work cut out for it. Colville, the Commission’s point person on telecom, says it could be a while before his group comes to a decision on the matter.

“It will probably be late in the year or early next year before we confirm our final view on the issue,” he says. “Whether it’s the same as the preliminary view I guess remains to be seen.”

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