U.S. VoIP regulation may heat up next year

Next year may be a big one for regulation of VOIP (voice over Internet Protocol) in the U.S., according to some speakers at the Voice on the Net (VON) conference in Santa Clara, Calif.

Several petitions to the U.S. Federal Communications Commission (FCC) to make decisions on the services are currently pending, and some of them legally should be decided within 12 to 15 months, according to Julie Veach, an assistant chief in the FCC’s wireline competition bureau, who addressed a one-day policy summit at VON.

However, major federal policy decisions on VoIP probably won’t be made until at least after the November election, with the uncertainty of a possible administration change looming, said Blair Levin, a managing director at financial services company Legg Mason Inc. and a former FCC official.

A state telecommunications regulator also said next year might be an opportune time to address the services before consumers start to switch en masse from traditional circuit-switched telecommunications to VoIP services. By three or four years from now, the movement could be substantial, potentially hurting government programs that depend on funds from carriers if VoIP service providers aren’t required to contribute, he said.

“In a year, there’s not going to be a massive migration that’s going to undercut all the universal service (funds), said Carl Wood, a commissioner at the California Public Utilities Commission.

At issue is how governments should treat VoIP, which is a data packet technology but to the customer looks like a voice product and thus a possible replacement for traditional circuit-switched phone service. Phone service is subject to a number of federal and state regulations and taxes that may or may not be appropriate for offerings based on the new technology. Among the issues are access charges paid to carriers for using their infrastructure, fees to support universal access to phone service, emergency 911 service, access for the disabled and support for law enforcement wiretaps.

Just as VoIP adoption has barely scratched the surface of the total telephone service market, the decisions already made on its regulation are just the beginning of what needs to be worked out, panelists said. What’s needed, most said, is total reform of the regulations in light of a technology that will transform telecommunications.

The FCC has received petitions on VoIP regulation from several service providers, including Vonage Holdings Corp., Level 3 Communications Inc. and SBC Communications Inc. Some are petitions for “forbearance” from regulation, which normally must be resolved within 15 months or the petitioner’s request is to be granted, the FCC’s Veach said.

Most important is the agency’s far-reaching NPRM (notice of proposed rulemaking) on IP services, which has been released for comments by interested parties. With it, the FCC seeks to determine broad policies on how IP services should be regulated, excluding the Communications Assistance for Law Enforcement Act (CALEA), a wire-tapping requirement, which is involved in another process under the Department of Justice, Federal Bureau of Investigation and Drug Enforcement Administration, Veach said.

The FCC already has ruled that at least one VoIP service, the Free World Dialup service offered by Pulver.com Inc., should be free from most federal regulation. That service does not use conventional phones and does not allow calls to non-members of the service. That decision and comments by FCC Chairman Michael Powell indicate the agency wants to apply a light touch.

The Pulver ruling may have had more to do with the size of the service provider than with the technology, Legg Mason’s Levin said. Because Pulver.com is a relatively small player and VoIP currently makes up a small portion of the telecommunications industry, the government didn’t see it threatening a “material impairment” to the industry, he said. That would be different if Microsoft Corp. were to build VoIP software into its next operating system and steal away 30 per cent of traditional carriers’ revenue, he said. That is entirely possible given Microsoft’s “unique” ability to make a technology ubiquitous, Levin said.

Two state regulators at the forum presented opposing views of VoIP regulation. Charles Davidson, a commissioner from the Florida Public Service Commission, said regulation can create disincentives to invest in new technologies. The best way to serve the public may be by minimizing regulation to stimulate innovation, he said. That might lead, for example, to less expensive phone service for economically disadvantaged citizens in danger of being left out, he said.

Wood, of the California PUC, disagreed.

“That’s faith-based policy-making…. The reality is that all markets discriminate” and focus investment on the most lucrative markets, he said.

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