FCC To Rule On VOIP Regulation This Week

DudeAsInCool · February 11, 2004

FCC to weigh in on VoIP regulation

Last modified: February 10, 2004, 3:20 PM PST

By Ben Charny

Staff Writer, CNET News.com

Federal regulators this week are expected to issue their first major decision on Internet phone services, in a closely watched decision that could reshape the telecommunications industry.

At a meeting scheduled for Thursday, the Federal Communications Commission is widely expected to contend that companies that sell phone services based on voice over Internet Protocol (VoIP) technology aren't subject to traditional telephone rules.

The FCC is then expected to open a 12-month to 18-month public-comment period to help decide what to do next, sources familiar with agency's plans said.

The FCC has yet to disclose its position. Still, commission watchers said they believe that the outcome is not in doubt, given the outspoken antiregulation views several commissioners aired prior to the ruling. Chairman Michael Powell and at least two FCC commissioners on the five-member board have said publicly that they believe that modern telephone laws don't apply to VoIP services.

"When it comes to nascent services such as VoIP, we should employ the regulatory equivalent of strict scrutiny.

News.context

What's new:

The FCC this week is expected to rule that phone services based on voice over Internet Protocol (VoIP) technology aren't subject to traditional telephone regulations.

Bottom line:

The decision will likely pre-empt state efforts to apply traditional phone regulations to VoIP providers and could lead to new rules drafted specifically for Internet phone calls within the next 12 to 18 months.

For more info:

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We should make sure that our rules are narrowly tailored to the governmental interests at stake," FCC Commissioner Kathleen Abernathy said recently.

The FCC's decision is expected to derail state-by-state efforts to regulate VoIP providers, cementing a federal court decision issued last year that found that VoIP provider Vonage was not a telephone service and was thus not subject to phone rules the Minnesota Public Utilities Commission set.

Although the FCC won't likely slap traditional phone rules on VoIP services, the agency may still regulate Internet calls. For example, some industry groups are already lobbying for consideration of new rules that would require VoIP providers to offer access for the disabled, support 911 emergency services and allow law enforcement to intercept calls, among other things.

At the same time, VoIP providers are hopeful that the agency will, for the foreseeable future, steer clear of ordering price regulations and other "economic sanctions" that traditional phone companies must obey.

The FCC's expected decision Thursday comes in response to a petition filed last year by Free World Dialup founder Jeff Pulver, who asked the FCC to declare that his free Internet phone service isn't subject to traditional phone regulations.

"I just wanted to ask a simple question a year ago: 'Do phone rules apply?'" Pulver said. "In my wildest dreams, I didn't think it would become something as big as this."

Internet phone services have existed for years, but they have recently gained prominence, thanks to improvements in quality and ease of use. While traditional phone services create an end-to-end connection between callers, VoIP breaks up conversations in packets that are routed independently across a network and reassembled on the other end. VoIP calls are cheaper than circuit-switched calls, because they make more efficient use of network resources. But the biggest cost savings from VoIP come simply because the calls are usually not subject to taxes that apply to the old telephone system.

Regulators are already worried about revenue shortfalls, as more calls shift to IP-based systems. Consumer VoIP services from companies such as Vonage, 8x8 and VoicePulse have begun to sign up tens of thousands of residential customers. VoIP subscriptions could soar, as cable companies begin to market broadband phone services to their customers, threatening local taxes, if large numbers of people switch over and cancel traditional phone service.

As IP-based voice traffic surges, other sticky policy issues are waiting in the wings. Already, more than 11 percent of long-distance calls travel at least part of the way over IP networks, a number that's expected to jump to more than 50 percent by 2007. That trend raises significant policy issues related to connection fees paid between carriers for completing each other's calls.

Signaling the importance of the issue, AT&T last year filed a petition with the FCC, seeking to exempt its IP-based traffic from someinterconnection charges. The FCC is still weighing its response in that case, and observers said they do not expect the agency to issue an answer by Thursday.

Cathy Martine, in charge of the company's VoIP rollout, says it could save AT&T about $10 billion a year. "We'll reinvest it and make our network better," she said.

The regulatory makeover is another example of how technology has outpaced FCC regulation. The FCC faces a number of glaring examples of just how Internet dialing has made its rules obsolete and, at the same time, how it threatens the way it funds public services like 911. Perhaps the best example: universal service fees, which telephone operators pay as a percentage of service revenues to subsidize rural telephone expansion.

On traditional phone networks, calls travel the same series of circuit switches, so it's easy to determine whether a call is local or over a long distance. But that's not the case on the Internet. Each of the approximately 50 packets of data that represent a single second of an Internet phone call could take a different pathway, sometimes halfway around the world, to avoid Internet traffic jams. The FCC's rules, rooted in geography, can't cope.

VoIP by any other name

One of the most important regulatory problems that face the FCC is creating a definition of a VoIP provider.

The National Cable & Telecommunications Association (NCTA), which represents cable interests, has developed a test that it is lobbying the FCC to use, and that's gaining some favor inside the beltway, sources said.

Lobbyists said there should be at least three criteria met before labeling something a VoIP provider: It gives its customers a 10-digit telephone number; it allows customers to make calls to and from the regular phone network; and its service is IP-based.

That test casts quite a wide net. It would include most U.S. telephone service providers, which now routinely use the Internet to complete long-distance phone calls, as well as cable companies that use VoIP to enter the local phone market, plus Vonage, 8x8, VoicePulse or other subscription services that connect broadband subscribers to each other and the regular phone system.

It wouldn't include the few hundred thousand VoIP devotees who use what's called Internet-to-Internet methods such as Skype, Free World Dialup and instant-messaging clients, which completely avoid the traditional phone networks.

"Only a regulatory framework that is minimally burdensome can create the right incentives and a favorable climate in which service providers can invest, innovate and deploy VoIP services," the NCTA wrote in a recent white paper, making the rounds among the telecommunications sector's elite.

What state is VoIP?

Whether VoIP is to be regulated by states or the federal government is another longer-term policy issue. On this front, VoIP providers both large and small, in addition to FCC commissioners, agree that VoIP is subject to federal controls.

Under a federal umbrella, VoIP providers would face only one policy. Currently, about a dozen states have expressed interest in crafting their own rules for VoIP, the beginnings of a possible patchwork of slightly different regulations that could slow down the pace of VoIP's spread.

With just 300,000 people in North America now paying for VoIP service, Abernathy and others feel that it would be wise to keep VoIP under the jurisdiction of the federal government, where it can be coddled with light regulations and give it enough room to expand from coast to coast.

"As VoIP providers gear up to roll out services regionally or nationally, they should not be burdened with a patchwork of disparate state regulations," Abernathy recently said.

The FCC also has shorter-term problems they have indicated they will address more immediately.

One is what to do about universal service. Both FCC Commissioner Kevin Martin and AT&T, which will use VoIP to launch a local phone service, want to base universal service not on revenue but on the number of telephone numbers that a service provider has.

VoIP luminaries want to use the FCC overhaul to redirect universal service to fund broadband expansion, an old idea that's gaining new support.

http://news.com.com/2100-7352_3-5156819.html?tag=nefd_lede

DudeAsInCool · February 12, 2004

Pulver predicts Capitol Hill VoIP calls

Last modified:February 11, 2004, 4:00 AM PST

By Ben Charny

Staff Writer, CNET News.com

Serial entrepreneur Jeff Pulver has become the Internet phone industry's unofficial ambassador to Washington, D.C.

His pedigree as co-founder of two of the three most recognizable U.S. Internet phone services has won Pulver frequent meetings with Federal Communications Commission staffers and legislative aides now shaping the industry's regulatory future. Never one to miss an opportunity for face time, he once led a tutorial inside FCC offices on the standards Internet phone calls use.

Pulver has played a role in the creation of more than a dozen businesses. But voice over Internet Protocol (VoIP) service providers Vonage and Free World Dialup are the first to require visits with federal lawmakers.

But on Thursday, the FCC will give the first indications of how well Pulver has done.

It's not so farfetched to think that Pres. George Bush will have to state his position on VoIP.

That's when the regulatory body is expected todecide whether FCC rules apply to Internet phone providers. Pulver is asking whether the FCC should have any jurisdiction over VoIP providers, a question whose outcome many say may well be the tipping point for a regulatory overhaul.

Handicappers give Pulver a good chance of winning his argument. But his is only one of at least a half-dozen issues the FCC has to address. VoIP legislation of various degrees has also been introduced in the U.S. House of Representatives and the Senate.

Pulver, a former ham radio operator who turned to Web phoning partly out of boredom with the then current technology, is a co-founder of Vonage as well as Free World Dialup. He spent time recently with CNET News.com discussing the thinking about VoIP inside the Beltway and how it might affect the future of telephone regulation.

Q: What's one of the more surprising things you've learned about how Washington is thinking about VoIP?

A: I think that VoIP will play a role in the upcoming presidential elections. There's VoIP legislation in both the House and Senate. The FCC is going to be making a lot of important policy decisions in the next few months. It's on many persons' agendas here. It's not so farfetched to think that President George Bush will have to state his position on VoIP.

What's your overall sense as to what's really happening with lawmakers and regulators?

Everyone is waking up. February seems to be VoIP month in Washington.

What are some of the biggest changes you see on the horizon as a result of the regulatory shuffling that's going on?

I think that the whole concept of universal service is going to change. It worked well in the '80s and '90s, providing telephones for the underserved. But we need to move it to a policy that supports universal broadband so that everybody has high-speed connectivity.

FCC Commissioner Kathleen Abernathy was at Catholic University, where she proposed only a few "social policies" VoIP providers should follow, like offering 911. What do you think of that?

I do think that over time, our "social policy" will evolve to address universal service to the point that this morphs into universal broadband so that everyone gets broadband, and then voice is an application delivered in that environment.

I've been working with the industry to get commitments from the IP communication service providers to support 911, so this will happen.

I'm already working closely with the NENA (National Emergency Number Association) folks who are responsible for 911, and I've been working with the industry to get commitments from the IP communication service providers to support 911, so this will happen.

Let's do some handicapping.AT&T has asked the FCC to be exempt from paying access charges. Do you think they don't have to pay carriers these federally mandated connection charges?

If it's granted, it'll be great for AT&T. If it's not granted, for AT&T and others that followed the lead, it's not so good.

Why does everybody think AT&T's petition is going to get shot down?

It's based on the reaction of the AT&T lobbyists in Washington. That, plus the noise that was made at the end of last year behind closed doors in separate meetings that AT&T and SBC Communications had with the FCC.

And what makes you so sure about yours being successful?

Again, I'm posturing. It's also my attempt to read between the lines.

What's your read?

I think that, eventually, it will get passed, whether it's in February, March or in the future. I think that I happen to be one of the good guys. What I hope is that the concept of end-to-end IP is embraced by all those who benefit from it. It would encourage investment and more innovative services on the edge.

Do you expect the FCC to begin making new VoIP rules, as they have indicated?

They may ultimately find VoIP to be its own classification, as far as telecom goes. There will likely be wireless, wirelines and separate rules for VoIP.

In the past few months of lobbying, haven't traditional phone companies and VoIP providers reached some middle ground on whether to regulate?

I call it the rise of the broadband parasites. There's this new recognition that anyone can offer services over infrastructure they don't own. We all came to the same conclusion. For the Baby Bells, they will be damned if they let some start-up take away subscriber access loans. The Bells want their cake and to eat it, too.

Just as the Bells have compromised their views, haven't VoIP providers? They were against any regulations in 2003, now they are embracing them.

There's always a fine line between where it snows, rains and ices.

What about on the executive branch?

They are pretty hot on VoIP. Never in my life did I think that VoIP could become part of a presidential platform for an election year.

What do you think of the California Senate, which has begun exploring whether state legislators can pass laws on VoIP providers? One example is whether VoIP providers should follow the state's own telephone laws.

We may have entered and started down a very slippery slope. Now, the issue is that a company that appears to be operating a service similar to other traditional operators may be held accountable for their business practices. In reality, this may be a good thing. The subtle part is whether or not such a business meets the definitions of what is and what is not a communications service.

DudeAsInCool · February 12, 2004