VOIP Service Providers Should Speak Up on Regulation

By Ellen Muraskin  |  Posted 2004-07-26

VOIP Service Providers Should Speak Up on Regulation

The congressional debate over regulation of IP-based telephony is complex, multifaceted and hairy, pitting state public utility commissions against the FCC and VOIP service providers. In the meantime, Bell operating companies profit from the present state of FUD as potential deserters wait for the smoke to clear before disconnecting.

"You have 500 different lobbyists trying to tell people whats really occurring," says Jason Talley, CEO of VOIP provider Nuvio. "And theres probably a true story in there somewhere, but no one is getting the full picture."

This weeks surprise amendments to Sen. John Sununus VOIP-friendly "Regulatory Freedom Act" in Senate Commerce Committee hearings showed that the states determination to regulate—and tax—VOIP the way it does telcos is alive and kicking.

Read more here about the amended act, which passed by a vote of 13 to 9.

The argument that the VON (Voice over the Net) Coalition should be making, and making clearly, is not that VOIP should be exempt from all regulation. Instead, it should assert that regulation should be limited to "social obligations" (such as 911 service, wiretapping by law enforcement and support for universal phone service) and should be determined on a federal level.

Intracarrier and intercarrier compensation rules established circa 1934 are meaningless to something that runs over the Internet and has no geographic monopoly.

Of those regulations aimed at the VOIP providers, easiest to understand are the "social" obligations incurred by traditional telecommunications services:

  • Callers must have 911 services that route distress calls to the proper emergency-response agencies. An upgrade of this requirement for wireless services—E911, not enforceable until 2005—has mandated that wireless calls be geographically traceable to within 50 to 100 square meters.

  • The FBI and other police agencies must be able to tap phone lines as part of criminal investigations.

  • Those who live in sparsely populated areas must have telephone service, too, even if telecom companies find no profit in extending their networks to them.

    The more impenetrable part of the puzzle lies in access charges: what my carrier pays your local carrier—if youre still using POTS (plain old telephone service)—to use its central office switch and local loop to complete the last leg of my call to you.

    This is a very complicated state of affairs even in the present POTS world–one in which the NECA (National Exchange Carrier Association) figures out what Qwest owes Verizon, or SBC owes MCI, and who terminated for whom more.

    So much for what the regulation arguments are about. As far as avoiding regulation goes, the VOIP folks should have acknowledged the distinction between categories: the first a matter of public well-being, the second a historical irrelevancy to Internet-based services.

    Next Page: Who me, a telephone service?

    Who Me, a Phone

    Service?"> The VOIP providers, starting with Vonages Jeff Pulver, didnt help by initially claiming that they werent a telephone service but an information service. Yes, VOIP flows over data lines…until it has to hop off the network.

    Yes, there are data-driven aspects to the call logs and call-routing options that come with VOIP, and more integrated data applications to follow. Yes, VOIP is getting all integrated with instant messaging. For now, however, and for most users, VOIP telephony looks, feels, sounds and smells like what you get from telcos.

    Indeed, thats exactly what VOIP providers advertise to prospective customers, with rates that steeply undercut the PSTN (Public Switched Telephone Network) telcos on the consumer and small-business side.

    Click here to read about a calling plan from Primus that sets a new VOIP price floor.

    By speaking so audibly out of two sides of its mouth, the VOIP community only invited skepticism among the legislative bodies that it needs to persuade and educate. (Of course, with $20 billion in access charges and universal service fees at stake as VOIP wins away business, the states are quite predisposed to skepticism.)

    Equally problematic, the VOIP community appears to be letting the media misrepresent it on the issue of social obligations. Many, if not most, VOIP service providers do pay into the Universal Service Fund indirectly, with payment for the lines they lease to attach their networks and gateway out to the PSTN.

    Talley has expressed a willingness to pay universal service subsidies if that money goes not to his PSTN competition but to pay for the universal access to broadband.

    The VON Coalition also has acknowledged the need for 911 solutions–and many of its members have implemented them. "We think its so important that we entered into an agreement last December with the National Emergency Numbering Association [NENA] to work on enabling that," says Jim Kohlenberger, a VON Coalition spokesman.

    As for wiretapping, the coalition has publicly come out against applying CALEA (Communications Assistance for Law Enforcement Act Extending) to VOIP, as it specifies the design requirements of telephone wiretaps. It claims that such specific deployments will be very hard to technically implement over IP, where the network is more amorphous.

    But the coalition also claims that service providers are already required to cooperate with court wiretap orders when they receive them, and that they do. It further points out that other Internet communications—e-mail and IM—have not come under similar requirements.

    Click here to read about a recent wiretap ruling that could mean the end of e-mail privacy.

    "We understand that there may be some 911 and social policy areas that need to be addressed," Talley says, "but what you cant subject us to is legislation and governance in 50 different jurisdictions that may not have the ability to properly govern us. You could come into some huge constitutional issues."

    Someone who resides in one state and has a phone line in another, he says, could be doubly taxed. "The other issue is, what if [one of those states] says its illegal to use VOIP? Who controls?"

    If VOIP vendors dont start doing a better job managing their message, the answer to that question wont be one they want.

    Check out eWEEK.coms VOIP & Telephony Center at http://voip.eweek.com for the latest news, views and analysis on voice over IP and telephony.

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