FCC Policy-maker Lays Out VOIP Problem

SANTA CLARA, Calif.— A Federal Communications Commission policy-maker underlined the financial implications of voice over IP in a speech here Tuesday.

For months, FCC Chairman Michael Powell has argued that the government should take a hands-off approach to VOIP, which uses the Internet Protocol (IP) to transmit voice information. But if VOIP takes off, the government will lose an important source of revenue that is being used to fund the communications needs of the poor, said Bob Pepper, chief of policy development for the FCC during a speech at the Voice On the Net show.

The problem is that universal service, used to provide a basic level of telecommunications services to underserved markets, is funded through interstate calls. Calls made between states can yield only a few cents in fees per call, but the total obviously adds up, Pepper said. In 2001, $99.3 billion worth of interstate calls were made, Pepper said. And, as wireless and VOIP calls become more popular, the source of universal service funding will decrease.

The habit is affecting American culture, Pepper said. “The only time I ever pay a long-distance bill is by accident,” he said. “I use a cell phone. The incremental cost to call long distance is zero; I think of it as free. Why should I pay $4.95 a month and then get charged by the minute when I can call on my cell phone for free?”

While universal service costs the government $700 million per year, interstate calls also subsidize rural telecommunications providers to the tune of $3 billion or so annually, plus an additional $2.2 billion for libraries and $16.7 million for rural hospitals.

Meanwhile, the agency faces five petitions, all of them by companies looking to be exempted from federal fees. The most notorious is Vonage; a Minnesota judge overturned a ruling by the states Public Utilities Commission and labeled Vonage an “information service” that runs on top of the wired infrastructure, and thus should not be subject to access fees.

AT&T and Level 3 Communications are asking the FCC to rule that if they use IP networks to route calls, even between PSTN switches, that the companies should also be exempt from fees. SBC, meanwhile, is arguing that even if its own services arent subject to regulation, the company should be exempted, Pepper said.

The problem with labeling VOIP as an “information service,” rather than part of the “telecommunications” infrastructure or a “telecommunications service,” is that it paints VOIP as just another protocol, like HTTP. By doing so, the definition risks not only losing a valuable source of revenue but also begs the question of which federal agency, if any, would regulate the industry, Pepper said. Requirements like e911, the ability to locate calls for emergency personnel, and CALEA (Communications Assistance for Law Enforcement Act of 1994) compliance with law enforcement agencies would also be called into question, Pepper said.

“We need to separate economic regulation and local policy,” Pepper said. “Were going to achieve those goals and find new ways to do that.” Comments on the Review of Regulatory Requirements for IP-Enabled Services are due May 28.

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