Tuesdays FCC vote exempting Vonage Holding Corp. from “traditional state public utility regulation” comes as no surprise and gives the VOIP (voice over IP) industry cause for celebration. In the decision, the commission stated that it—and not individual states—would decide which regulations apply to VOIP. The official order will be handed down in two weeks.
The FCCs five commissioners voted unanimously in favor of Vonage, with the two Democratic members, Michael Copps and Jonathan Adelstein, “concurring” but expressing some reservations about the regulatory decisions left unmade. These issues, including intercarrier compensation (fees paid between carriers for completing a subscribers call); universal service fees to subsidize rural carriers, and emergency 911 services, are to be ironed out in the ongoing “IP-Enabled Services Proceeding.” No deadline was given.
Even at this point, however, the ruling clears the way for existing VOIP service providers to continue their rollout into new markets. It encourages the PSTN (Public Switched Telephone Network) incumbents whove launched VOIP services of their own. For business and residential customers, it portends a wide choice of providers and hot competition to differentiate based on customized services.
“If you dont like provider A, it will be very easy to switch,” said Robert Jackson, a telecommunications attorney affiliated with the firm of Reed Smith, in Washington. “Thats the result of divorcing the service from the facilities.” In other words, divorcing the voice service from the broadband service, typically provided by cable companies or telcos, or perhaps, in rural areas down the road, through WiMax wireless broadband access.
“The trick for service providers will be adding value to keep their customers,” Jackson said. “I think well see an awful lot of new features that will be customized in ways we cant see now. Its got a lot of potential to let customers customize their service to meet their own needs.”
And certainly dont count out competition based on price. Zultys Technologies, which is expected to announce next week that it will co-market its IP PBX with interoperability-tested VOIP trunking services, predicts a scenario in which enterprise customers can pick and choose multiple VOIP providers for outbound calling or inbound 800-number service, based on their best long-distance rates to specific destinations.
While theres relatively recent precedent for choosing providers in the PSTN world, theres nothing close to VOIP for ease of setup, said Patrick Ferriter, vice president of product marketing at Zultys. An enterprise plan with a carrier to Brazil, for example, might require that carriers delivery, installation and configuration of a new T-1 circuit, which could take three to five weeks and incur an $800 setup charge. It would also require an $1800 piece of network interface hardware on the PBX end for 24 ports of calling.
In contrast, a connection from Zultys SIP PBX out to an SIP-based carrier requires a $30-per-port license fee, said Ferriter. And it can be accomplished—assuming your data pipe is wide enough—just as soon as the provider sets up your account and you configure your PBX and point it at the providers IP address.
Just because the states rights to regulate access fees and universal service charges will not apply to VOIP doesnt mean these fees can disappear altogether, however. Someone has to pay to keep rural residents and businesses reachable, and their carriers solvent.
“People can forget that universal service has a market value,” Jackson said. “I may not want to call rural Nebraska, but Im not sure I want to buy my service from someone who excludes them. From that standpoint, rural operators should get something.”
The FCC will have to tackle a whole host of issues to get this money—or some of it—out of callers, and the cost of VOIP service may not be able to stay as low as it is now when theyre done. But the amounts required may dwindle as more economic ways are found to tie in rural areas.
“It doesnt follow that we have the same cost structure we have today, especially if you look at things like broadband over power. Maybe some of these rural areas wont have the same costs,” Jackson said.
Intercarrier compensation will have to be rethought as well. Now based on paying local carriers per minute for completed or originated calls, it will have to move towards capacity-based compensation, Jackson said, “based on the size of the pipe they provide to other carriers.”
And Jackson noted that the Feds will take over for the states in regulating certain basic public interest requirements, which have costs. But the states may be left in the picture in part. “I think theyll work with the states, too, on things like disabled access, law enforcement, Universal Service fees, intercarrier compensation, and emergency wiretap,” he said. “I think the FCC will set the broad parameters, and the day-to-day, consumer problems—such things as fraud, false marketing—will be handled at the state level.”
eWEEK.com VOIP & Telephony Center Editor Ellen Muraskin can be reached at Ellen_Muraskin@ziffdavis.com.