Review service voip

It's not easy being a regulator. You are forever having to answer the same question: do I regulate this or not? The current topic for the world's telecom regulators is a technology that's been around for some time--Internet voice, better known as voice over IP (VoIP).

But whereas VoIP has until now been confined either to the world of geekdom--those who like talking over a headset through their PC--in enterprise networks, or as a backbone transport for long distance voice, it is now invading the last preserve of the carriers, the local retail loop.

The disruptive aspect is that VoIP separates the service from the infrastructure. It is just one of potentially many apps on an IP platform, where by contrast the PSTN and the voice business are inseparable.

The ownership of that infrastructure by incumbents meant effective domination of domestic and long-distance voice. That is now under challenge, setting off a classic regulatory debate in the US and, before too long presumably, in other parts of the world.

The question which the FCC and communications lawyers are debating is whether to regulate VoIP--and ultimately the Internet itself--as a telecommunication service, or to leave it unregulated as an information service.

Critics such as Sonia Arrison, director of Technology Studies at the Pacific Research Institute in California, point out that VoIP has already had a greater impact on US competition than the 1996 Telecommunications Act. That legislation, passed at the time when the commercial Internet was just emerging, was focused on the traditional carrier market and avoided imposing new rules on the Net. But instead of sparking competition between telcos, it set off a wave of RBOC mergers which entrenched their dominance of the local market.

Proponents of expanding VoIP regulation point to four key areas: two financial issues (universal service and access charges) and two practical issues (emergency calling and the ability to support legal wiretaps).

They fear that the migration of voice traffic away to VoIP will collapse the USO funding mechanism, the interconnection regime and the global settlements system. And whereas telcos must comply with the E911 and law enforcement wiretap laws, VoIP service providers do not.

Smart regulation

Theoretically, the easiest response would be to simply declare VoIP providers as telecom carriers. Of course, this is the worst fear of the VoIP sector and in fact few people advocate this, at least directly.

Entrepreneur Jeff Pulver, of Pulver.com, is one of many who ask for the industry to be allowed to innovate.

"If there is to be regulation, let it be smart regulation," he told a forum convened by the FCC in early December. "Please fix the broken problems rather than applying old regulatory policy on new innovations," he said.

Pulver says cooperation is already underway to create voluntary emergency and wiretap practices and standards, while another businessman, Jeffrey Citron, CEO of VoIP provider Vonage, said the company had never received a subpoena for a voice "call" over its network but there was "no immediate technical obstacle" to providing the data.

But while the practical issues look manageable, the financial disruption could be tougher to handle.

John Hodulik, telecom analyst from UBS Securities, told an FCC-convened forum in early December that VoIP presented the regional Bell companies with their "greatest challenge yet."

He said the de-coupling of the service and network towered barriers to entry and could discourage investment in telecoms.

"IP technology also creates another deflationary factor for the industry and largely lies the constraints that have protected local voice service from the effects of Moore's Law," he said. "Over time, this will put undue stress on the existing regulatory framework, making the existing intercarrier compensation regime and universal service funding mechanisms untenable."

Certainly, FCC chairman Michael Powell has made his preferences clear. "I believe that IP-based services such as VoIP should evolve in a regulation-free zone," he told the December meeting.

Instead of developing in a "piecemeal fashion or by dangerous accident", it was important to establish a rational policy environment for IP-based services, he said. The starting point should be that the Internet was an inherently "global network that does not acknowledge narrow, artificial boundaries."

That seems to have been recognized in Japan, where the government has embraced IP with its IPv6 program, issuing millions of extra IP addresses to allow devices to connect to the Internet.

Other Asian markets have also moved. Hong Kong, which admittedly has minimal USO requirements, has liberalized VoIP of all varieties. Australia's ACA says it is keeping a close eye on US developments, and will hold an industry forum early in 2004. Singapore's IDA has no plans to review its VoIP rules at this stage.