VoIP future hangs on regulatory decisions

Voice over IP will be boosted or stifled based on the regulatory decisions made over the next three years, according to experts addressing the Fall VON 2004 show in Boston.

Regulators in the U.S. and around the world are trying to figure out whether and how to place restrictions on IP telephony, knowing that they could change the economics of VoIP as a business to make it impossible for start-up providers to survive.

In a keynote address, U.S. Rep. Edward Markey (D-Mass.) said he thinks regulations should be imposed on VoIP providers gradually so they are not crushed by regulator economic demands. "There is little question VoIP providers will eventually pay into universal funds and to [federal] e-rate [funding of IT gear for schools] and provide 911 emergency services," he says. "The question is at what expense?"

"There's 255 pages of telecom regulation in Colorado," says Greg Sopkin, chairman of he Colorado Public Utilities Commission. "Imagine if we imposed that on every new little provider that offered VoIP and they had to meet regulations in every state."

In California, where the state has decided to apply wireless regulations to VoIP providers, these carriers would have to respond to every customer question - whether it is their customer’s or someone else’s - within three business days. This would create crippling overhead costs, says Susan Kennedy, a California PUC commissioner. "It is so far beyond ridiculous that I'm sure it will be thrown out by a court," she says.

Internationally, the International Telecommunications Union is working on VoIP regulation recommendations that would be incorporated in treaties, says Walda Roseman, CEO of telecom consultancy Compass Rose. In addition, groups within the United Nations are looking at VoIP from the perspective of regulation, but also weighing how to promote funding of the technology, she says. "The results will affect costs, what services are allowed and who is allowed to enter the market," Roseman says.

Government stances on telecom regulation vary widely around the world, says Eric Loeb, international regulatory law and policy director for AT&T. In Canada, the government is leaning toward imposing traditional telephone regulations on start-up VoIP companies.

In Singapore, the regulators favor a hands-off approach, encouraging new providers and competition. In Egypt and Thailand, only the incumbent state phone companies will be allowed to provide telecom services. In Thailand, this is so strictly enforced that 30 users of SIP phones were arrested there because the peer-to-peer connections were considered a phone service, Loeb says.

In Europe, one standard is that if VoIP comes with no quality-of-service guarantees, then it is not regulated, says Tricisa Paoletta, a partner in Harris, Wiltshire & Grannis, an international telecom law expert. In Hungary, that is manifested by a ban on VoIP providers offering QoS at all, she says.

In the U.S., similar differences exist among the 50 states. New York has decided it has the authority to regulate start-up VoIP provider Vonage because its service fits the legal definition of service that the state regulates. Others are looking to regulate only those portions of VoIP that absolutely require it.

"Why do state regulators not want to let go of VoIP?" says Charles Davidson, a commissioner of the Florida Public Services Commission. "This would represent the first regulatory escape from a massive subsidy system. It's a threat to the regulatory model."

Commissioners from the states are pushing for the Federal Communications Commission to rule that states should keep their hands off VoIP providers except in very specific areas: providing 911 emergency dialing that would pinpoint where the caller is located; providing wiretap capabilities to law enforcement agencies; providing access to everyone at an affordable price; and resolving billing disputes.

"The requirements [for states to impose VoIP regulation] need to be the failure to provide basic services," says Tom Welch, chairman of the Maine PUC. "They should literally ignore everyone else."

Markey, who has sat on the U.S. House telecom subcommittee for 28 years, says a separate issue from regulation is more important. Telecom laws need to insure that VoIP providers are not discriminated against by providers that own the broadband wires and cables that connect to customer homes and over which VoIP travels. Otherwise, only those providers that own networks will be able to make a go of VoIP, he says.

"As much as we hope Comcast and Verizon are successful in deploying VoIP, we need more than just Comcast and Verizon," Markey says.

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