Feds Consider Regulating VOIP

WASHINGTON -- Providers of voice over Internet protocol (VOIP) telephone services need the "regulatory certainty" of a national policy, a new report suggests.

Authors of the report advocate a national VOIP policy that is relatively free of regulation but intended to protect the growing industry from dozens of state telecommunications regulations. The report, released Tuesday, is entitled "The Future of Internet Phone Call Technology: Regulatory Imperatives to Protect the Promise of VOIP for Industry and Consumers" and was sponsored by the New Millennium Research Council.

VOIP could transform the telecommunications industry in next five to ten years, the report suggests. But the U.S. telecom regulatory policy, which regulates traditional telephone service fairly heavily but imposes few regulations on Internet-related services, needs to change as VOIP blurs the lines between the two communications media, the report's authors say.

The report calls VOIP a "middle ground" between traditional telecom services and data services. It recommends VOIP be subject to some federal oversight but spared from heavy regulation so the technology can grow.

Huge Potential Effect

VOIP has the potential to cause a "major paradigm shift" in telecom and could have as big an economic impact as railroads or the printing press, says Dave McClure, president of the U.S. Internet Industry Association and one of the authors of the New Millennium Research Council report. With telecom companies moving their telephone calls from circuit-switched telephone networks to packet-based data, the old regulations and pricing schemes based on circuits don't make sense, McClure says.

He, too, calls for a national VOIP policy. The concept was also recently endorsed by Michael Powell, who chairs the Federal Communications Commission. At a VOIP conference on December 1, Powell said he expects the FCC will work on a VOIP policy in the next year.

However, treating telephone calls that move over circuits differently from telephone calls that move partly or fully over the Internet makes little sense, McClure adds. "We can no longer keep pretending that packets sent over one kind of network are different than [information] sent over another kind of network," McClure says.

Other authors of the study are urging the FCC and Congress to ease regulations on traditional telecom instead of trying to shoehorn telecom regulations into the VOIP industry.

"To look at imposing on the new [VOIP] industry the old rules is really working on the wrong direction," say Lee McKnight, a report coauthor and associate professor of information studies at Syracuse University.

McKnight wants Congress to change the ways telecom and information services are defined and regulated. The current rules are "arbitrary" and a "relic of the past," he says. With many telecom companies already moving parts of their voice traffic over the Internet, it's nearly impossible to separate a telecom service from an Internet service, he says.

"This VOIP is increasingly infecting the entire communications network," McKnight adds.

Mixed Recommendations

At the December 1 FCC conference on VOIP, advocates of limited regulation urged the FCC to mandate such services as enhanced 911, support for the disabled, and funding for telecom in rural or poor areas. But most attendees asked the FCC to avoid regulating prices for VOIP service. Competition between VOIP providers should negate the need for price-based regulation, says Martha Garcia-Murillo, another coauthor of the report and assistant professor of information studies at Syracuse University.

Congress and the FCC should resist the temptation to impose traditional telecom regulations on VOIP, because heavy-handed regulation could prompt the whole industry to leave the U.S., adds Glenn Woroch, another report coauthor and executive director of the Center for Research on Telecommunication Policy.

Because of VOIP, the FCC has a better opportunity to deregulate traditional telecom services, Woroch adds. VOIP makes up about 11 percent of telephone traffic outside the U.S., he notes. "We really need to listen to new technologies like voice over IP because they expose the warts in the existing system," Woroch adds.

But ending all telecom regulation makes little sense and is unlikely politically, notes Brad Ramsey, general counsel of the National Association of Regulatory Utility Commissioners. Destroying the current FCC regulatory regime would cost "a ton of taxpayer money," he says.

For example, telecom regulations give customers a recourse for complaints, Ramsey notes. Rolling back telecom regulations "is a politically naive place to come from," he says.

Ramsey also questions why some of the report's authors suggest barring state regulators from VOIP. "The notion that state regulatory oversight is somehow going to cause a problem is baffling to me," Ramsey says. "I don't understand the argument that regulation is going to destroy the Internet."