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Most voice over Internet Protocol services would be exempt from state taxes and regulations and be treated by the U.S. government as a lightly regulated information service under legislation that U.S. Senator John Sununu plans to introduce by early next week.

Sununu (R- New Hampshire) has drafted a bill that defining most VOIP services as information services, like most other Internet-related services, under congressional and FCC regulations.

The Sununu bill would exempt VOIP from most regulations governing traditional voice telecommunications, including federal law-enforcement wiretap regulations and access charges typically shared among telecom providers.

Similar Plan

Sununu and Representative Charles "Chip" Pickering Jr. (R-Mississippi), who plans to introduce a similar bill in the House, say the legislation is necessary to give clarity to VOIP vendors and customers, even though the FCC began a rule-making proceeding on VOIP in mid-February. FCC Chairman Michael Powell has also called for VOIP to be exempt from state regulations, but the legislation could help avoid the court battles that have followed other FCC telecommunications decisions, Sununu says.

"The laws that are on the books now really don't deal in a clear way with VOIP technology," Sununu says. "[The bill] preempted heavy-handed state regulation, and it even limits the FCC's role at this particular time."

Calls that start as traditional voice calls, are switched to an IP network, then terminate back on the traditional switched telephone network are not exempted from telecommunications regulations in Sununu's bill. Telecom companies like AT&T are already experimenting with carrying some of their traditional voice calls over IP networks.

The bill is intended to narrowly define VOIP service and exempt it from regulation and taxes, Sununu says. "There are some people who would like to rewrite the 1996 Telecom Act now, today," he adds. "This is not a piece of legislation that's designed to rewrite decades and decades and decades of telecom law. It's a piece of legislation that's designed to ensure that this particular area of IP services is dealt with in a forward-looking way, that we don't try to take an archaic or outdated framework and try to jam it on what is a tremendous and promising technology."

The Sununu bill, called the VOIP Regulatory Freedom Act, would direct the FCC to act within 180 days of its passage to work out an alternative plan for access fees and a flat-fee mechanism for collecting universal service fees, which are used to bring telecommunications services to poor or rural areas.

Another Opinion

An FCC spokesperson had no comment on the Sununu bill, but a representative of the National Association of Regulatory Utility Commissioners (NARUC) questions the need for the legislation. State regulators should be involved in consumer protection issues, such as whether VOIP services carry enhanced 911 features, says James Bradford Ramsay, general counsel for NARUC.

The FCC is not equipped to deal with VOIP customers calling to complain about issues such as service interruptions, while state public utilities commissions are, Ramsay says. "There's a consumer protection role the states are particularly suited to do," he adds.

No state utilities commissions are looking forward to heavy-handed regulation of VOIP, because they want to encourage competition in their states, Ramsay says.

A bill focusing on VOIP may also become obsolete eventually, and one of the criticisms of the 1996 Telecommunications Act is it focused on specific technologies and wasn't technology neutral, Ramsay adds. "The NARUC view is we should not repeat the mistakes of the past," he says. "If you focus on one technology, you have to go back and rewrite [the law] later."

But VOIP could drive demand for broadband services, Pickering says. The legislation would protect VOIP from being slowed down by complying with 50 separate state regulatory regimes, he says.

"VOIP is an application that is emerging in the marketplace, and the technology is now being perfected," Pickering says. "A lot of the regulatory entities across the country are trying to say, 'does this new voice fit into the old regulatory scheme?' What we're saying is, 'no, it does not'."

Pickering's bill differs from Sununu's in that it doesn't prohibit other carriers from collecting access fees from VOIP providers. Sununu's bill would exempt VOIP providers from a wire-tapping requirement under the Communications Assistance for Law Enforcement Act, or CALEA, only requiring VOIP to provide law enforcement the same access to information as other Internet service providers do. Pickering's bill would require VOIP providers to allow government investigators to intercept communications.

Sununu suggests that current technologies are not able to distinguish VOIP calls for wiretapping. "The language in my bill reflects technological reality," he says. "The packetized voice conversation looks the same as a packetized instant message, looks the same as a packetized e-mail, looks the same as a packetized spread sheet that you are sending over an IP network."