FCC Takes Steps to Regulate VoIP

The U.S. Federal Communications Commission took the first step toward laying down rules governing voice over Internet Protocol service, by approving a proceeding that will solicit comments on how the emerging competitor to traditional voice services should be regulated.

In its notice of proposed rulemaking, the FCC will ask for comments on whether VoIP should be regulated as a substitute for the highly regulated traditional telephone service and whether the VoIP service connects to the public switched telephone network, among other issues. But the language in the notice, to be published within weeks, suggests most Internet services should continue to enjoy minimal regulation, according to the FCC.

The rulemaking proceeding was the "curtain going up on a really new era of communications," FCC Chairman Michael Powell says. "This is perhaps the most important item in communications history."

Positive Reactions

VoIP providers cheered the FCC action, saying the proceeding will provide regulatory certainty to providers and customers. Even though the FCC made no immediate regulatory decisions on most forms of VoIP, VoIP service provider Vonage Holdings greets the FCC rulemaking as a step toward creating a national policy on VoIP regulation, as opposed to 50 individual policies from state public utility commissions.

"The FCC is taking a definite step, one way or another," says Brooke Schulz, Vonage's vice president for communications. "It's the first step toward making real decisions."

The rulemaking proceeding is expected to take several months, but commissioners carved out one VoIP offering, the Free World Dialup service offered by Pulver.com, as exempt from most telecommunications regulations. Free World Dialup, a free service, allows members to talk to each other through software installed on their computers. The service does not allow members to place voice calls to nonmembers.

Other forms of VoIP will be addressed in the rulemaking proceeding. Other forms of VoIP include voice calls that start as VoIP but end up on the public switched telephone network--such as when a Vonage customer dials a customer of a traditional phone service. Some major telephone carriers are also offering a third type of VoIP--using an IP network to handle traditional phone traffic, with customers never knowing that their phone call was routed to the Internet.

Moving Too Fast?

Commissioner Michael Copps questions the Pulver.com decision, saying the commission was ruling before it worked out many of the regulatory questions on VoIP that will be addressed in the rulemaking proceeding. The U.S. Federal Bureau of Investigation and Department of Justice have raised concerns about their ability to wiretap some VoIP calls without a wiretapping policy in place before the FCC ruled on Pulver.com's petition, he notes.

"This item troubles me, and it troubles me a lot," Copps says. "I think we're looking before we're leaping."

But Pulver's service is obviously an Internet-based service, like e-mail, and not a for-profit telecommunications service, Powell says. The FCC will address concerns with law enforcement agencies to listen to VoIP calls, Powell adds.

"I think this is the correct answer, four-square in existing law," he says.

Jeff Pulver, chief executive officer of Pulver.com, cheers the FCC action. "The FCC has sent a strong signal to consumers and capital markets that the FCC is not interested in subjecting end-to-end IP communications services to traditional voice telecom regulation," he says in a statement. "It is indeed a great day for the Internet."

To Be Determined

The rulemaking proceeding may deal with more Internet services than VoIP--the language includes other undefined "IP-enabled services"--although the major debate will likely be about VoIP. Petitions from Vonage and AT&T have asked the FCC to define VoIP regulation, and companies like AT&T and MCI are starting to convert some of their voice traffic to VoIP.

"We need to start asking the questions," says Commissioner Kathleen Abernathy. "While it is premature to say precisely what this [regulatory] framework will look like, there is no question that the time is right for the commission to build a record."

VoIP service raises questions about several regulations traditionally applied to telecommunications service, including call-termination access fees exchanged between carriers, the availability of 911 service, and law enforcement wiretapping rules. The FCC will address the wiretapping issue, part of the Communications Assistance for Law Enforcement Act, in a second rulemaking proceeding, and the FCC will host a summit on 911 service March 18.

The FCC also needs to pay attention to how VoIP affects federal universal service funds, used to bring telecommunications service to rural and poor areas, Copps says. "[IP services] sizzle with possibility for consumers and businesses alike," he says. "IP applications will only revolutionize communications if everyone has access to really high capacity bandwidth."

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