PANELISTS SAY VoIP MAY TRIGGER DIFFERENT REGULATORY STRUCTURE

Robert Pepper, the FCC’s chief of policy development, said one example of the agency’s seeking new ways to support social programs could be seen in its current proceeding to change the way contributions were raised for the universal service fund.

John Rego, chief financial officer of VoIP provider Vonage, said his company’s “position isn’t no regulation, it’s just we don’t fit into the old” regulatory mold. He said he saw a big difference between traditional phone company regulations such as the access charge regime and those with social goals such as universal service. Vonage isn’t opposed to helping support social programs such as CALEA and has worked with law enforcement organizations on CALEA issues, Rego said. However, it doesn’t believe it should be subjected to other types of regulations that don’t apply to it, he said. He took umbrage at those who said Vonage didn’t contribute to the universal service fund. The company pays into it as a data customer, he said. Qwest CEO Richard Notebaert recently made such a statement, Rego said: “I'd love to send Qwest our phone bill” to show the payments.

Traditional telephone regulations such as access charges developed when there were monopoly providers are different from the “obligations” of telephone carriers to provide funding for universal service for high-cost rural areas or access to law enforcement agencies for wiretapping, Pepper said. Those obligations aren’t going to go away, he said, but perhaps must be addressed differently. The cellphone industry has obligations but not traditional telephone regulation, Pepper said. Asked about Qwest CEO Richard Notebaert’s comment that Qwest was moving to mass market VoIP as a path to deregulation, Pepper said Qwest and others already were moving toward offering IP-based features and functions in response to competition. However, moving toward deregulation “doesn’t mean not having obligations [for] universal service, 911 and fair-play rules,” Pepper said.

Pepper said FCC Chmn. Powell had made it clear he didn’t want to “regulate VoIP by accident” and that’s why there had “some urgency” at the agency to address the question of how to treat VoIP. It’s “quite clear” that the agency didn’t want “to impose legacy regulation on new entrants,” he said.

Pepper said the FCC addressed that issue in 1998 by developing guidelines for determining whether an Internet- based provider should be classified as a phone company or treated as an information service. For example, the agency made a distinction between PC-to-PC Internet telephony and the kind that traveled from telephone to telephone, setting out tests for determining whether the latter bore the characteristics of telephone service. The tests included whether the provider held itself out as a voice provider, used the same telephone instruments or “CPE” as a traditional telephony company and used the N. American Numbering Plan. Pepper said those were the kinds of issues the FCC would continue to explore in its Dec. 1 forum on VoIP.

Panelists agreed that broad usage of VoIP was right around the corner, with telecom and Internet analyst Jeff Pulver estimating that 40% of telecom traffic would migrate to “nontraditional” providers in the next 5-6 years. Asked what was the “killer app,” panelists said it was voice because people loved to talk. On the other hand, Pepper said he tended not to define the IP revolution as voice-over-IP, but rather “anything over IP” because there were many popular IP-based applications such as instant messaging. Pulver credited the development of broadband Internet access for the recent spurt in the growth of VoIP technology. “In the last year or so, the awareness has been remarkable,” he said. Pepper said “what’s happened is not just new entrants” such as Vonage entering the market but also “the incumbents are all experimenting with the technology.” The Bells, for example, are experimenting with IP Centrex systems to compete with the competitive development of IP PBXs, Pepper said.

Pulver said he was concerned about the prospect of incumbent cable companies’ shutting out businesses such as his, or otherwise giving more favorable treatment to their own VoIP services. He said he was seeking a “level playing field.” Pulver worried that cable companies might give competitors worse service, driving customers to the incumbent service instead. Cable companies giving their own VoIP service priority or discriminating in some other way constitute “the dirty game that could happen… that would be ultimately unfair, if difficult to prove,” Pulver said.

Asked later how such discrimination could be addressed by regulators, Pulver said he would prefer to see some sort of “best practices” adopted, although he didn’t rule out regulation as an option. His preference would be voluntary measures “without having to force them to offer” competing services. “I am paranoid because paranoid is okay,” he quipped. The cable industry, in fighting off similar calls for “open access” by 3rd-party Internet service providers (ISPs), has told the FCC on several occasions that no cable company currently discriminated on content and all allowed their customers to freely visit any Internet sites they wanted. The industry also said many cable companies privately had negotiated contracts for ISPs to offer service to cable customers. Whether the cable pipe is considered an open or private platform is the subject of a lawsuit in the 9th U.S. Appeals Court, San Francisco.

Pepper cautioned that the FCC shouldn’t act in anticipation of abuses. “If we see real problems, the intervention should be targeted and targeted to the specific problems,” he said. He also said the FCC wouldn’t give any “backbone companies” a free pass, but “if there are real, demonstrable problems, we shouldn’t be shy if need be.”