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Figuring Out the Rules for VoIP

By Cynthia L. Webb
washingtonpost.com Staff Writer
Wednesday, October 20, 2004; 9:44 AM

The land of Internet calling may not be free of regulation for much longer.

With upstarts like Vonage taking business away from traditional phone companies while AT&T and others try to play catch up with their own Voice Over Internet Protocol offerings, the government is looking to step in soon to set up rules for the growing telecom service. But if FCC Chairman Michael Powell has his way, Uncle Sam will tread lightly and intervene to keep VoIP from getting wrapped up in red tape and taxes at the state level.

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Powell, speaking at a Boston telecom conference, "said yesterday he will push -- before the next president is inaugurated -- to protect fledgling Internet telephone services from getting taxed and heavily regulated by the 50 state governments," the Boston Globe reported, adding that Powell "hopes before Jan. 20 to get the five-member commission to agree that only the FCC can regulate Net phone plans like those offered by Vonage Holdings Corp., AT&T Corp.'s CallVantage, and a host of other services offering low-priced, unlimited phone calls. Powell said his goal is to keep Internet phone subscribers from having to pay the fees and taxes levied on conventional phone service offered by companies like Verizon Communications Inc. He also wants to prevent state price and service regulation from squelching a fast-growing but still small industry that counts just under 1 million U.S. subscribers."
Boston Globe: FCC Chief Pushes to Protect Net Phone Services

The Associated Press noted Powell said "he would seek broad regulatory authority for the federal government over Internet-based telephone services to avoid stifling the emerging market. Powell told a receptive audience at an industry conference that letting states regulate [VoIP] services would lead to a patchwork of conflicting rules like those which have ensnarled the traditional phone business for decades," the Associated Press reported. "To do so, Powell said, 'is to dumb down the Internet back to the limited vision of government officials. That would be a tragedy.'" The Boston Globe had a slightly different take on the chairman's wording: "To hold that packets flying across national and indeed international digital networks should be subject to state commission economic regulatory authority is to dumb down the Internet to match the limited vision of government officials. That would be a tragedy," Powell said, according to the Globe.

Powell, as quoted by the AP, said: "We cannot avoid this question any longer. It is very likely that treatment of VOIP will have some of the farthest reaching consequences of anything this commission has done or will do." More from the AP: "Powell, who reiterated his belief in minimal regulation of VoIP services, said questions of its taxation and connectivity to 911 emergency assistance are best left to the federal government because the technology erodes geographic barriers."
Associated Press via washingtonpost.com: FCC Chair to Seek Net Telephone Oversight (Registration required)

NetworkWorld Fusion reported Powell said the FCC VoIP proposal would start from scratch. Powell "says state resistance to this may be caused by public utilities commissioners trying to defend their turf rather than trying to encourage new services," the news service said.
NetworkWorld Fusion via PCWorld.com: FCC Chair Advocates Hands-Off Approach to Voice

Early reaction to Powell's remarks has been mixed. "Cherie Kiser, a top Washington telecommunications lawyer with Mintz Levin Cohn Ferris Glovsky and Popeo P.C., said despite Powell's call for the FCC to supersede states in regulating Net phone service, 'There's no way that chairman Powell's going to totally oust the states. A total preemption would be a very aggressive and very unusual stance,'" the Globe said. InternetNews.com reported that "Cathy Martine, who lead VoIP efforts for AT&T, spoke after Powell. She was supportive of a 'light regulatory touch' on VoIP but stressed that all telecoms must be treated alike."

From the Los Angeles Times: "Many in the growing Internet phone industry believe that Powell's policies have favored big regional telecommunications companies such as SBC Communications Inc. and Verizon Communications Inc. They fear Powell's hands-off approach could allow the phone companies and the cable firms to use their control over the high-speed, or broadband, lines into homes to stifle competition from VoIP providers."
Los Angeles Times: FCC Chief Outlines Plans for VoIP (Registration required)
InternetNews.com: Powell Calls for Federal VoIP Rule

VoIP's Rising Tide

How popular is VoIP? Powell pointed to figures from the Yankee Group, which said there will be 1 million subscribers by the end of 2004, up from 131,000 last year, the AP reported.

The Los Angeles Times noted: "Internet protocol, long used in long-distance traffic, has boomed this year in the consumer market as an inexpensive alternative to conventional phone service. The technology turns voice into data packets and sends it over high-speed Internet connections like e-mail. Whether firms that sell the service should be as tightly regulated as traditional phone companies has been an issue of sharp debate. Backers of VoIP say too much regulation will stifle innovation. Phone companies and some state regulators counter that the same rules should apply because VOIP is just another way to make a phone call. Powell's comments to the Voice on the Net conference ... expand on previous remarks about allowing new communications technologies to develop on their own with minimal government oversight."

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