POWELL SEES FCC FOCUSING ON DISCRETE ISSUES ON VoIP

Powell also announced a special working group at the FCC that would make recommendations to the commissioners on VoIP’s regulatory fate. “While this service is coming quickly, it is still quite nascent,” Powell said, noting that 100,000 VoIP customers out of 170 million telephony access lines represented a small fraction of the market. The FCC plans to roll out a rulemaking (NPRM) soon, but when asked about timing, Powell said he thought “right is better than haste… Doing no harm is important.”

In his remarks kicking off the roundtable forum, Powell said: “IP-based services such as Voice-over-IP Protocol should evolve in a regulation-free zone… No regulator, either federal or state, should tread into this area without an absolutely compelling justification for doing so.”

Powell said it was “imperative” that the Commission establish a rational policy environment for IP-based services to continue to evolve: “In my view, that policy environment must begin with the recognition that the Internet is inherently a global network that does not acknowledge narrow, artificial boundaries.” Powell said states had “important roles in the areas of their traditional police powers.” Sens. McCain (R-Ariz.), Wyden (D-Ore.), Allen (R-Va.) and Sununu (R-N.H.) had urged that the Commission examine carefully the role of state regulation of VoIP to ensure that investment and innovation were undeterred. “To be sure, health, safety and welfare may give rise to uniquely state interests and it might be proper for them to play a role in these areas,” Powell said. However, he said economic regulation was “entirely another matter and we should approach that area of regulation with significant skepticism.”

Powell was particularly afraid that a heavy-handed regulation might drive VoIP overseas, where it’s just as easy to set up servers under a lighter regulatory hand and still provide the same service to Americans. “We want those jobs and that productivity in the United States,” he said.

VoIP only ‘Mimicking’ Traditional Telephony

FCC Comr. Copps said it was “increasingly apparent” that Commission action was needed soon: “We've let VoIP bubble up on its own, but now it’s starting to boil. Before it becomes too hot for end-users and entrepreneurial businesses to touch, we must bring clarity to the issues.” Copps said addressing VoIP issues would take the FCC back to fundamentals: “We are challenged to adjust our policies and rules not only to accommodate, but to facilitate” convergence of voice, data and video onto Internet-based networks. “It goes to basic questions and to examining how what we do on VoIP will affect so many of the programs currently in place,” he said: “Indeed, it is difficult to think of an area of telephony that won’t be affected by what we do here -- consumer-wise, business-wise, regulatory-wise.”

In a Q&A session with the panelists, Powell said some of the services discussed were “not really the same as telephone as much as they are mimicking the telephone system for consumer comfort more than out of a necessity.” For example, he said in case of VoIP, telephone numbers sometimes were “just made up for your comfort purposes.” Pulver.com CEO Jeff Pulver disagreed: “Rather than mimicking other things, [VoIP] provides you for the first time with an opportunity for invention of new services.”

Cisco Systems Senior Vp-Gen. Mgr. Charles Giancarlo agreed with Powell that a hostile regulatory environment could drive VoIP services offshore: “We want to create a regulatory regime that would really encourage VoIP control to not only stay within U.S. corporations, but would also enable things like E911 to be the things that are put into place.”

Supernova Group founder Kevin Werbach argued that VoIP was “not a service in the same way as a plain telephone service. It’s a class of applications.” He said it would be futile for the FCC to try to “chase the technology… Instead, the Commission needs to start from the other end and try to figure out what it’s trying to achieve. The question becomes what is the kind of service that regulation was designed to address, and how do we define that service from the bottom up, as opposed to looking at everything that’s out there and figuring out how to scranch down a definition.” UBS Managing Dir.-Communications Group John Hodulik said the Commission should look at the issue from a service rather than a technology standpoint,: “Technology hasn’t evolved nearly to where it’s going to be 5 to 10 years from now.”

FCC Comr. Abernathy expressed concern that some VoIP products didn’t interact with the public switched telephone network (PSTN) and that there were no incentives to invest in PSTN. However, Hodulik said Bells, regardless of whether the traffic migrated to IP or stayed on a traditional network, were “not going to invest much money in telephone network anyway… Their investment is going to be looking toward new services to replace old revenue streams that they are losing… I think most importantly for these companies is to pursue these newer areas that will allow them to generate the cash they need to continue the minimal investment that they need to fund the PSTN.” Werbach predicted that in 5-10 years, voice probably would become a “relatively small piece of the overall revenue base, which will be based on broadband access and a variety of services, of which voice will just be one.”

After the forum, SBC Senior Vp-Federal Regulatory Strategy Dorothy Attwood said the FCC should declare VoIP service “to be interstate in nature.” She said the Commission should initiate a dialog with state regulators and the industry, stressing that there “should be minimum regulation: “All providers of IP services should be treated the same.” A Verizon spokesman agreed: “Don’t apply yesterday’s economic regulation to the future.” He said access charges should apply “when a phone call is transferred for completion across our switched telephone network regardless of the technology used to originate the call.”

‘Innovative Spirit’ Will Solve Problems

On a 2nd panel, acting NTIA Dir. Michael Gallagher said any regulation of VoIP should be “minimalist and narrowly tailored” to meet public interest goals. FCC commissioners should keep in mind that over-regulation could “offshore” the service, threatening Homeland Security, he said. Cal. PUC Comr. Carl Wood, also representing the National Assn. of Regulatory Utility Comrs. (NARUC), said his state already was asserting jurisdiction in the courts and he feared USF and consumer protections would be lost without state involvement. He later acknowledged that the borderless nature of the Internet lent itself to federal jurisdiction but said states still had a role to play. Fla. PUC Comr. Charles Davidson, on the other hand, suggested a hands-off approach, saying this was still a nascent service and that regulation should be confined to USF and a few other public interests.

Level3 CEO James Crowe said he wished for “sensible” rather than “extreme” regulation and was supportive of mechanisms for E911 and USF. Tom Evslin, CEO of ITXC, an international VoIP provider, said he believed forbearance on this point had been a success and that the FCC should make forbearance “explicit, not just tacit.” A monopoly is the only condition that requires regulation and there’s no such monopoly in this instance, he said. What’s more, citing voluntary industry efforts like that announced on E911, Evslin stressed that regulation would be unnecessary. Voluntary efforts also are under way for CALEA, he said. Vonage CEO Jeffrey Citron urged the FCC to “let the innovative spirit that has guided the industry” solve the problems it faced. However, U. of Wis. Prof. Gregg Vanderheiden said that industry never had provided access for disabled and older persons without some form of govt. coercion and that the FCC should codify into law rules to that effect.

The FCC working group Powell announced will be led by Chief of Policy Development Robert Pepper and Jeff Carlisle, senior deputy chief, Wireline Bureau, and will draw from each of the affected bureaus, including media, since cable is becoming a VoIP provider as well. At some point, there also might be some form of public outreach, perhaps even a public forum on VoIP, we were told. Other members of the group named were: June Taylor, chief of staff, Consumer & Govt. Affairs Bureau; Anna Gomez, deputy chief, International Bureau; Kyle Dixon, Media Bureau deputy chief; Jeffrey Goldthorp, Office of Engineering & Technology; Mary McManus, special counsel; and David Furth, assoc. chief, Wireless Bureau.

Powell said he thought the forum had helped to crystalize the fact that there were only a discrete number of issues of concern affecting the public interest on VoIP. Each of the panelists addressed those issues, which were how VoIP might or might not contribute to the Universal Service Fund (USF), how it would deal with security issues under CALEA, provide emergency 911 service to customers, and how companies would address a handful of disability and consumer issues. However, Powell later said the FCC also must address other issues not discussed Mon., including how a regulatory regime might affect Internet Messaging functionality, Wi-Fi- enabled PDAs or even X-box. “I think it’s the most fascinating thing I've done since I've been here,” he added.

911 Agreement Announced

Coinciding with the forum, members of the VoIP industry and the National Emergency Number Assn. (NENA) announced they had reached agreement on one of the key issues cited, provision of emergency 911 services to VoIP users. Eleven companies, including Level 3 Communications, Vonage and pulver.com, as well as the Voice on the Net (VON) Coalition, endorsed the voluntary plan under which: (1) Customers with conventional style phones would get 911 service, or at least routing to a public safety access point (PSAP) 10-digit number, in 3-6 months and before then inform customers about the lack of such access. (2) Providers, when they began selling in an area, should coordinate with local PSAPs, although the obligation didn’t apply to “roaming” by customers. (3) NENA and industry would be supported in work on an interim solution that included delivery of 911 through the existing network, providing callback numbers to the PSAP and in some cases, initial location information. (4) Long- term solutions for delivery to the proper PSAP would be supported, providing callback number and/or recontact information to the PSAP, providing caller location, and PSAPs having direct IP connectivity. (5) An administrative approach to funding for 911 resources equivalent to current or evolving processes would be supported. (6) Consumer education projects would be developed.