LEVEL OF URGENCY ON VoIP LEGISLATION SUBJECT TO DEBATE

Several witnesses insisted that VoIP faces threats from states eager to apply telecom regulations on the service, and urged congressional preemption. House Commerce Committee Vice Chmn. Pickering (R-Miss.) has a bill (HR-4129) that would do that. States such as N.Y. and Cal. “are beginning to look at” regulating VoIP, he said, adding that the Senate Commerce Committee has vowed to mark up its VoIP legislation: “I don’t think this committee should ever be in a place where the Senate does something faster than the House.” There’s “great common ground that there should be a federal policy,” Pickering said, “the lions and lambs are laying down together. For certainty of capital and certainty of preemption, we need to go forward this year.”

But Stearns and House Internet Caucus Co-Chmn. Boucher (D-Va.) argued that a more comprehensive approach would be better. “Shouldn’t we rewrite the Telecom Act of 1996 to include voice, video and emerging services” in a new regulatory category, Stearns asked Wireline Bureau Senior Deputy Chief Jeffrey Carlisle. Carlisle seemed to endorse that approach. “One of the problems with the current model,” he said, “is that everything depends on an on/off switch” -- classifying VoIP as an information service under Title I or a telecom service under Title II. Parties lobby the FCC for the classification favorable to them, he said, leaving the FCC with “a sort of broad, meat-cleaver approach” to regulating the service. Some regulations can be imposed under Title I and some forbearance can be done under Title II, he said, but the system remains “bipolar.” “If Congress were to tackle this and avoid that argument entirely” it could start with a clean slate, he said. To Boucher, Carlisle said “I agree that we should be looking at a broad framework out of administrative efficiency if nothing else.” He said with that approach “you don’t have to go back and formulate an entirely new regulatory system” every time a new technology emerges, but he said “we have to be concerned we don’t fade over into regulating vast portions of the Internet that have never been regulated.”

Stearns and Boucher Tues. introduced a bill (HR-4757) that would create a new category to regulate all IP services, including voice, video and any service not yet conceived (CD July 7 p2). “A new regulatory framework is required,” Boucher said. “It’s time for an entirely new regulatory framework for Internet communications.” He acknowledged that his new bill, the Advanced Internet Communications Services Act, would be a “substantial rewriting of the 1996 Telecom Act.” But that was an analog act, he said, and HR-4757 could help “frame the debate” for a broader rewrite to deal with the Internet, whose impact wasn’t anticipated 8 years ago.

Congress doesn’t have time for that debate, Pickering said. “A broad telecom reform act will be very intensive and will take a minimum from today of 3 years.” VoIP could be the dominant voice service by then, he said. Pickering said his bill would ensure the FCC would tackle tough issues such as 911, universal service contributions and intercarrier compensation, but would provide certainty for VoIP providers by preempting states. “I would hope we find a way to do it this year,” rather than taking 3 years, because “the market and the technology can’t wait that long.” Despite Carlisle’s apparent sympathy for a more comprehensive approach, he also seemed supportive of Pickering’s desire to act. Carlisle read from a letter Chmn. Powell sent Pickering on VoIP in which Powell said “the time has come for Congress to act.”

Pickering made an “impassioned plea for Congress to act,” said Rep. Engel (D-N.Y.), but he said “my experience in Congress has told me that sometimes there are bigger and broader issues and you can use the need to deal with the smaller issue as a catalyst to deal with the larger issue.” He said taking care of VoIP first would remove a spur for a larger Telecom Act rewrite next year, which he said is necessary: “I don’t know if we should keep trying to plug holes in an analog law with digital Band-Aids.”

Asked by Rep. Davis (D-Fla.) if industry could wait 3 years for congressional action, several witnesses said no. “This issue cannot go 2 or 3 years without being resolved,” said BellSouth Pres.-Regulatory & External Affairs Margaret Greene. She said “all things broadband and wireless are moving to IP” and 2/3 of BellSouth’s traffic now is data. It’s not a question of how VoIP “will disrupt the industry,” she said: “The disruption is here.” Level 3 Communications Group Vp-Emerging Opportunities Ronald Vidal said VoIP technology could be suppressed if congressional action took 3 years. Several witnesses said the regulatory uncertainty made it impossible to predict what a company’s price would be for providing service, and Vonage CEO Jeffrey Citron said Congress had to act quickly, because officials in Cal. have vowed to regulate VoIP as a telecom service “if Congress doesn’t step in.”

But the urge to hurry wasn’t universal on the panel. Great Plains Communications CEO Michael Jensen, representing NTCA, said a 2-3 year delay “wouldn’t be a problem,” saying there was no need for Congress to move hastily. “We must avoid a piecemeal approach to telecom reform,” he said, and “look at the broader framework.” Mich. PSC Telecom Committee Chmn. Robert Nelson -- speaking for the National Assn. of Regulatory Utility Commissioners -- agreed with Jensen. He said there wasn’t a real threat of state action, because the 2 states that have sought to regulate VoIP were enjoined from doing so. Nelson also declined to back federal preemption of VoIP, insisting “state regulation can be tailored so it does not disrupt new technologies.” Agreeing with full Committee ranking Democrat Dingell (Mich.), he said states have obligations to protect consumers. Pickering and Boucher each said that under his own bill states could continue regulating VoIP for consumer protection.

At least one witness urging quick action also seemed to favor a more comprehensive approach. VoIP is “symptomatic of the tremendous disruption” to the telecom industry in recent years, Greene said, but to “treat VoIP by itself could possibly be a mistake.” She said “you need to have a unified federal perspective,” ensuring that access charges are fair and universal service burdens are shared equally, and that platforms are held neutral under regulations.

Dingell said “I agree with those who argue it would be foolish to impose Title II regulation, in its entirety, upon VoIP service offerings.” However, he said the FCC has “broad discretion” under Sec. 10 of Title II to forbear and should feel free to do so with VoIP. He found “quite troubling” placing VoIP under Title I as an information service, a move he said would have “serious adverse consequences… I would like to take this opportunity to remind the FCC that it is a creature of the Congress, and the Congress has never intended that voice services be deregulated at the whim of the FCC.” He didn’t address the approach of Stearns and Boucher to create a new regulatory category.

Intercarrier compensation reform could be a sticking point in moving any legislation, Stearns told us. He said some committee members don’t want to change the current system or don’t believe there’s any rush. Nearly all witnesses called for reform, Covad Gen. Counsel James Kirkland saying the current system is “broken.” But Citron, citing different connection rates for wireless providers, said his company should avoid paying for connecting to the public-switched telephone network (PSTN) until compensation reform is complete. Greene said Vonage and other VoIP providers should be paying now. Cablevision Systems COO Thomas Rutledge said his company is paying for PSTN connections through its CLEC, Lightpath. VoIP calls among Cablevision customers never hit the PSTN and thus no compensation is paid -- but when a call is placed to a PSTN line compensation is paid. Vidal said “perhaps 20 years from now, all calls will be IP-IP,” but for now VoIP providers and customers “continue to live in a no-man’s land, with no clear direction from regulators.” Meanwhile, Kirkland and Martine took the opportunity to urge continued access to unbundled network elements (UNEs), which they said were critical to VoIP deployment.

VoIP Just Packets, Carlisle Says

Carlisle insisted VoIP is just another form of transmitting digital bits via packets. “Saying VoIP is just another way to make a phone call is very much like saying that Amazon.com is simply an alternative technology for selling books.” He said e-commerce has “changed the way we shop for things,” and VoIP and other IP-based services can have the same social impact. It’s also a different business model. Under plain-old-telephone-service (POTS), “whoever owns the pipe into your home owns you as a customer,” he said, whereas VoIP is “less a stand-alone service you buy and more a free or almost-free add-on to something else.” VoIP comes in different “flavors,” he said, which is why AT&T’s service was placed under Title II and Pulver’s service under Title I, but he said that the FCC “is still constrained by this structure.”

Asked by Rep. Eshoo (D-Cal.) whether eventually the content carried in packets online will become irrelevant from a regulatory standpoint, Carlisle said “we're already there.” It’s reasonable to ask, he said, “why we should take one bit stream out” from other packets for specific regulation. That point was made by Telecom Subcommittee ranking Democrat Markey (Mass.), who with Rep. Cox (R-Cal.) hoped the FCC would take a hands-off approach to VoIP in its current rulemaking.

All 9 witnesses at the hearing said VoIP providers should comply with CALEA, though about 1/2 called VoIP an information service, which would exempt it from CALEA. Some providers said they already were cooperating with law enforcement. There was also strong support for providing reliable 911 service, although the general sentiment was that the private sector should be left to develop that approach without a regulatory mandate. There also was little dispute about making VoIP providers pay into the Universal Service Fund, although there also was little consensus on how that should be done. Still, while calling the USF program “broken,” Martine said she wanted to “emphasize that nothing about VoIP threatens universal service… we support VoIP being part of the broader reform of the USF system.”

Jensen urged Congress to strengthen and expand USF, including having it promote broadband, which witnesses agreed is necessary VoIP. Rep. Towns (D-N.Y.) said “many of my constituents don’t have dial-up, let alone broadband, so VoIP is not a concern in the near future.” He said “if high- paying profitable customers migrate to VoIP, there could be serious consequences for universal service and the maintenance of the [PSTN].” He expressed sympathy with a “broader Internet approach” rather than “simply tackling VoIP.”