Incumbents, Entrants and Regulators Wrestle With VoIP
LONDON -- Telecom regulators must confront VoIP challenges on closed markets quickly or risk undermining international accounting rates before there’s a new system in place, a speaker said Thurs. at the Carrier World 2004 conference here. VoIP regulation in closed markets is still in the early stage of debate, and some countries are closely watching the consultations in the U.S. and European Union, said Craig Sillman, MCI vp-international regulatory affairs. In the current unsettled state, he said, regulators, incumbents and entrants are dealing with VoIP several ways.
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The VoIP market has several driving forces, Sillman said. A significant amount of VoIP traffic results from regulatory arbitrage; it’s neither circuit-switched voice nor traffic captured under the international accounting rates. The higher the accounting rates are, the more likely companies are to bypass them and use VoIP, he said. Incumbents -- many at least partly owned by govts. -- deal with arbitrage by trying to protect their legacy businesses. Some countries bar VoIP; some provide that only telcos licensed for public switched telephone networks may offer VoIP; and some allow inbound, but not outbound, voice calls, Sillman said. Competitors seeking cost-effective ways to terminate traffic are moving to VoIP. Regulators, he said, “are dealing with a dilemma” - - how to safeguard incumbent telcos’ revenue while bringing benefits to the market.
A 2nd VoIP driver is the wholesale market. There are no major differences here between incumbents and entrants, Sillman said, because all carriers want to consolidate their networks for efficiencies. The enterprise market also encourages VoIP uptake as customers seek to consolidate their networks on voice platforms, he said. Incumbents often forge cooperative commercial relations with global carriers that serve as agents for local licensees in closed markets, he said, but “they're on the fence about this.” On one hand, incumbents want to cooperate with local carriers; but on the other, they don’t want those markets to open up. Regulators are torn, wanting to attract business to their countries but not cannibalize their own industry, he said. VoIP is also beginning to grow because of advanced functions it can provide in the mass market, Sillman said.
Competitive carriers see VoIP as lowering entry barriers but worry incumbents will use it to escape regulatory obligations, Sillman said. In closed markets, he said, VoIP can “be the driver for liberalization,” but only if regulators move quickly. They must: (1) Address the problem -- above-cost accounting rates -- not the symptom, VoIP as a bypass. (2) Promote the development of a competitive enterprise market, eliminating all restrictions on VoIP in closed user groups. (3) Allow VoIP services to be provided competitively, but clarify which rules apply.