Regulate Incumbents, Not VoIP Providers, Skype Creator Says

Skype is growing “phenomenally fast,” adding over 155,000 new subscribers daily worldwide, Zennstrom said. With 33 million registered users, Skype is the fastest growing Internet product ever, he said. Because the application is independent of the network, new services and products can emerge according to software product development cycles rather than those for network infrastructure. Zennstrom denied that Skype is merely a parasite on telecom infrastructure. The service is no different from e-mail or instant messaging, he said. Like them, it uses bandwidth consumers already pay for to get broadband service.

Skype and other VoIP applications won’t “be the death of phone companies,” Zennstrom said: For one thing, VoIP is driving broadband sales. For another, it’s more cost- effective to run one network than to run separate telephony and IP networks, he said. But since VoIP is a nascent technology that needs to connect to the Public Switched Telephone Network (PSTN) for delivery over 3rd- party Internet access, network-owning incumbents have an incentive to block VoIP services, he said.

Numbering is another key issue for VoIP providers, Zennstrom said. VoIP users are mobile and want geographical numbers that follow them. The U.S. is a single market with regard to geographical numbers, he said, criticizing European countries for their reluctance to provide such numbers. Zennstrom urged regulators to grant access to geographical and virtual numbers, and to stop network operators from blocking access to VoIP services.

VoIP is absolutely within Europe’s regulatory scheme but regulation is “extremely light"unless a provider has market power, said James Allen, a consultant with Analysys and the principal author of a study on voice services commissioned last year by the EC. Under the new e- communications regulatory framework (NRF), a service’s classification decides whether and how it’s regulated. VoIP “fits rather well” into the regulatory scheme, depending on a given service’s actual business model, Allen said. His report classified Skype as a self- provided, “do-it-yourself” model -- Skype uses a peer-to- peer model -- which could mean no regulation is necessary. But if it provides Publicly Available Telephone System (PATS)-like services, such as access to emergency numbers, it’s a phone and should be regulated as such, he said.

Access markets are key to VoIP success, Allen said. Dominant incumbents can’t block VoIP packets and charge more for VoIP than other services, but non-dominant providers can, he said. VoIP will redefine telephony -- not just PATS but video, audio, file-sharing and other applications, Allen said. It will create competition not based on access. “A closed Skype user group for everyone with broadband?” Allen said: Imagine in what position that puts the person who controls the software.

Regulating VoIP won’t do much good, said Cisco Dir.- Technology Communications Policy Jeffrey Campbell. He agreed VoIP is a software application, and said it differs from the PSTN in significant ways: (1) It can be embedded in another application. (2) It detects one’s presence on the network. (3) It supports rich media. (4) VoIP end- user devices are computers or require computer interfaces. VoIP may look like a duck now, Campbell said, “but it’s growing up to look like a swan.”

Any regulation should focus where “it can do some real good,"Campbell said, such as ensuring nondiscriminatory interconnections to the PSTN and allowing for geographical numbers. Even social issues such as access to emergency services and lawful police intercepts may not require VoIP regulation; they may be better handled by the market, he said. And regulation has no place in economic issues, because in VoIP no one has market power. The good news, Campbell said, is that regulators are “getting it right.” He urged them to think before they regulate.

VoIP isn’t “one thing” but a variety of offerings that will be handled differently under the NRF, said Peter Scott, EC Information Society & Media Directorate-Gen. head of unit on policy development & regulatory framework. The EC is trying to decide whether it can live with member states’ varying approaches to VoIP regulation, or consider them barriers to the service, he said. The Commission will decide at year’s end whether it needs to do anything about VoIP.

It’s “deplorable” that the EC launched a consultation on VoIP last year “and now all efforts to harmonize European Union VoIP regulations have fizzled out,” said Axel Spies, a German attorney who represents alternative telcos. The European Regulators Group issued a “lukewarm” common statement on VoIP in Feb., in which it urged regulators to encourage innovation while ensuring competition and consumer protection -- “and since then nothing has happened,” Spies said later.