More VoIP Regulation Said Coming from FCC, States, Abroad

No matter what happens in the 2008 election, more VoIP regulation is likely, said attorney Glenn Richards. Future FCC decisions probably will move VoIP more into the category occupied by a typical telecom provider, he said. “It doesn’t really matter whether we end up with a Clinton or a Giuliani” on that count, he said. No matter who chairs the FCC, health, safety and terror will drive Commission decisions, he said. “All of these things have taken over the mind set as opposed to deregulation.”

VoIP companies should tell the FCC not to impose access charges on VoIP, or risk making decisions that won’t act “in a good way for the VoIP industry,” Richards said. The FCC is expected to decide soon whether VoIP companies should pay the same access charges as AT&T, Sprint Nextel and other big telcos, he said. It’s an issue the “FCC has been grappling with that for about eight years,” but Commission Chairman Kevin Martin has said changes top his list for the near term, Richards said.

The FCC soon may intervene to force failing VoIP businesses to tell customers they're going out of business before closing down, Richards said. Under FCC rules, traditional phone companies have to give customers 30 days’ notice, he said. SunRocket’s sudden closing last July could spur the FCC to apply that rule to interconnected VoIP providers, he said.

Positive FCC developments could emerge, panelists said. FCC soon could make new rules to “clean up” the number portability process, helping VoIP companies win traditional phone service customers, said attorney Ron Del Sesto. And Universal Service Fund reform could make paying USF “much easier to handle,” said Kevin Minsky, Microsoft policy counsel for U.S. legal & corporate affairs. Paying into the fund based on how many numbers a carrier owns would be more equitable than the current revenue-based system, he said.

An explosion of state regulation to do with VoIP could complicate life for the industry, Minsky said. Companies will “have 50 different [governments] regulating them,” a factor that’s not going to go away next year, he said. Many states assess or want to assess E911, USF and sales tax fees on VoIP, and others are introducing VoIP-focused consumer protection laws, said Del Sesto.

Movement in the U.K. could foreshadow a wave of European telecom regulation, Minsky said. U.K. regulator Ofcom already has adopted a labeling requirement stipulating that certain VoIP services disclose whether the service can call 999, that country’s 911. It opened a proceeding on 999 auto location, despite finding VoIP not yet a substitute for traditional phone services, he said. “Even when there’s data out there proving that some of these mandates aren’t necessary… regulators are still wanting to impose regulations just to regulate,” Minsky said. “The fear I have is, if they do adopt this 999 auto location precedent, you'll see other governments across the E.U. following something similar.”

International regulators should limit market regulation of VoIP to services marketed as replacements for switch-based phone service, Minsky said. Regulation should be considered only where market forces fail to achieve a clearly defined public interest objective, he added. That mindset has taken hold in the U.S., but many foreign markets need convincing, he said.

Regulation can cause headaches, but the VoIP industry shouldn’t fear it, Del Sesto said. “Regulation is not always scary,” he said. “If everyone is regulated the same way… there’s no room to arbitrate. It makes a level playing field [where] it doesn’t mean that a company that’s willing to take more legal risk wins the marketplace.” -- Adam Bender

VON Conference Notebook…

VoIP businesses must add social media features to phones if they want consumers to replace traditional switch-based networks, VON founder Jeff Pulver said at the VON conference Tuesday. “User experience” is key, he said. “Better” voicemail, call forwarding and other so-called advanced VoIP services show little evolution beyond traditional phone service, he said. Industry should learn from Facebook, which claims 22 percent of Canadians and 19 percent of Norwegians as users, and add social network features to VoIP, he said. That Facebook is “quickly becoming the white pages of the Internet” means online social media will continue to gain importance, he said. The past 20 years have seen businesses adopt Internet e-mail and Web sites, Pulver said, predicting that in 2008 and 2009, businesses worldwide will determine social media strategies.

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The VoIP rocket driving large-scale replacement of traditional switch-based telephone “never fired,” said Tom Evslin, chief technology officer of Jeff Pulver startup Free World Dialup. The VoIP industry underestimated telcos’ power to use regulation to slow new technology, he told the VON conference. But the VoIP industry’s lack of innovation also is keeping the technology down, he said. VoIP phones lack new applications that would make them “way better” than a PSTN, he said. “We really haven’t made any progress except for cheap minutes,” he said. And the need to interconnect VoIP with switched networks has held industry back, he said. “We handicapped ourselves by tying a ball to our ankle by keeping backwards compatibility with the PSTN,” he said. “As long as we do that, then we don’t have services that reach the full potential for communication between people. It’s incredible that we're still dialing numbers. Who uses numbers? We have names, right?” However, a “new rocket coming from the Klingon galaxy” could bring change, he said. Significant broadband penetration, growth of online social networks and mobile devices that act more like small computers than phones could unhitch future VoIP technology from the old phone network, he said.