February 9, 2005 5:07 PM PST

Telecom execs go to Washington

Executives from some of the telecommunications industry's leading gear makers went to Washington on Wednesday to urge members of Congress to keep communications over the Internet free of regulation.

Representatives from Alcatel, Lucent Technologies, Motorola, Qualcomm and Siemens testified in front of a House of Representatives subcommittee panel regarding possible changes to the Telecommunications Act of 1996. The executives took a firm stance against government rules, which they said could stymie technology development and deployment.

"Many technologies are fundamentally different from when the (1996) Act was created, so it makes sense that regulation would have to change," said Patricia Russo, the CEO of Lucent. "It's critical for Congress to adopt a federal policy framework designed to promote and enable the converged lifestyle. To ensure that, it means minimizing and, in some cases, eliminating regulation."

The hearing comes amid a wave of consolidation in the telecommunications industry that is changing how traditional phone companies operate and build their networks.

Last week, local service provider SBC Communications said it would buy long-distance carrier AT&T for $16 billion. Qwest Communications, another one of the four Baby Bells, has put in a bid for the No. 2 long-distance phone company, MCI.

As carriers merge with each other, the role of the service provider is undergoing a shift. The move for phone carriers is away from only offering voice calls, and for cable companies, away from only offering television. Instead, analysts have predicted that telephone companies, cable operators, wireless service providers and satellite companies will all use Internet technology to offer the same suite of voice, video and broadband services to businesses and consumers.

Because telephony has always been highly regulated, there are several concerns about how voice and other services that run over IP networks should be handled from a regulatory standpoint.

Congress first began looking at voice over Internet protocol (VoIP) regulation in July 2004. During Wednesday's hearing, executives from the technology manufacturers urged Congress to look at telecommunications as a whole rather than looking at individual technologies.

"There aren't distinctions between wireless, wire-line and cable anymore," said Edward Zander, CEO of Motorola. "These technologies will be available on all devices. We have to understand that there is a big paradigm shift here."

The gear suppliers all agreed that telecommunications reform needs to be made, and they urged Congress to act swiftly.

"Whatever happens, we'd like to see it happen relatively quickly," said Michael Quigley, senior executive vice president of Alcatel and president of its North American activities. "If changes take a long time, it will create uncertainty in the marketplace."

Quigley further pointed out that in the past, regulatory uncertainty has led phone companies and other service providers to take their time when investing in new technologies.

One of the biggest concerns regarding the regulation of IP services is what should happen to the Universal Services Fund. This is a tax added to consumers' phone bills in order to help pay for service in underpopulated regions of the country and also to help fund the E-rate program, which provides discounts on Internet service and equipment for schools and libraries. Executives reasoned that technology advancements would actually reduce the need for high taxes to fund the USF.

"When you use wireless technology, the cost-per-subscriber goes down," said Irwin Jacobs, CEO of Qualcomm. "The technology will help reduce the cost of providing those services. Rural services can then be provided with new technology, rather than having taxes added to pay for it."

 

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