On Wednesday, a House of Representatives panel will convene its first hearing devoted to considering how much of the thousands of pages of weighty telecommunications regulations should be imported to cover voice over Internet Protocol (VoIP) services. The apt title of the hearing: "VoIP: Will the Technology Disrupt the Industry or Will Regulation Disrupt the Technology?"
This is a process fraught with problems. For all the hype surrounding VoIP, it remains a fledgling industry that could be severely--perhaps even permanently--harmed if Congress veers in the wrong direction.
For all the hype surrounding VoIP, it remains a fledgling industry that could be severely--perhaps even permanently--harmed if Congress veers in the wrong direction.
Rick Boucher, D-Va., and Cliff Stearns, R-Fla., are planning a press conference on Tuesday afternoon to announce a second House bill on VoIP. Boucher told me that while the legislation won't be finalized until the event, it has two major components: One of them is to block states from regulating VoIP. The other is to encourage the Federal Communications Commission to consider what 911, universal service, and access charges requirements will apply.
In the Senate as well, politicians are divided on how to react to VoIP. At a hearing last month, senators were skeptical of the Justice Department's requests for broad, new VoIP wiretapping powers. Others insisted that the FCC must levy universal service taxes on VoIP calls, with proceeds going to fund discounted analog phone service for low-income and rural American households.
The growth of VoIP is a big concern of state regulators, who say they fear losing tens of millions of dollars--from fees and subsidies provided by telephone companies--if more calls flow away from traditional phone networks and onto the Internet. States such as Minnesota and New York already are active in trying to seize authority over VoIP companies.
This is a classic Washington scenario that often heralds bad legislation. When just about everyone wants something, they tend to be willing to trade political favors for it. The Justice Department conceivably could ink a deal to back universal service taxes on VoIP--on the condition that certain senators drop their opposition to new wiretapping requirements, and so on.
This is a classic Washington scenario that often heralds bad legislation.
These rules, most of which are laid out in excruciating detail in Title II of the Telecommunications Act of 1934, may have had a place when the Bell system was the only way to make a phone call. Extending them to the Internet risks stifling the growth of a promising new technology with a web of taxes, entitlements, and cross-industry subsidies designed for a much earlier era.
Take "universal service," one of those rare taxes that enjoys enthusiastic bipartisan support. In its modern form, it was invented by a Republican Congress in the mid-1990s and can be politically dangerous for politicians to oppose. Telecommunications companies pay a total of about $6 billion a year in universal service taxes. Yet a 1998 analysis by Lawrence Gasman, head of a telecommunications consultancy in Charlottesville, Va., concludes it can't be justified even for analog telephone lines. If so, why should it be renewed in the form of higher taxes for VoIP users?
"We're directing the FCC to put the issue under the microscope and figure out a reasonable way to have universal service apply to VoIP," Boucher said. "What we are saying is that the commission shall apply universal service formulas to VoIP, and we leave it to the commission to make a decision on how to do that." Boucher said his bill would not prohibit the FCC from imposing universal service fees on offerings such as Free World Dialup, Skype and instant messaging programs that include voice chats.
A white paper released last month by the VON Coalition--which includes Microsoft, MCI, Intel and Pulver.com--points out that VoIP providers already "contribute to universal service either directly or indirectly" when they link to the phone network. The report also stresses that "phone companies are already fully compensated for their costs when Internet phone calls are terminated on their networks," so there's also no need to impose new access charge taxes. It concludes that imposing regulations designed "for a 100-year-old telephone network on innovative Internet communications services" may not make much sense.
Unfortunately, when Congress starts writing new telecommunications laws, a dollop of common sense often doesn't go very far.
Biography
Declan McCullagh is CNET News.com's chief political correspondent. He spent more than a decade in Washington, D.C., chronicling the busy intersection between technology and politics. Previously, he was the Washington bureau chief for Wired News, and a reporter for Time.com, Time magazine and HotWired. McCullagh has taught journalism at American University and been an adjunct professor at Case Western University.
The only thing that regulators have going for them is the ability to hand out phone numbers. However, services that reject regulation will gladly use things like IP addresses and SIP IDs instead of phone numbers.
By attempting to enforce Universal Service fees on behalf of rural and poor people, regulators will unintentionally create the effect of putting these types of users in low tech (TDM telephone service) ghettos. Just like "Great Society" public housing was the worst kind of housing, Universal Service fee based services will be the worst kind of telephone service.
Regulators of all kinds should focus on creating the tax advantages that would drive low marginal cost broadband deployment. This will insure true universal service for everyone with very highly featured VoIP services.
If we look at the call-server model, then again this is problematic, as a call-server operator does not necessarily have any idea of where or to where a call is being made, at least from a location perspective. There is also no requirement that I am aware of, for the call-server to reside in the same country as either the caller, or the receining party. All of this is to say, that VoIP breaks the tie between access providers and service providers. In Good old phone networks these were geographically dependent, in VoIP they are not. Surely this will make it hard for States that seek impose taxes, if the service provided is outside of the juristiction of the State. If I were a service provider, I would simply setup shop in States or countries where such taxes were not inforced and let the subscribers move to me.
Some federal legislation of VoIP is absolutely essential. Without it, 911 emergency services is going to end up working differently depending on what type of phone service you choose. That's a disaster in the making and absolutely WILL get people killed.
Fortunately, current regulation regarding cell phones and emergency services would cover the bases for VoIP as well. Providers wouldn't have to meet some new, arcane standard or invest in new base equipment. Just chip the phone exactly the same as a cell phone for purposes of location and move on.
I agree that porting taxes and fees from traditional harline phones to VoIP is beyond silly.
Fast forward to the present, when I am now an AT&T CallVantage subscriber, and have ditched my regular landline. Now (in Texas) while the service costs $20/mth, I pay $30 already (even with "less" regulation of VoIP than regular landlines).
Regulatory fees only stand to strangle this new, revolutionary technology. They must be stopped.
- Stearns/Boucher bill deregulates the physical layer
- by July 7, 2004 8:04 AM PDT
- The Stearns/Boucher bill would deregulate the physical layer; it would preclude open access to transmission networks if they support an ILEC's or cable company's IP offering. It would reverse the Brand X decision on cable and would close off ILEC UNEs, special (and maybe even switched) access and perhaps even the requirement to allow resale. See section 3(a)(3) where it specifically mentions transmission networks, facilities and equipment. Beware this bill!!!
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