Hands-off policy on Net phones

The White House's point man on telecommunications says the federal government, at least for the time being, should not regulate telephone calls over the Net.

"The Clinton administration comes to this issue with a general attitude of regulatory forbearance," Larry Irving, head of the National Telecommunications and Information Administration, told a conference gathered to discuss Internet telephony last week. "President Clinton, Vice President Gore, Secretary [of Commerce William] Daley and I all have spoken about the need to let new telecom and information technologies blossom and grow and about the importance of looking to the private sector for solutions to problems."

Such a stance would be highly favorable to the development of Internet phone service, which has yet to take off. While it is possible to make local and long distance calls via the Internet right now, the quality is poor and special software is required on both ends of each call.

That is likely to change. According to Michael Killen, president of the Palo Alto, California, research firm Killen & Associates, revenue from Internet telephony will reach $63 billion by 2002. Killen currently pegs revenues at $741 million.

He added that the growth will occur only when software and hardware companies--which must build substantial infrastructure--have incentives to make such investments. For that reason, Killen applauded Irving's speech.

"It sends a signal to all the infrastructure providers that there is somebody in the bully pulpit that encourages the growth of voice over alternative networks and not to worry that the United States is going to do as some foreign countries have done [and ban Internet phone services]," Killen said.

But small long distance carriers see the issue differently. Internet service providers and others providing Net phone services currently are not required to pay special telephone access fees levied by the Federal Communications Commission. Because telecommunications companies are required pay to those fees, they are placed at a disadvantage, they say.

"Nobody is against Internet telephony as a new service, but I think the public is being fooled," said Chuck Helein, general counsel for America's Carriers Telecommunication Association, a trade organization which in March petitioned the FCC to regulate Net telephony. "If you want to favor businesses developing Internet telephone service, why don?t you favor other small businesses reselling long distance services?"

The ACTA, which is made up of 218 small and medium-sized telephone companies, has yet to hear back from the FCC on its request.

Internet phone service has the potential to stand long distance on its head, because calls would travel over the Internet in much the same manner email does. Just as with most email services, users would pay only the initial cost of the software and fees charged by their ISPs.

There are about 65 companies providing Net telephony service right now, according to Jeff Pulver, founder of the Voice on the Net Coalition, a trade group made up of software and hardware companies advocating for unregulated Net telephony.

Pulver disagreed that the budding industry is seeking an unfair advantage over the small telephone companies, adding that the inherently lower price structure of Net telephony means that it is only a matter of time before all telecommunications companies adopt the technology.

"The paradigm shift has occurred and the playing field is different," Pulver said. "Those people who don?t recognize that are technologically challenged and competitively disadvantaged already."