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Vonage In The News
Vonage Holdings Corp. Reports Fourth Quarter and Full Year 2013 Results

Carolyn Katz Elected to Board of Directors of Vonage Holdings Corp.

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FCC Looks At Phoning On Internet


Vonage In Print News

FCC Looks At Phoning On Internet

November 30, 2003

By Martha McKay

Making phone calls over the Internet used to be strictly a computer geek activity.

And as such, regulators left it pretty much alone.

But these days, improved quality and cheap rates have pushed this technology closer to the mainstream.


That's good news for companies such as Edison-based Vonage, Newark-based Net2Phone, and North Brunswick-based VoicePulse Inc., all providers of Internet phone calls.

This increase in popularity has also caught the attention of regulators who are grappling with what to do about Internet phone calls, specifically, whether they are subject to the same sort of regulations covering conventional phone calls.

On Monday, the Federal Communications Commission will hold its first forum to address issues surrounding the new technology.

Instead of using a traditional phone network, companies like Vonage send calls over the public Internet using a technology called Voice over Internet Protocol, or Voip for short.

With VoIP, speech is broken into tiny packets of data, shipped over the Internet, and reconstructed at the receiving end of the call. That's different from traditional calls, which open up a single circuit between two callers.

Up until now, Voip has been regarded by regulators as an information service, as opposed to a telecommunications service.

Rules and exemptions

The Internet telephone companies haven't been subject to the same rules as other phone companies, such as required contributions for 911 systems. Those exemptions have, in part, kept the prices of Internet phone service lower than traditional phone service and given the Voip providers a competitive edge, at least among people willing to take some extra steps to get the Internet service hooked up.

The fledgling Internet phone industry won a victory this month when a U.S. District Court judge struck down a decision by Minnesota regulators who had previously ruled that Vonage should be treated like a conventional phone company.

The decision, which was closely watched by the industry, means Vonage doesn't have to obtain a telephone operator's license in Minnesota, pay fees to support 911, or send customers paper bills (Vonage uses e-mail to bill customers.), among other things.

However, the company and five others are facing the possibility of similar requirements in California. Vonage says it is talking with California regulators.

Other states, such as Florida, have ruled that Vonage should not be subject to the same regulations as a traditional phone service. The New Jersey Board of Public Utilities has not taken up the issue, according to a spokesman.

Looming large over all the state regulators is the FCC, which has yet to rule on Internet telephony. The traditional phone system taxes users to subsidize the cost of providing service in rural parts of the country where it's more expensive. Regulators will be looking at questions such as whether Voip should be taxed in the same way.

The FCC has asked Monday's forum participants, who include industry executives such as Vonage CEO Jeffrey Citron, to look at "what, if any, regulatory obligations currently imposed upon traditional circuit-switched voice service providers should be placed upon Voip providers and whether from either legal or technical perspectives such obligations are feasible."

Formal review process

According to the FCC, the participants have been asked to address issues such as price regulations, as well as issues such as how these phone systems might be made accessible to people with hearing disabilities, whether these networks should contribute to a fund that pays for phone service in rural America, how the networks might work with federal wiretapping rules, and whether they should be required to contribute money for 911 service.

An FCC spokeswoman said the commission would begin a formal process of reviewing Voip in the weeks following the forum.

Vonage Chief Financial Officer John Rego says the best-case scenario would be a hands-off approach.

"We'd like to see a moratorium on regulating this industry for a period of time, say five to 10 years," said Rego.

He wouldn't mind seeing a regulatory framework built around the technology, but "let's let it grow up," he said.

The large phone companies, most of which are planning to introduce Voip services of their own, are also unwilling to press for regulations.

Taking a closer look

"We don't believe that Voip should be regulated on price or service because the market's very competitive," said Verizon spokesman Larry Plumb. But, he added, "there are things that are going to have to be looked at," such as 911 contributions and the wiretapping issue.

"The FCC and the government face a two-sided challenge," said Julia Mermelstein, senior consulting analyst with Allied Business Intelligence, a telecommunications market research firm.

"They can't risk being accused of hindering the development of the Internet and the economy, and they do have some obligations to companies they've been regulating for years," she said.

"We pay taxes on our phone service to make sure it's available everywhere."

About 10 percent of all voice traffic is transmitted using Voip technology, according to the research firm IDC. That includes the smaller companies like Vonage, which reports more than 60,000 customers, and large companies like AT&T, which transport calls on their network using VoIP.



 
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†AK and HI residents pay $29.95 shipping. ††Limited time offer. Valid for residents of the United States (&DC), 18 years or older, who open new accounts. Offer good while supplies last and only on new account activations. One kit per account/household. Offer cannot be combined with any other discounts, promotions or plans and is not applicable to past purchases. Good while supplies last. Allow up to 2 weeks for shipping. Other restrictions may apply.

1Unlimited calling and other services for all residential plans are based on normal residential, personal, non-commercial use. A combination of factors is used to determine abnormal use, including but not limited to: the number of unique numbers called, calls forwarded, minutes used and other factors. Subject to our Reasonable Use Policy and Terms of Service.

2Shipping and activation fees waived with 1-year agreement. An Early Termination Fee (with periodic pro-rated reductions) applies if service is terminated before the end of the first 12 months. Additional restrictions may apply. See Terms of Service for details.

HIGH SPEED INTERNET REQUIRED. †VALID FOR NEW LINES ONLY. RATES EXCLUDE INTERNET SERVICE, SURCHARGES, FEES AND TAXES. DEVICE MAY BE REFURBISHED. If you subscribe to plans with monthly minutes allotments, all call minutes placed from both from your home and registered ExtensionsTM phones will count toward your monthly minutes allotment. ExtensionsTM calls made from mobiles use airtime and may incur surcharges, depending on your mobile plan. Alarms, TTY and other systems may not be compatible. Vonage 911 service operates differently than traditional 911. See www.vonage.com/911 for details.

** Certain call types excluded.

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