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Republican Heavyweights Frown On Net-Calling Rules

Vonage In Print News

Republican Heavyweights Frown On Net-Calling Rules
Powell, Others On FCC Afraid Of Slowing Growth Of Fledgling Industry

December 2, 2003

By Scott Lanman

U.S. Federal Communications Commission Chairman Michael Powell said the agency and state officials should try to avoid regulation of Internet-based telephone calling because new rules might hamper the industry's growth.

The five-member FCC's two other Republican commissioners echoed Powell's statement at an agency hearing on unregulated voice-over-Internet protocol, or VoIP, technology in Washington.

The FCC is deliberating to what extent providers of so-called Voip calling, such as closely held Vonage Holdings Corp., must follow rules that apply to phone companies such as Verizon Communications Inc., including paying fees to connect calls. VoIP, which sends voice messages over data networks, can be more efficient and less expensive than conventional calling.

"Regulatory medicine can be poison to an otherwise healthy technology," Powell said in opening remarks at the meeting. "No regulator, federal or state, should tread in the area without compelling justification to do so."

Commissioner Kathleen Abernathy called for a "predominantly federal scheme that employs a light regulatory touch," while fellow Republican Kevin Martin said the FCC shouldn't be "unintentionally placing economic regulation on these new services."

In addition to the payment of call-connection fees, the FCC is considering whether VoIP-service sellers must comply with rules that force other phone companies to allow court-ordered wiretaps, give a portion of revenue to a federal fund for rural phone service and let customers dial the 911 emergency hotline.

The market for calling based on Internet technology, which includes VoIP, is expected to rise to $15.1 billion by 2007 from $3.3 billion in 2003, according to Thomas Valovic, a program director at technology-researcher IDC, a unit of Boston-based International Data Group.

Carl Wood, a member of California's Public Utilities Commission and a proponent of Voip regulation, said at the hearing that exempting Internet-calling from phone-company rules may cause the price of conventional phone service to rise and jeopardize government programs such as support of rural service and Internet access in schools and libraries.

"Telecommunications services should be regulated in a technologically neutral manner to the degree possible," Wood said in FCC testimony.

"The advent of Voip technology does not in itself provide a legal or policy basis for exemption from regulation."
Routing calls using Internet technology is cheaper and more efficient than regular phone circuits partly because Voip calls are digitized into pieces called packets that share the same wire or the Internet with other calls.

Conventional circuit-switched calls use one entire line, or circuit, at a time.

The technology allows Edison, N.J.-based Vonage, for example, offer unlimited calls to the U.S. and Canada plus caller identification, voice mail and other features for $35 a month, according to the company's Web site. New York-based Verizon, the largest U.S. local-phone company, sells a similar package for $50.

Verizon and the other three regional U.S. carriers are trying to increase their own sales of Voip services as customers disconnect local lines. San Antonio-based SBC Communications Inc., the No. 2 local carrier, said last month that its Internet- based calling service is available in 18 cities.

While Verizon's view is that regulators should not "apply yesterday's economic regulations to the future," any company that uses the company's network to complete phone calls must pay access fees, Verizon spokesman Larry Plumb said in a statement.

Vonage Chief Executive Officer Jeffrey Citron said in FCC testimony today that any assertion that Voip providers must pay access fees is "baseless" and that such a regulation may derail broader FCC proceedings considering the issue of payments between phone companies. Vonage has about 100,000 customers, Citron said.

Vonage already pays into the rural-phone fund and lets customers dial 911, he said. The possibility of Voip regulations opens a "Pandora's box" that may lead to rules on e-mail, instant messaging and video communications, Citron said.

Michael Gallagher, representing the Bush administration as acting head of the National Telecommunications and Information Administration, said in testimony that any regulation "should be minimalist" and that "importing last century's regulatory apparatus onto 21st-century technologies will stifle innovation and investment."

This story also appeared in:
  • The Tri-Valley Herald, 12/2/04
  • The Daily Review, 12/2/04
  • The Argus, 12/2/04
  • ComputerWorld,12/2/03
  • IT World, 12/2/03
  • eWeek, 12/1/03
  •, 12/1/03

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