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Vonage's Citron Asks For Regulatory Clarity In VoIP

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Vonage's Citron Asks For Regulatory Clarity In Voip

February 9, 2004

By Susan Polyakova

Vonage CEO Jeffrey Citron warned Fri. that "premature regulations could kill the nascent Voip industry." Speaking at a policy lunch sponsored by the Progress & Freedom Foundation in Washington, Citron said regulations could slow broadband deployment, undermine the U.S. position as a technological leader and force service providers offshore

He urged legislators to "bring clarity to the Voip regulatory framework to protect competition. New laws are needed to ensure Internet applications remain free from regulation."

Citron said public policy issues such as CALEA, 911 and Universal Service Fund (USF) contribution could be addressed without federal regulations. Vonage was "the first to offer a Voip 911 solution and is working to improve the offering," he said. He compared Voip with the wireless industry when it first emerged, saying that just as that industry took time to develop an appropriate Enhanced 911 solution, so it would be for the new Voip industry. He said Vonage was working with the National Emergency Number Assn. (NENA) to come up with technical standards that he said would be released this year: "This is a very positive step forward. You don't need a government regulation for" 911 to occur."

As for CALEA, "giving law enforcement access to communications networks... is probably very important if done properly," Citron said. He said Vonage already could offer intercept capabilities and complied with all information requests from law enforcement. He said he didn't think CALEA, which is one of the most controversial issues at stake, would arise as a major obstacle with regard to the NPRM scheduled to be released by the FCC at its meeting Feb. 12.

Addressing USF issues, Citron said Vonage indirectly contributed "very close, within 10% or so" to the USF compared to what it would have paid if it had to contribute directly: "VoIP is not going to destroy the USF." He said USF-related issues should be included in the NPRM or dealt with as part of a separate USF reform. On access charges, Citron said: "Access fees were broken before we got here. Access fees need to be fixed." He said one of the solutions could be to set a national policy consistent to all providers, but noted it was important to take into account that some providers needed to use more networks than others to terminate calls.

In an interview with reporters, Citron asked: "Why can't regulators and network operators figure out [the access charge] problem if the whole world was able to figure it out" for IP networks globally. As an example, he said he could send a packet on the Internet from one spot to another "without even knowing where that spot is" and that packet would have to go through "hundreds different networks. Nobody compensates every single user of the networks," he said. "Somehow 10,000 different ISPs in the world in 150 countries figured out by market forces how to build the system compensating people for their networks without global government influence." He said the IP network was "about 10 times the size of the PSTN [public switched telecom network] here in the U.S., and globally, a hundred times the size of the global PSTN," because in many countries, especially in Asia, "they didn't originally build PSTN, they started building IP networks. That's why our country is so far behind in IP broadband deployment."

Commenting on a BellSouth preemption request filed with the FCC that asked the agency to bar states from requiring the Bells to continue providing DSL service to customers that switched to competitive voice services, Citron said that would slow broadband deployment and he urged the Commission to look very carefully at the petition: "It's a matter of antitrust in a way, because it doesn't give any maneuverability to consumers."

Separately, Vonage announced Fri. it had closed a $40 million financing round led by 3i and Meritech Capital Partners, bringing total investment in the company over the last 3 months to $75 million. As part of the deal, 3i Managing Dir. Sanford Miller will join Vonage's board. Vonage said it would use the financing to accelerate the expansion of service in the U.S. and abroad, including Canada, the U.K. and Switzerland and to support the development of new offerings. Existing investors New Enterprise Assoc. and Vonage senior management also participated in the round, bringing the capital raised to $103 million, Vonage said.

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