VoIP Regulation

BY RICH TEHRANI

The telecommunications market, like the technology space, has been decimated as of late and the single brightest spot in all of technology right now may just be VoIP. Let�s hope our government is wise enough to realize that we need to help this sector and not make it more difficult to attract customers as an Internet Telephony Service Provider (ITSP).

"There is universal agreement that these Internet services hold great promise for the American people," FCC chairman Michael Powell said in a letter to Sen. Ron Wyden (D-Ore). "Imposing regulatory burdens on these new and emerging Internet services, before the FCC fully engages the public and develops a comprehensive record, may have the unintended consequence of stifling its growth and denying the public benefits of that growth." That does not mean VoIP should be totally unregulated, Powell contends.

So what will be the eventual outcome of the discussions that took place this past Monday? Will Internet telephony be considered datacom or telecom? Perhaps we can look to a related news item, where a Minnesota judge ruled just under two months ago that Vonage, an Internet telephony service provider, should be classified as an information service and not a telecommunications service making it exempt from having to apply for certification as a phone company -- which is what the Minnesota Public Utilities Commission had sought to require.

According to an article on Newsday.com, Vonage says it adds a federal excise tax of three percent to its $34.99 per month flat fee, plus a $1.50 "regulatory recovery fee" to reflect payments it makes to phone companies that complete its connections and that do pay fees. So we see that VoIP providers such as this one are already doing their part and are collecting taxes, meaning that government still derives additional revenue from VoIP.

I had the chance to speak with a few industry experts on this topic and wanted to make sure to share their thoughts with you. The first person I spoke with was Stefan M. Lopatkiewicz, who is a partner with the law firm Dorsey & Whitney and practices in the areas of domestic and international telecommunications with emphasis on satellite and terrestrial wireless services. He provides a broad range of commercial services to companies engaged in the telecommunications market, including the negotiation of acquisitions, joint ventures and service agreements, and conduct of specialized due diligence activities. He practices before the Federal Communications Commission (particularly the International and Wireless Bureaus), the International Telecommunications Union and various state public utility commissions.

According to Lopatkiewicz, "It's interesting to see VoIP regulation being discussed by the FCC at the same time as the federal moratorium on taxing Internet access and e-commerce is back for consideration by Congress. While the two issues overlap one another by raising the question of whether and to what extent the Internet and its applications should be subject to regulation, they are in other ways distinguishable. The provision of voice services via the Internet presents additional regulatory challenges, such as to what extent such services will be subject to state and federal universal service funding obligations, E911 requirements and federal law enforcement wiretapping legislation."

"This is a disservice to the American public and an abuse of the Internet," according to Jeffrey J. Prosser, chairman, president and chief executive of Innovative Communication Corp., a diversified telecom and media company based in the U.S. Virgin Islands. "If this trend is allowed to continue, it will seriously impact small and independent telephone companies throughout the heartland of America. With the loss of access fees for long-distance and reduced revenues, small companies will have no other choice than to increase the cost of local service."

I agree with Mr. Prosser that by not treating IP telephony like telephony, the government creates a loophole for many Internet telephony service providers. Perhaps this is the incentive needed to get all service providers to quickly transition to VoIP? One interesting point that was made apparent in the VoIP Forum was that IP telephony service providers can always relocate outside of the US if the FCC makes it unappealing to be a service provider in the US. Furthermore, you can forget about states taxing VoIP accurately because unlike cellular calls where towers are used to determine location, VoIP knows no such limitation. Again, let�s hope that logic prevails and no hasty taxes, fees or ridiculously expensive burdens are placed upon VoIP providers or users.

If you are interested in signing a petition against VoIP regulation, please click here.

If you want to write to the FCC on this matter, you have until approximately 12/14 to give your comments. Please keep your comments to 1,000 words and send them to: [email protected]

See related news: FCC's Powell Says States Should Not Regulate Internet

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Rich Tehrani is TMC's president. He welcomes your comments. Participate in our forums.