[November 16, 2004]

VoIP Wagon Swerving on the Road to Regulation?

BY JOHANNE TORRES

Despite the notably favorable ruling by the FCC, which protected (VoIP - define - news - alert) services from certain taxes and some regulation at state level, many analysts and industry visionaries still believe that the Internet telephony regulation battle and universal adoption has a long way to go.

Many technological and financial issues remain to be resolved within our industry, issues which haven’t even reached the feds’ desks yet. While developers handle the security issues and end-users worry about 9-1-1 calls, Cisco is ready to announce it sold over four million IP phones. VoIP is certainly enjoying plenty of attention, and it’s in the headlines with new developments and regulation controversy every day … but has it passed the temporary hype stage yet? For many skeptics, it’s more a black-and-white issue: They ask to see the numbers.

The Financial Post’s Mark Evans reported today “that as Internet telephony gains momentum, suppliers and analysts like to roll out numbers to demonstrate the market's growth. While Vonage Holdings (news - alert) regularly talks about its rising subscriber growth, the reality, however, is while the Internet telephony market is growing, it will take some time before the technology expands beyond early adopters in the corporate and residential markets.”

The FCC ruling last week was indeed great news for the Internet telephony industry; however, many issues were sort of left in the air. The FCC ruled out some taxes, but has yet to explain the taxes and fees that the service will indeed be charged with. The commission said last week that it promises to tackle such “critical issues” during 2005.

Even after the highly anticipated ruling by the FCC last week, the state of Minnesota vs. Vonage Holdings case is still pending and awaits resolution during an appeal hearing scheduled for tomorrow. Many believe the state has a very slim chance of succeeding tomorrow in making the VoIP service provider comply with Minnesota’s PUC list of dictated regulations after the FCC ruling last week. The company and other industry leaders thought the state would decide to discard the appeal process following the decision.

FCC chairman Michael Powell’s “treat with caution” approach toward Internet telephony services may serve to lessen the severity of regulation in the near future. Other issues awaiting resolution include E911, the Universal Service Fund and network usage fees.