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David Sims - TMCnet CRM Alert Columnist[March 1, 2005]

Is VoIP Illegal in Latin America?

By David Sims, TMCnet CRM Alert Columnist

According to published news reports – this reporter’s travel expense budget wasn’t up to first-hand reporting, sorry – VoIP might soon be outlawed or taxed beyond use in Costa Rica.

“But why? VoIP makes so much sense.” You, dear reader, must be an American.

The majority of Latin American countries, Costa Rica included, are top-heavy with useless, corrupt government. Useless, corrupt governments eat money at prodigious rates – useful, honest governments do too, come to think of it – and nationally-owned telephone monopolies are there to keep the cash sluicing in. Anything threatening a Latin American government’s cash flow is Double Plus Ungood in the government’s eyes.

Jose Otero, a Latin American telephone consultant told Ben Charney in last year about “government crackdowns on Net telephony.” Specifically:

  • Broadband customers in Panama pay a 12 per cent tax on calls made using VoIP.
  • The Panamanian government fines internet cafes between $10,000 and $50,000 for letting customers make Net phone calls.
  • In Mexico the government is virulently anti-VoIP.
  • Colombia all but outlawed VoIP in the late 1990s.

Bloated national telephone carriers fund bloated national governments. In March South Africa warned citizens that using VoIP would be considered breaking the law. In most Middle Eastern countries except Oman it’s illegal. Vietnam, Turkey, China and Egypt cast a colder eye but tolerate it for now.

As TechWeb reports, “ The growing surge in international VoIP calls has caused the state-owned telecommunications monopoly in Costa Rica to propose legislation that could criminalize the use of Internet telephone calls.” To date, however, there is no evidence that the ICE has blocked any VoIP service in Costa Rica.

One wonders how enforceable such a law would be, and whether it’s meant to be enforced – on the Internet, the old saying goes, nobody knows you’re a dog, and also on the Internet info packets are info packets. There’s certainly no practical way to police Internet lines, that must be done at the terminal.

What’s surprising is that this is happening in Costa Rica, which is Switzerland compared to other Latin American countries. No revolutions, no military (believe it or not), social stability, and until last year’s financial scandals the government was actually considered clean. 78 percent of software developers in the Central American and Caribbean region are located in Costa Rica, and Costa Rica has been rapidly growing its outsourcing business, and low-cost telephone service is crucial to the growth of that business, so the recent crackdown seems counterintuitive at best.

Two weeks ago Neville Hobson, an independent communication practitioner working with companies, customers, employees and shareholders posted a blog entry on his wife's unsuccessful efforts to use Skype to call numbers in Costa Rica, where they have family and friends. Suddenly calls started going through, calls with “superb clarity and quality, something we've not experienced before when calling any numbers in Costa Rica via SkypeOut.”

Remember: “Traditional phone systems” = “Money for government.”

He cites an article in La Nación, the leading and most influential Costa Rican daily newspaper about “some pretty radical measures that Costa Rica's state-owned telephone company is planning to get pushed through the Costa Rican legislature to prevent usage of internet phone services by making use of them illegal.”

Kind of like how radar detectors are technically illegal in Virginia and smoking dope is technically illegal in Oregon, but judging by common use you’d never know it.

According to La Nación, Hobson says, the Instituto Costarricense de Electricidad, the phone company, is thinking of either making internet telephony as a fraudulent activity and to make it a criminal offence for anyone to use VoIP services, or to treat it as an added-value service and regulate it. “Regulation” in this sense can be translated “taxed to just more expensive than the traditional phone system.” (Remember math lesson above).

Current estimates are that 20% of all Costa Rican calls to numbers in the U.S. are VoIP. That’s a lot of cash the government’s missing out on, and you know those third homes in Miami don’t come cheaply.

Claudio Bermúdez, deputy director of ICE, tells the newspaper “VoIP, which has all the characteristics of a telephone service, is considered to be a carrier and substitute telephone service, and so is required to use the public telecommunications infrastructure.” Let’s be sure to keep Señor Bermúdez away from the FCC.

Not all Central America is allergic to VoIP – El Salvador introduced a low-cost VoIP international phone service in early February. May the rest of the region follow.

David Sims is contributing editor and CRM Alert columnist for TMCnet.

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