[January 7, 2005]

Pitfalls in Government Controls Over VoIP

Commentary From VoIP Inc.

As VoIP continues its inexorable march into the communications mainstream, it's obvious that government involvement will be required.  But VoIP is not your father's telephony system. Its amorphous and incredibly diverse applications present unique issues that complicate regulatory and tax intervention—and in some cases may defy their influence altogether.

As VoIP continues its inexorable march into the communications mainstream, it's obvious that government involvement will be required.  But VoIP is not your father's telephony system. Its amorphous and incredibly diverse applications present unique issues that complicate regulatory and tax intervention—and in some cases may defy their influence altogether.

Steven Ivester, CEO of VoIP Inc., a global IP on-premises equipment provider, believes that while there is a general trend toward VoIP de-regulation, especially by the FCC, there will be unofficial pressure both by the federal government and general public to add key services such as E911 and, in the government's interest at least, CALEA government intercept. 

The VoIP industry is responding to these measures.  There is, however, as Ivester points out, an elephant in the room: If regulation is imposed that is deemed to be unfair, VoIP providers simply move offshore—or worse, they move to a point-to-point architecture that is virtually invulnerable to regulatory efforts.  Regulation depends on jurisdiction, and each nation may have its own opinions on how far to go with legislative controls on VoIP.

Don't like the regulatory climate in your host nation?  Just pull up stakes and move your HQ and/or servers to a nation where life is simpler.

The unique characteristics of VoIP also complicate USF taxation.  USF was designed to help those in low income or remote areas to gain telephone service, something that was judged to be for the "common good."  But with the last few years, the FCC has determined that Internet access is not in the same category as telephony.  So where does that leave VoIP?

Ivester believes that USF tax should be levied on the physical wire, bandwidth, or other medium by which data is transported into the last mile.  Taxation, in his opinion, should be focused on the physical plant only.  Then there's the problem of offshoring again—how do you levy USF taxes on companies that aren't based in the United States?