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A New Years Resolution

By William B. Wilhelm, Jr., Esq. and Paul O. Gagnier, Esq.


2005 saw a flurry of regulatory activity on VoIP services in a number of countries. In many cases, however, regulators failed to account for the fundamental differences between VoIP and traditional telephone service. Too often the result was bad rules and bad public policy.

So what is in store for 2006? More of the same unless the VoIP (define - news -alerts) industry grabs the reins and starts to drive the regulatory debate. Our collective New Years resolution should be to take control of the direction of regulation of VoIP.

As consumer uptake of VoIP increases, VoIP providers can be sure that regulators will take action to ensure that consumer interests are protected. Regulators also have made clear their intent to ensure that certain social goals that have long been met primarily by traditional telephone carriers, such as universal service, access to emergency services, law enforcement, and national security access to communications, and access by persons with disabilities, continue to be available in a VoIP world.

Most of us recognize the importance of these objectives. At the same time, the VoIP industry has been largely passive in the debate over how VoIP will affect them. To a large extent the industry has allowed those with other agendas to set the direction and tone of the discussion. Instead of showing how VoIP can advance these goals and even improve their execution the industry has reacted to proposals put forth by others. This must change in 2006.

The common theme of the many regulatory decisions issued in 2005 was the recognition that the growth of VoIP presents a challenge to the assumptions that underlie much of communications regulation. Rather than try to develop a new paradigm, however, most regulators chose to shoehorn VoIP into existing regulatory structures without proper recognition of the important differences in the technology.

In the U.S., the FCCs E911 and CALEA orders imposed onerous and, in some cases, unreasonable obligations. In its E911 order, the FCC promulgated rules that ignored the unique practical and technological challenges faced by VoIP providers in providing access to emergency services. The result has been widespread acknowledgement that the 120-day compliance deadline is unachievable. For example, one RBOC recently reported a 30 percent compliance rate while another reported 67 percent compliance several months after the deadline had passed. Likewise, the FCCs CALEA order disregarded important differences between broadband, VoIP, and traditional telephony. While both of these Orders are being challenged in court, these challenges and the uncertainty that accompanies them generally weigh more heavily upon innovators than it does incumbent operators.

Canadas emergency access requirements for VoIP also went into effect. The CRTC also imposed extensive obligations on VoIP providers and a short timeframe for compliance. However, unlike the FCC, Canadas regulator recognized the technical difficulties associated with providing 911 service for nomadic VoIP and allowed providers the flexibility to adopt interim solutions for providing access to emergency services.

In the EU, the story was largely one of inaction. The European Commissions stalled VoIP consultation continues to languish. As a result, the EU, despite its forward-looking communications legislation, is on the sidelines of the VoIP debate. This has required VoIP providers to navigate 15 sets of national regulations (25 if you count the EUs new members) with widely differing approaches to VoIP.

Certainly there were positive developments in 2005. Regulators in a number of countries issued decisions that recognized the differences between VoIP and traditional telephony and recognized the benefits that VoIP confers on consumers. For instance, Australia, Hong Kong, Malaysia, and Singapore issued new regulatory frameworks for VoIP that regulate VoIP services with a light touch and exempt many VoIP services from the full panoply of obligations imposed on legacy networks. Another important ruling was Finlands December 2005 decision with respect to Skype. In its decision, the Finnish regulator undertook a detailed analysis of Skypes VoIP services that recognized the substantial differences between those services and traditional telephony. More important, the decision took pains to minimize the regulation of Skypes services while also ensuring that Finlands social goals were met.

Looking to 2006, it is clear is that regulators are going to continue to look at VoIP and the regulatory obligations that should be placed on it. Pending proceedings in the U.S. and a number of European countries will examine various regulatory issues related to VoIP.

What is less clear is what the VoIP industry is going to do about these proceedings. For too long, many in the VoIP industry have laid low, apparently in the hope of being overlooked by regulators who were focused on bigger issues. This is no longer a viable approach (if, indeed, it ever was). What is undeniable is that the popularity of VoIP has attracted regulatory attention and the industry must respond.

So what is required? To be more proactive with consumers and consumer groups, business, law enforcement agencies, and regulators about the ability of VoIP to promote universal service, provide access to emergency services, to allow wiretapping, and to serve the disabled. We need to demonstrate how our technology can in many cases meet these goals even more effectively than traditional telephony. Finally, we need to demonstrate why cramming VoIP into ill-fitting legacy regulation is likely to undermine, rather than further, the goals that regulators are trying to advance.

The regulatory genie is out of the bottle. Our choice is to continue to allow others to frame the debate or to take the lead in defining the future of VoIP. The outcome is up to you. IT

William B. Wilhelm and Paul O. Gagnier are Partners at the law firm of Swidler Berlin LLP. For more information, please visit (news - alerts). The preceding article is not to be considered to legal advice and it represents solely the personal views of the authors.

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