VoIP providers: Lay off the regulation

WASHINGTON - The U.S. Federal Communications Commission (FCC) should take a mostly hands-off approach to regulating the VoIP (voice over Internet Protocol) industry, so that VoIP can continue to grow and provide consumers with a choice as to which type of telephone service they use, a chorus of vendors told the FCC Monday.

Too much regulation would "retard innovation," argued Jeffrey Citron, chief executive officer of VoIP provider Vonage Holdings. Others called for the FCC to stay out of regulating prices for VoIP.

But not everyone agreed how the FCC should apply its "light touch." FCC Commissioner Jonathan Adelstein, along with a member of the California Public Utilities Commission, questioned whether all VoIP phone service carriers would include enhanced 911 service or pay into federal and state universal service funds, as other telephone service providers do, if they are not forced to. Universal service funds help pay for telecommunications service to low-income areas, rural health care providers, schools and libraries.

Law enforcement groups, including the U.S. Federal Bureau of Investigation, have also questioned whether VoIP providers would comply with phone-tapping requests unless required to do so in FCC regulations.

Regulation is appropriate when a monopoly controls a market, such as AT&T's nationwide telephone network before the U.S. government broke it up in the early 1980s, but it is not needed in the VoIP market because there are potentially dozens of competitors, said Tom Evslin, chief executive officer of VoIP vendor ITXC. A minimalist regulatory approach encourages telecommunications carriers to invest in VoIP and, currently, VoIP is one of the largest areas of investment in the sector, he argued at the FCC's day-long VoIP forum Monday.

"If we were to have unnecessary federal regulation -- and even worse, if we were to have all kinds of conflicting state regulations -- then that investment would obviously be restricted," Evslin added. "It's not two people talking on headsets that call out for regulation; it's a monopoly that calls out for regulation."

The FCC's VoIP forum was scheduled as the commission heads into a debate on how to regulate VoIP, which has so far enjoyed little regulatory oversight, unlike traditional phone service providers. The FCC is planning a VoIP rule-making proceeding, and during the forum FCC Chairman Michael Powell announced an FCC Internet Policy Working Group to assist commissioners in identifying, evaluating and addressing policy issues as telecommunications services move to Internet-based platforms.

VoIP is no longer the sole domain of specialists such as Vonage and ITXC; major telecommunications carriers such as Verizon Communications and SBC Communications have announced VoIP products within the past month. MCI has announced plans to shift nearly all of its voice traffic to IP-based networks by 2005, and has already started to move voice traffic to IP networks, noted Michael Gallagher, acting assistant secretary in the U.S. Department of Commerce.