Thursday, June 30, 2005

FCC Regulation of Service Bundles??

The FCC has a proceeding open that, even after its Supreme Court victory in Brand X, suggests there may be some uncertainty about whether the agency will regulate one-price "bundles" of broadband and other services like voice. To read my SkyReport op-ed on this issue, click here.

posted by Kyle Dixon @ 1:30 PM | Broadband, Cable, Communications, Innovation, Internet, VoIP, Wireline

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Thursday, May 26, 2005

E911 and VoIP

The FCC's latest action to mandate VoIP providers provide E911 is not surprising. The political obviousness of being "for" E911 is apparent even to VoIP providers, because they cannot afford too many headlines like this, notwithstanding they fully-disclose the service's E911 limitations.

Is the mandate an entry barrier that disadvantages "portable" VoIP services like Vonage and Lingo? Certainly.

More than that, the current E911 situation is a tale of unfortunate political economy, antiquated network architecture, balkanized systems and costly backwards compatibility. What's more, it is no one's fault; rather, it is the product of a series of unfortunate choices about how we regulate, architect and disburse funds for 911 service.

Dale Hatfield probably knows more than anyone about the nation's E911 system. So much, he wrote a report on it. I asked Dale what he thought of the current situation,

Continue reading E911 and VoIP . . .

posted by Ray Gifford @ 4:41 PM | VoIP

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Forbes: Raising VoIP's Costs

Forbes believes that the E911 VoIP mandate is a clear entry barrier and instance of raising rivals' costs.

posted by Ray Gifford @ 3:28 PM | VoIP

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Thursday, May 12, 2005

The Broadcast Flag and Minimum Requirements for Broadband

As Ray noted last week, the D.C. Circuit rebuffed the FCC (again) for asserting authority it does not have. Yet despite the angst and juibilation surrounding the "broadcast flag" decision, the case did little to undermine the already-tenuous basis for the FCC to assert its so-called "ancillary" authority to regulate broadband "information services" under the Communications Act. The decision does, however, add more kindling to the fiery debate over which, if any, baseline obligations should be imposed on broadband to the extent competition justifies protecting these services from more intrusive regulation.

Continue reading The Broadcast Flag and Minimum Requirements for Broadband . . .

posted by Kyle Dixon @ 1:51 PM | Broadband, Communications, Internet, Net Neutrality, The FCC, VoIP

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Friday, May 6, 2005

911 Awareness Week

Only several weeks ago, Ray expressed his concern about the possibility of the Texas AG's suit against Vonage spreading to other states and resulting in a de facto E-911 mandate. Ray may be regretting his powers of clairvoyance. This week, we learned that Connecticut has joined four other states in filing suit. And despite reports that Vonage is working out deals for 911 access with every major ILEC, the FCC may be moving quickly to require a 911 mandate for VoIP as early as this fall.

Continue reading 911 Awareness Week . . .

posted by Adam Peters @ 10:21 AM | VoIP

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Thursday, May 5, 2005

CA Consumer Bill of Rights: It's Baaaaack . . .

This week's reincarnation of a "consumer bill of rights" in California dramatically illustrates the need to clarify the appropriate role for state communications regulators as part of overall telecom reform. But clarifying state and federal regulators' respective roles must go beyond considering who regulates; we also must consider why they regulate. Specifically, we must consider whether state regulation should attempt only to further basic social goals, or whether states should be allowed to engage in broader economic regulation.

Continue reading CA Consumer Bill of Rights: It's Baaaaack . . . . . .

posted by Kyle Dixon @ 5:47 PM | Broadband, Capitol Hill, Communications, Net Neutrality, VoIP

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Tuesday, April 12, 2005

AG's Gone Wild! A Gathering Storm for Vonage?

Tech Daily (subscription required) reports today that the Texas AG's consumer fraud suit against Vonage may be spreading. The AG's spokeman stated: [s]everal states have expressed an interest in the suit,..." I blogged about the stretch that Vonage's E-911 disclosures constituted consumer fraud here. Randy May responded to that post, taking a slightly more benign view of the Texas AG's action.

Continue reading AG's Gone Wild! A Gathering Storm for Vonage? . . .

posted by Ray Gifford @ 4:57 PM | VoIP

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VoIP Blocking: The Case of Clearwire

Clearwire, a wireless broadband company backed by Craig McCaw and just entering US markets, has caused a minor stir by saying up front that it will block third-party VoIP applications like Vonage. Clearwire's terms of service disclose this fact that they can restrict high-bandwidth applications.

Continue reading VoIP Blocking: The Case of Clearwire . . .

posted by Ray Gifford @ 2:53 PM | Net Neutrality, VoIP

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Friday, April 8, 2005

Arkansas-VON-VoIP

The VON Coalition has sent a letter to Arkansas legislators with the purpose of heading off state taxation of VoIP services. Ray wrote about it here; a follow-up is found here. While I've read the letter, I don't see it on their website and so a link will be forthcoming when available. Among other arguments, VON rightfully makes the point "VoIP transmissions are indistinguishable from other forms of data traffic - making voice traffic difficult to separate out from other e-mail and web surfing traffic for tax purposes." I particularly like VON's appeal to demand-side arguments regarding broadband. Nearly all policy proposals to increase broadband penetration focus exclusively on supply side effects. Not so with VON. This is good since understanding markets requires both sides of the equation.

posted by Kent Lassman @ 9:47 AM | Broadband, State Policy, VoIP

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Saturday, April 2, 2005

VoIP Tax Freedom Killed in Colorado

Representative Knoedler falls just short.

posted by Ray Gifford @ 6:46 PM | VoIP

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Friday, April 1, 2005

Will Colorado Limit Taxation by Regulation?

Ray's post below spotlights an alarming trend: the application of traditional utility regulation to emerging, competitive services like VoIP. However, at least one state may swim against the current. The Colorado legislature is considering a bill to prohibit state and local taxation of VoIP and state regulation under the "telecommunications" statutes.

VoIP is by definition competitive therefore the old rules shouldn't apply. But state legislators there may also recognize the less obvious but salutary pressure created by tax competition. Will consumer enhancing VoIP providers spend more resources in Colorado or neighboring Nebraska? The policy climate matters. In addition, the Colorado law nods appropriately to FCC jurisdiction on E-911 standards. However, Section 8 of the proposed law suggests that it is necessary for the "immediate preservation of the public peace, health and safety." This clause is pro forma in Centennial State legislation. It preempts the referenda process that otherwise could "recall" and overturn a statute. Nonetheless, it is a stretch.

Word has it that one of the sticking points in the process has been an unclear assessment of how this bill would affect USF funding. Until USF is tackled comprehensively, many state proposals are trapped in limbo.

posted by Kent Lassman @ 11:40 AM | Broadband, State Policy, VoIP

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Thursday, March 31, 2005

Taxation by Regulation: No Escape

Nebraska and Arkansas this week follow "taxation by regulation" to its logical ends by affirming the respective states' rights to tax Voice over Internet Protocol (VoIP). The Nebraska PSC, with a display of not inconsiderable regulatory will, concludes that is possesses the authority to tax VoIP for purposes of its state universal service fund. Meanwhile, the March 29 Communications Daily (subscription required) reports that the Arkansas legislature moved to "to ensure that VoIP and other types of non-traditional telecom services are subject to Ark.'s telecom gross receipts tax."

The Nebraska PSC action is the more interesting of the two, but both are of a piece. Both actions demonstrate the internal logic of the current universal service system that cannot abide any exit from the taxble "telecommunications" category. Thus, the Nebraska PSC endeavors -- in the face of the FCC's Vonage Order -- to conclude that VoIP services can be taxed for state universal service purposes. Surprise, surprise, the PSC concludes it gets to tax VoIP as telecommunications, based in part on the FCC's ducking of the matter in the Vonage Order. Universal service policy abhors a regulatory definitional vacuum -- and the states will fill in where the FCC gives room.

Continue reading Taxation by Regulation: No Escape . . .

posted by Ray Gifford @ 11:12 PM | Universal Service, VoIP

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Wednesday, March 23, 2005

After the Level 3 Petition

Level 3 has withdrawn its forbearance petition with the FCC in advance of a certain denial. The petition asked the FCC to forbear from requiring access charges on VoIP calls originating or terminating on the public switched telephone network. On balance, I favored the petition, with perhaps some time limit to keep the incentives right for more holistic intercarrier compensation reform.

A large part of my favorable inclination toward the petition is based on the belief that this "piecemeal" approach to allowing escape from the access charge regime begins to push the incentives toward broader, more complete intercarrier compensation reform. That is arguable, and it surely is arbitrage -- but arbitrage is a morally neutral activity. It can be good to rationalize markets; it can be bad if it stops beneficial price differentiation.

So, where are we now? The incentives for "holistic" intercarrier compensation reform look spotty, and the political rewards for doing so are probably negative. Nevertheless, the current system is inexorably leaking, as consumers migrate to platforms not subject to the access charge tax.

Continue reading After the Level 3 Petition . . .

posted by Ray Gifford @ 12:19 PM | Communications, The FCC, VoIP, Wireline

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Tuesday, March 22, 2005

Nanny State in Texas--Hard Cases and Bad Law

The Texas Attorney General has sued Vonage under the state deceptive trade practice act for failure to disclose limited E-911 functionality. The AG's case follows on the heels of a tragic situation in Houston where a Vonage customer attempted to contacted E-911 during a home invasion, but apparently had not activated the 911 features on the account.

To begin with, I am missing the "fraud" Vonage has perpetrated. As a Vonage customer -- having received all of their sign-up information and used my account interface through the web -- it was perfectly clear to me of the service's limited 911 functionality. Indeed, in my experience, Vonage actively notifies its customers of the need to affirmatively opt-in to E-911. Because Vonage is not location-specific, its customers needs to activate E-911 by giving Vonage their location information. Given the political sensitivity of E-911, I cannot imagine Vonage was less forthcoming to its Texas customers about the service's E-911 limitations.

Continue reading Nanny State in Texas--Hard Cases and Bad Law . . .

posted by Ray Gifford @ 1:04 PM | VoIP

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Thursday, March 10, 2005

Broadband and Internet Voice: Lessons from a Mad River

The FCC's consent decree with rural telephone company Madison River Communications has re-fueled speculation about the best way to avoid unnecessary regulation of Internet voice and other broadband-related services. In explaining their decision to settle complaints that Mad River had blocked Internet voice calls on its network, agency officials reiterated the wisdom of avoiding regulation of this service according to the same formula the agency has employed to minimize regulation of broadband generally. Specifically, the FCC has attempted to assign these services to legal classifications under the Communications Act that are subject to relatively fewer requirements. One example of this formula is the FCC's decision to classify Vonage's offering as an "interstate service" that is not subject to state jurisdiction. Another is the FCC's classification of cable modem service as an "information service" that would remain largely unregulated under Title I of the Act (a case that is currently being reviewed by the Supreme Court in Brand X).

Previously, I have said that the FCC's approach is better-suited to avoiding regulation than first classifying broadband-related services as regulated common carrier services and then "forbearing" from such regulation. But reactions to Mad River reveal that, although the FCC's approach to regulating Internet voice and broadband-related services is the best alternative under the current Act, the industry nonetheless may experience substantial delay and uncertainty even under the FCC's approach, especially to the extent the agency succumbs to what might be termed "political pressures."

Continue reading Broadband and Internet Voice: Lessons from a Mad River . . .

posted by Kyle Dixon @ 6:02 PM | Broadband, Communications, The FCC, VoIP

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Wednesday, March 9, 2005

The Thing-In-Itself: Kant on VoIP

To offer a slight modification to Randy's discussion of "Something Old, Something New," I think the metaphysics of VoIP belong not to the religious traditions of metaphysics, but rather invite a Kantian analysis. Kant would hold that we cannot know "the thing-in-itself" or the noumena of VoIP; indeed, we cannot even prove it exists absent some a priori principles which scientific inquiry cannot lead us to. We can therefore only know the phenomena of VoIP, those qualities that are coincident with the ability of our mind to perceive. Thus, we can never really "know" the essence of VoIP to be able to categorize it. Then again, neither can we know our categories of "telecommunications" and "information" service with any metaphysical certainty. We are in the realm of practical reason where we must behave according to the categorical imperative "as if" these categories exist and are known.

Such reasoning is about as fruitful and insightful as any other discussions on the topic, so why not add it to the mix? That, and for all of the, shall we say, exercised correspondents about my Level 3 Forbearance Petition post can take solace in the real-world, practical reasoning I use to reach my conclusions.

This is also why a St. John's education is so valuable -- annoy your friends and blog readers with unwelcome and unnecessary displays of philosophic esoterica.

posted by Ray Gifford @ 10:56 AM | VoIP

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Tuesday, March 8, 2005

Something Old, Something New

Last night, again according to Tech Daily's PM Edition [subscription required], Michael Powell told a receptive crowd of industry insiders that "Internet VoIP is genuinely something new and not just a new way of doing something old."

I don't want to quibble with the Chairman on the way out the door, but...I'm not sure whether VoIP is "genuinely something new" or "just a new way of doing something old". I'm not sure VoIP is not a new way of communicating with people (something old). And I'm sure it offers some new features and functions in doing so (something new).

So, I am absolutely sure--in my both my certainty and uncertainty-- that I was right in January 2004 in The Metaphysics of VoIP when I said the debate about VoIP's regulatory status would turn metaphysical quickly. Whether VoIP is really "something old" or "something new" might be good fodder for debate in a philosophy class at a Jesuit seminary or Talmudic academy, with the answer perhaps turning on the meaning of reality beyond what is perceptible to the senses. By definition, a metaphysical feast!

But as I said back then in The Metaphysics of VoIP, in today's competitive environment we need to move quickly to put in place a regime that looks to marketplace realities, not metaphysics, to determine (de)regulatory treatment.

posted by Randolph May @ 5:53 PM | VoIP

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Sunday, March 6, 2005

The VoIP Blocking Consent Decree

The home page for Madison River Communications claims that "What We Bring Together...Sets Us Apart." In light of the consent decree that the rural LEC entered into with the FCC earlier this week for blocking VoIP services, what now sets Madison River apart is that it is the first carrier found to have violated Chairman Powell's 'Net Freedoms. What it brings together is a series of issues and a consent decree which seemingly raises more questions than it answers:

The FCC's Enforcement Authority
The most interesting legal issue stemming from the consent decree is the nature of the FCC's jurisdiction and enforcement authority. The Commission cites section 201(b) as its statutory authority, thereby treating Madison River (a DSL provider) as a Title II common carrier, despite recent Commission efforts (through its Cable Modem Order and the Wireline Broadband NPRM) to bring these broadband providers under the deregulatory provisions of Title I.

Continue reading The VoIP Blocking Consent Decree . . .

posted by Adam Peters @ 6:24 PM | Net Neutrality, The FCC, VoIP

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Friday, March 4, 2005

D-Day for Level 3 Forbearance on VoIP

Chairman Powell's tenure will end with one last opportunity for him to address the regulatory status of VoIP. Level 3 has filed a petition for the FCC to forbear from assessing access charges on VoIP calls that originate or terminate on the public switched telephone network (PSTN). PFF has already weighed in on the petition here.

There are a number of questions at stake here: What will be the regulatory treatment of VoIP? How will network owners be compensated for traffic flowing over their networks? How can we transition from the current access charge regime that distorts both providers and consumers behavior? The difficulty is that the principles that answer these questions are prudential, meaning they permit no categorical conclusions, just intuitions about what will be the best outcome long-term. And there is of course, the perpetual cynic's question: Cui bono? [That's pretentious Latin for "who benefits"?]

Continue reading D-Day for Level 3 Forbearance on VoIP . . .

posted by Ray Gifford @ 1:30 PM | VoIP

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Sunday, January 23, 2005

Google...

a telephone company. Huh. Here's betting they don't want to be regulated by 50 states, or even the FCC. Go Vonage appeal!

posted by Ray Gifford @ 11:08 PM | Communications, VoIP

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Sunday, January 9, 2005

Vertical Integration and Next Gen Gaming

Xbox Live already provides a nice VoIP option for access avoidance. Just imagine the possibilities in reading this passage from a CNET interview with Bill Gates:

Xbox Live is really talking to your friends, doing things with your friends. And as we bring in new game titles that are more approachable, appeal to different demographics, the boundary between what's game playing, what's socialization and what's communication-you will have really broken down the barriers there.

We can make these hot, super great graphics games something that are easy for people to use. That's a big initiative we have as we move to the next generation of Xbox. Likewise, the connection between the Xbox Live and our Messenger will be really simple so people can say, "Hey, come and play," "Oh, okay, I'm finishing my homework, I'm almost done, I'll get on and play with you." And so even as they're connected up to each other, they don't think of, "Oh no, now I'm gaming, now I'm communicating."

posted by Adam Peters @ 6:52 PM | Software, VoIP

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Tuesday, December 28, 2004

From their Cold Dead Hands....

In a move that would hardly defy the oddsmakers in Vegas, were they to set lines on such things, California has challenged the FCC's Vonage Order in the Ninth Circuit.

posted by Adam Peters @ 6:20 PM | State Policy, The FCC, VoIP

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Monday, December 13, 2004

"A Wave of Abject Fear..."

California PUC Commissioner Susan P. Kennedy recently noted that VoIP scares people. To wit: regulators fear the loss of jurisdiction; legislators fear the loss of funding for Universal Service; incumbents fear the loss of access charges; and, "rural carriers fear everything - but they especially fear loss of subsidies."

As is said in the blogosphere, read the speech. Kennedy provides clear examples of the consumer harming distortions created by the current regulatory system. She also uses a turn of phrase like a rapier. For example, after describing VoIP's relationship to the line between telecom and information services, the line between local and long-distance and the line between inter and intrastate, she slices through the fog with a sentence like, "the only lines that exist today are those that are drawn by and for regulators to facilitate the status quo." (Emphasis in original.)

Kennedy rightly calls attention to the most important communications debate of the decade: VoIP. She says the "regulatory treatment of VoIP and IP-enabled services is the line separating the past from the future. It's the line between fear of change and faith in innovation."

It reminds me of another speech by a Kennedy. He said, "Let us begin anew--remembering on both sides that civility is not a sign of weakness, and sincerity is always subject to proof. Let us never negotiate out of fear. But let us never fear to negotiate." These words are worth remembering when Commissioner Kennedy is attacked for recommendations to address "some of these issues on the federal level."

posted by Kent Lassman @ 4:17 PM | VoIP

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Wednesday, December 8, 2004

The Path of Least Resistance

Business Week is reporting that the National Governors Association will be sponsoring a meeting in DC next week to discuss ways to simplify and make the taxation of all communications services equally painful....er, more equitable.

The article then discusses a Virginia proposal that would create a "model" for other states to follow. It states:

The Virginia agreement would replace those levies with a flat 5% tax on all telecom services -- including VoIP.

I'm going to assume this is a scrivener's error in the article, since VoIP is NOT a telecom service. But then again, as Jeff Pulver discussed yesterday, the City of Santa Monica is trying to figure out how to tax Free World Dialup.

posted by Adam Peters @ 3:59 PM | Communications, State Policy, VoIP

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Tuesday, December 7, 2004

Lifetime Linkup

Talk about dropping phone rates, get this from the Boston Globe's online version: "RNK Telecom Inc. is promising subscribers that for a one-time payment of $999 they can make an unlimited number of phone calls for their remaining days on earth." Read all about the "Phone for Life" VoIP service here.

Oh, the $999 price includes the VoIP phone too.

posted by Randolph May @ 1:32 PM | VoIP

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VoIP Goes Mobile

Visually it's not as striking as Kyle's fleet of dirigibles, but imagine a bank of devices working like mobile phones, connected to various wireless networks. Now imagine those devices also connected to the Internet. If I read the company's literature correctly, that's what you have with Xcelis. For a flat monthly fee, you can get unlimited wireless phone service. How? It seems you call Xcelis on your mobile phone, that call is treated like a mobile-to-mobile call (which increasingly is free) and then Xcelis uses VoIP to complete your call. Can't imagine the wireless providers will be too happy with that -- this could be an arbitrage business model that won't last -- but it sure is an example of someone building a better mouse trap.

posted by Patrick Ross @ 10:10 AM | VoIP, Wireless

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Wednesday, December 1, 2004

Minnesota Pulls Back on Vonage...For Now

Yesterday the Minnesota Public Utilities Commission pulled back from its effort to regulate Vonage. CNET has the story of the two-page MPUC stay issued yesterday. (The original complaint alleged that Vonage offered telephone services. Egads! The nerve of those people offering unregulated telephony. Some things must not stand.)

The stay keeps the door open for the MPUC to jump back in the game if circumstances change due to judicial action or new federal legislation that would reverse the FCC's recent claim of authority. The article quotes our regulatory friend, and sometimes sparring partner, NARUC's Brad Ramsay suggesting that at least one state will challenge the FCC decision. Ramsay didn't give additional details about which of the "dozens of states" that have tried to regulate VoIP would be the potential litigants. Stay tuned. The next procedural step is at the 8th Circuit where the issue went after a District Court judge ruled that the MPUC did not have authority to regulate Vonage. Oral arguments were held on November 17 and tomorrow supplemental submissions to the Court are to be filed.

posted by Kent Lassman @ 5:01 PM | State Policy, VoIP

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Friday, November 26, 2004

VoIP compensation debate continues to heat up

As most policymakers digest Thanksgiving turkey, the debate heated up further regarding how telephone companies will be compensated for use of their traditional networks when they are used to connect "voice over IP" (VoIP) calls. FCC Chairman Powell issued a carefully worded statement regarding a recent filing by one major telephone company about a new service option by which Internet voice providers can connect to the telephone company's network. Critics have assailed the plan as an attempt to perform an "end run" around ongoing compensation proceedings, while the company underscores that it will comply with any forthcoming FCC rulings and that the new service is optional (TRDaily, Nov. 24, 2004 - subscription required). Powell's statement does not clarify whether the FCC has permanently rebuffed a call to suspend and investigate the new service. But it does make clear that pressure to resolve these network compensation issues will continue to mount as use of Internet voice services grows.

posted by Kyle Dixon @ 1:15 PM | VoIP

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Thursday, November 18, 2004

Internet Taxation and VoIP

It appears Congress, in the 13th hour (we're past midnight when in a lame duck), is finally ready to extend the moratorium on discriminatory Internet taxes and access taxes, more than a year after the previous moratorium expired. Jonathan Krim of The Washington Post reports today that a year-long deadlock on legislation has been broken. A key victory is that the moratorium, while not permanent, for the first time explicitly bans taxes on DSL service.

This debate is far from over, however. VoIP will loom large between now and November 2007, when this new moratorium is due to expire. Former governors now in the Senate, including Lamar Alexander (R-Tennessee) and Tom Carper (D-Delaware), will make sure of that. These two successfully prevented the moratorium from becoming permanent, and fear that as consumers shift from regulated wireline phone service to potentially unregulated VoIP, the tax revenue states and localities draw from those wireline services will disappear.

The Senate sponsors of the moratorium, George Allen (R-Virginia) and Ron Wyden (D-Oregon), insist their legislation doesn't address taxation of VoIP. But just as VoIP is forcing a reexamination of universal service subsidies (a topic PFF will examine in a December 3 congressional seminar), VoIP also should force a reexamination of the logic behind telecom taxation. If current telecom taxes aren't justifiable, does it make sense to migrate them to VoIP?

As Kyle and Randy have noted, the FCC has taken its first step in preempting states from regulating VoIP. Keep in mind, however, there are thousands more state and local taxing authorities than there are public utility commissions.

posted by Patrick Ross @ 9:40 AM | VoIP

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Tuesday, November 16, 2004

Well done, albeit not done yet

It will probably be some time before the FCC can piece through the myriad issues it must address to set the regulatory framework for voice over the Internet. But the Commission deserves a hearty pat on the back for its work on its Order preempting state regulation of Vonage's "DigitalVoice" service. The Order's thorough and compelling reasoning issues a stiff rebuke to those who wish to regulate Internet voice applications because they "quack" like the "duck" of traditional telephony. Among other things, the Order emphasizes how very different (and superior) the service is, both in terms of how it works and in terms of what it offers consumers.

The FCC also deserves kudos for signaling that it will preclude states from over-regulating similar services where a company provides the service over its own "last mile" broadband network (see para. 46). Throw in a prudent nod to states that the FCC expects to work cooperatively with them to safeguard interests such as public safety (para. 45), and the FCC has provided a constructive roadmap for tackling the remaining regulatory issues pertaining to Internet voice. (The welcome sway held by wiser heads in recent state discussions of Internet voice suggest states may be willing to follow that roadmap, at least for now. Lexis subscription required or see Nov. 16, 2004 edition of Comm Daily.)

So even if the FCC did not go as far as I had hoped last month, it has provided a great deal to be thankful for well before the holidays. With any luck, the appellate courts will be similarly thankful.

posted by Kyle Dixon @ 11:40 AM | The FCC, VoIP

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WTO Regulating the Internet?

Has the FCC opened the door to international regulation of the Internet by the WTO? Former FCC commissioner Harold Furchtgott-Roth believes so. In a piece in today's New York Sun (subscription required) , he discusses the FCC decision on Vonage, praised here, that declared its Voice over Internet Protocol (VoIP) service to be interstate, if not international in nature. There's no question the FCC made the right move in preempting states from micromanaging Internet traffic. But perhaps preempting state regulation has enabled international regulation, Furchtgott-Roth argues. Citing a recent WTO ruling that U.S. law prohibiting Internet gambling was an anti-trade move against Antigua and Barbuda, he says the WTO can seize on the FCC ruling as precedent for ruling on any U.S. law affecting the Internet, such as restrictions on drug purchases. "With an international Internet, the strength and threat of WTO regulation can only grow," he writes. The WTO shouldn't "be given a privileged position of operating above and beyond the reach of legitimate American laws."

posted by Patrick Ross @ 9:23 AM | The FCC, VoIP

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Wednesday, November 10, 2004

Cause to complain??

It was with some disappointment -- but little surprise -- that I read in TR Daily (Nov. 9, 2004 [subscription required]) threats of litigation by state commissions in response to the FCC's decision that "voice over Internet" services are inherently interstate, in part, because users' locations are unknown or irrelevant. (The threats are particularly troubling given that the text of the FCC's order has not even been released yet.) To the extent such litigation threats derive from a simple turf battle, the threats make "sense"; declaring these services interstate means that the FCC, and not state commissions, will decide what role states will play in implementing the federal Communications Act. But beyond such arguably petty justifications, the litigation threats remain, at best, mysterious and are probably counterproductive.

States have generally claimed they have no interest in subjecting Internet voice providers to onerous rules that have applied to traditional phone service, such as regulation of rates. Certainly, there is reason to doubt this claim on its face given how active states have already been in this area, not to mention their reliance on the idea that, at base, Internet voice is simply a new type of telephone service.

But leaving aside worries that following a "trust me" approach with states contradicts the facts (or common sense), the FCC expressly declined to preclude them from regulating in many areas that even states admit they want to regulate, primarily intercarrier compensation, universal service, public safety and consumer protection. The Commission's press release this week expressly invites state involvement in addressing public safety, scrupulously avoids preempting state fraud and consumer protection statutes and leaves open the possibility of a state role in deciding or implementing reforms to intercarrier compensation and universal service policies. So if states really do plan to limit their regulation of Internet voice to specified areas, the FCC's decision this week won't complicate that plan.

Which leaves the question: why threaten litigation? Or perhaps more interesting for states trying to decide whether to sign on to the litigation bandwagon: why threaten litigation now, rather than attempt to work cooperatively with the FCC?

Inquiring minds want to know . . .

posted by Kyle Dixon @ 11:43 AM | State Policy, VoIP

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Tuesday, November 9, 2004

Recognizing the Value of Facilities Investment

The Commission's action this morning on the Vonage petition seems to provide further evidence that it is more cognizant now than it was a year or so ago of the need for its policies not to disadvantage those companies who are investing in facilities. Thus, in addition to granting Vonage's petition for preemption of state regulation of its VoIP service, the Commision's press release points out that: "The Commission also stated that other types of IP-enabled services, such as those offered by cable companies, that have basic characteristics similar to DigitalVoice would also not be subject to traditional state public utility regulation."

This makes eminent sense, of course. Conversely, it wouldn't make sense to exempt from state regulation those companies like Vonage that essentially ride on the facilities of others, while leaving those offering services of the same inherently borderless nature over their own facilities to the vagaries of 50 different state regulatory regime.

So, if the full text of the Commisison's Vonage order comports with the news release, kudos to Michael Powell and his colleagues for taking an important step in the future.

(But don't ever bet your house on an FCC action without considering that the courts have the last word!)

posted by Randolph May @ 1:08 PM | The FCC, VoIP

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The Schump Trumps Again (with some help from the FCC)

I am telecommuting, so I decided to celebrate VoIP State Freedom Day by calling Ray on his VoIP connection from my landline.

I figure the torch was passed in parts unknown between the originating end of my POTS call and the terminating end of his IP-enabled application. It was a "local" call only in the sense that I dialed a local TN, but reached him at his office in Denver. And although I assume that I am paying a below-cost rate for my basic local package thanks to state retail regulation, a service I only (and temporarily plan to) retain due to my roommate's inertia in changing his wireless number, somehow I think Ray still got the better end of the deal.

posted by Adam Peters @ 12:30 PM | VoIP

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VoIP State Freedom Day

As expected, the FCC today ruled on the Vonage petition, declaring VoIP services like Vonage to be interstate in nature and thus beyond the reach of state regulation. Just as important, the Commission appears to have ruled that integrated VoIP offerings are also interstate and exempt from state regulation. Anna-Maria Kovacs reports:

We believe these rules will apply both to VoIP services that are pure applications as well as services in which the application is to some extent integrated with the underlying facility. We do not expect that it applies to pure cable modem or pure DSL as access media. We do believe it applies to an integrated cable VOIP offering and might be extrapolated to apply to an ILEC integrated VoIP offering as well.

This is important to both phone companies and cable companies because it gives them a path to regulatory escape from the state retail regulation and taxation through their own VoIP offerings. Oh, and those calling for intercarrier comp and universal service reform, the timetable just became accelerated. Congrats finally to Vonage, which with one petition seems to have accomplished more unregulation of communications than the FCC managed in the previous eight years.

posted by Ray Gifford @ 11:49 AM | The FCC, VoIP

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Friday, November 5, 2004

The Net Neutrality Police

Last week, "Mr. Blog" alleged that "British Telecom appears to be explicitly blocking VoIP for their DSL subscribers." Jeff Pulver, as the operator of an open VoIP network, polled visitors on his own blog to see if this was actually occurring in practice. Pulver concluded that it was not and today, Mr. Blog agreed. Apparently BT had deployed a faulty router.

While this "incident" serves as an example of self-regulation, it is safe to assume that there are interests out there who hope that the blocking of VoIP applications occurs, if nothing more than to provide a nice anecdotal example to support a net neutrality mandate. In the current domestic broadband market, I am an optimist, recalling the ICE principle, or "internalizing complementary efficiencies," which holds that even a platform monopolist (which is not the situation in many geographic markets) will have incentives to voluntarily offer access when it is efficient to do so. For these providers, then, continued voluntary compliance with Chairman Powell's "Internet Freedoms," reiterated once again at the VON conference last month, eliminates any premise for regulatory intervention. As is now clear, well-intentioned folks like Jeff Pulver will be watching.

posted by Adam Peters @ 8:50 PM | VoIP

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Tuesday, November 2, 2004

Vonage Petition on Tap

Kyle's post ("And Another Thing . . .") below convincingly argues that the FCC should take a broad, definitive action on the jurisdictional issues surrounding VoIP. Today, the FCC announced that it has scheduled a vote on the Vonage Petition for a Declaratory Ruling at its open meeting next week, signaling a more "incremental," albeit positive approach.

posted by Adam Peters @ 7:01 PM | The FCC, VoIP

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Thursday, October 28, 2004

And another thing . . .

The FCC intends to resolve an impressive number of pressing issues by year end. (See Comm Daily, Oct. 22 2004 [Lexis subcription required].) So it may seem too much to ask, like an urchin from the musical "Oliver!": Please, sir, may I have some more?" Yet, at least in the voice over Internet Protocol (VoIP) context, there are a few areas in which "some more" may mean a great deal to companies hungry for as much regulatory certainty as they can ingest before this season's porridge pot runs empty. In particular, the Commission should pay careful attention to the scope of its decisions and proceedings regarding VoIP.

First, the Commission should do as much as it can to decide jurisdiction in a manner that covers as many VoIP offerings as possible. Ideally, this would mean deciding that all VoIP should be subject to exclusive federal jurisdiction, whether or not a company provides the service using its own network. Without asserting federal jurisdiction over VoIP, the FCC cannot secure from state intrusion the "minimally regulated" environment that has served as the linchpin of its efforts to promote investment and innovation in broadband networks and related services and applications. These efforts have encompassed narrow requirements for leasing telephone company networks, attempts to establish a consistent regulatory framework for cable modem and DSL services, and even with respect to calls for broadband providers to maintain consumers' freedom to use the content, applications and devices of their choice voluntarily and without government mandate.

The jurisdictional determination should cover as many VoIP offerings as possible so as not to undermine the Commission's longstanding commitment to promote deployment of competing broadband networks. Deciding only that non-network-based VoIP providers offer interstate services runs the risk that parties will argue, future Commissions will decide or courts will conclude that network-based providers should be treated more onerously, notwithstanding their investment in the very wires and equipment that have spurred the emergence of these transformative services. This kind of "network versus no network" approach, of course, is the traditional method by which the FCC has regulated services related to data processing, and much of the criticism surrounding the agency's current treatment of broadband and advanced services centers around its wise divergence from that traditional method given the existing and prospective competition among networks that new digital technologies make possible. Leaving companies that have built or hope to build their own networks exposed to potential regulation could ultimately mean the Commission withstood all that criticism for nothing. More importantly, the regulatory uncertainty that such an approach would maintain or even exacerbate for those considering future investment in competing broadband networks leaves a critical flank of the agency's campaign to promote such deployment unprotected.

If time or other practical considerations prevent the FCC from deeming all VoIP services interstate, it should at a minimum avoid concluding or suggesting that these services somehow mutate into different jurisdictional form based simply on who owns "last mile" broadband networks. In particular, the agency in this case should state expressly that it is declining to determine the jurisdictional nature of services offered over a provider's own network. Further, in concluding that the other VoIP offerings are interstate, the Commission should avoid relying on any factors that, by implication, subject network-based VoIP providers to state jurisdiction. Given that all VoIP services rely on broadband networks whether or not they own them, it does not seem to follow that a provider's ownership or lack of a network is a logical jurisdictional distinction to make in any case.

Second, to the extent the Commission falls short of preempting state jurisdiction over VoIP entirely, it should be as clear as possible about the type of role state utility commissions will be allowed to play. The Telecommunications Act of 1996 maintains a framework of "cooperative federalism," in which the FCC shares regulatory authority with state utility commissions. Thus, states have been involved even with respect to issues the Act gives the FCC to address, such as states' successful attempts in the context of telephone numbering to obtain authority to help establish new area codes.

Although there are likely problems associated with state regulation of services like VoIP that inherently defy state and even network boundaries, those problems will be compounded if the FCC fails to preclude state involvement and then leaves ambiguous what role states can play. About half of state commissions have taken some action on VoIP, and that activity seems likely to continue even to the extent the Commission deems VoIP interstate. Rather than allowing states to fill this perceived gap "piecemeal," the agency should identify as clearly (and narrowly) as possible the areas in which it does not reject state involvement, relying heavily on some survey of where states' actions suggest they may intervene next. In addition to promoting regulatory certainty, detailing a role for states might discourage any court that is skeptical about the FCC's authority to eclipse states on VoIP from overruling the agency's decision that VoIP is interstate. Such a court might deem semantic the "difference" between allowing states to participate in regulating an "interstate" service and treating the service as though it were both interstate and intrastate.

Third, the agency should state affirmatively that it has no intention of regulating the overwhelming majority of services and applications that fall under its impossibly broad IP-Enabled Services proceeding. That proceeding sweeps in, not only voice, but any service or application (existing, emerging or as yet unborn) that relies on the Internet Protocol - a vast universe that will continue expanding rapidly in the foreseeable future. The Commission's instinct in asserting authority over computer applications that it has not traditionally regulated was not without some base; the agency might have predicted greater success in maintaining its commitment to "minimal regulation" if it lumped new offerings that (to some) quack like the "duck" of traditional phone service with other services few have considered subjecting to FCC regulation. (Do we really want the FCC to regulate online interactive video games?) But predictably, the record supporting -- or even mentioning -- regulation of most non-voice services covered by the proceeding is scant and diffuse.

Given the almost limitless possibilities that the Internet Protocol offers applications developers, this near silence is understandable; there are simply too many existing or emerging applications for participants in the proceeding to focus on any of them constructively without the kind of policy imperative that VoIP faces. This silence, however, is not golden - it has a dark side. As common sense and a recent report suggest, the uncertainty caused by such a cloud of potential future regulation strikes at the heart of the Commission's overall plan to promote investment and in innovation in digital technologies. In any event, the Commission does not need to assert authority over services it has never intended to regulate simply to acknowledge that VoIP is technologically similar or identical to those unregulated services. Thus, the Commission should rope off as broad a category of services as possible from regulation in the proceeding, beginning with primarily non-voice applications that do not rely heavily on the traditional public telephone network. In doing so, the Commission should underscore that, much like it has in decades past, it is promoting the development of data processing applications by expressly exempting them from regulation at the federal and (hopefully) state levels.

Again, it may seem somewhat gratuitous to ask more of an agency that already has too much on its plate. But if the FCC gives this kind of attention to the scope of its decisions and proceedings on VoIP, its care will be more than rewarded by making its actions more effective in promoting these innovative services and, ironically, by saving the Commission some work and headaches in the long run.

posted by Kyle Dixon @ 4:00 PM | The FCC, VoIP

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How to Avoid Long Distance Charges, II

Last week on this weblog, Ray mentioned how his Vonage Colorado home phone and mobile could be reached from Washington, DC using a local 202 area code that acts as a 'toll bridge' to circumvent paying distance charges and this threatens the principal redistributive purpose of telephone rates.

Indeed what Vonage and other VoIP companies are doing on a nationwide basis, Primus' Lingo VoIP service is doing worldwide. Look at their $19.99 a month plan that includes unlimited calling in the US, Canada, and Western Europe (landline only). If you call someone in Western Europe the number that will appear on that person's caller ID begins with a local European number (usually the nearest big city). So, that if I call a friend in the UK, it comes up as a London number. When they ask, "Hey are you in London? Let's meet up!" I have to respond, "No, I'm calling from an internet based phone in Washington, DC which is tricking your national PSTN system into thinking that I'm in London so that I don't have to pay any international toll charges."

Lingo doesn't stop with Europe; it also has a $34.95 a month plan that will add on eight Asian countries as well as Australia and New Zealand. For $79.95 a month it offers unlimited international calls to 35 countries worldwide. No doubt other VoIP providers will begin to offer similar plans, but Lingo has taken the lead.

Routing over the IP network is a neat little technique that illustrates quite clearly how VoIP technology is well ahead of current national based regulation regimes. This diagram below shows how a call made over a broadband line is transported via the internet (1) in IP format to a gateway in the terminating country, where it is then converted (2) to analog format and completed as a local PSTN call (3) with no international settlements paid. Cool huh?

How Lingo routes international calls:

posted by Rich Zielinski @ 1:13 PM | VoIP

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Thursday, October 21, 2004

How to Avoid Long Distance Charges

A microcosm of the demise of toll charges (and the access charges embedded within them) is an e-mail I just sent to my staff. I told them to call my virtual "202" VoIP number, which rings here in Denver and simultaneously on my mobile phone. Both of these are "720" Denver-located area codes. So now, any call from Washington to me reaching me on a Denver VoIP line or my Denver cell phone incurs no long distance toll charge.

From a cost and competition standpoint, this is a ho-hum point. I as a consumer am taking advantage of the competitive pressures in a declining cost industry to save money.

But wait. There is a hue and cry against this practice--regulatory arbitrage!! goes the epithet. Indeed, my old days as a regulator, if this were taking place wholly within the state of Colorado, we would have been petitioned to stop this practice as illegal "toll bridging," the practice of routing calls simply to avoid access charges. [Qwest to its credit has embraced a "no-access charge for VoIP" position.] From a regulatory perspective, this "toll bridging" is intolerable. It threatens a principal redistributive purpose of telephone rates.

This just goes to show how legacy regulation and its internal logic has ceased to have the individual consumer's interests at heart, but rather exists to preserve the prerogatives of a given set of consumers, usually in rural, high-cost areas (and, oh yes, it also persists to protect and perpetuate the interests of the regulatory class).

posted by Ray Gifford @ 9:38 AM | VoIP

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Saturday, October 16, 2004

A Contract -- A Real Live Contract

I activated my Vonage phone account today, with the nifty virtual phone number feature so I have both a "720" Colorado number and a "202" DC number on the same phone. In with the welcome package, behind the voice mail instructions and advanced features directions, there is this peculiar document called "Terms of Service." And, sure enough, you read it and it's a bona fide contract between me and Vonage.

So what, you say? I have contracts o'plenty in my life, most of which I've never read.

But in alternate universe of landline telecommunications, there are no contracts (except for large enterprise customers). Tariffs have ruled as the only valid contract terms. Only if state regulatory commissions allow a tariff to go into effect, are its terms legal between the provider and the customer. Further, those are the only legal terms. No one can contract around them. A small step in the creative destruction of regulation.

posted by Ray Gifford @ 5:46 PM | VoIP

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