FCC Begins Long Journey to Writing VoIP Rules

The FCC on Thursday officially began the long journey to writing rules governing the regulation of phone services that are routed over Internet Protocol networks.

Based on the premise that Internet services should remain largely unregulated, the FCC opened a notice of proposed rulemaking seeking public comment on a variety of issues related to Internet-based phone services, known in industry jargon as Voice over IP (VoIP).

Broad rules are not expected to be released for at least a year.

The top U.S. communications regulator separately ruled that a company routing calls entirely over the Internet is not subject to traditional phone rules. The FCC declared pulver.coms Free World Dialup is an unregulated information service, although FCC commissioner Michael Copps said the agency was making a hasty decision without scrutinizing the ramifications on such matters as public safety and the Universal Service Fund, the multi-billion dollar pot of money used to subsidize phone service in rural areas, schools and libraries.

FCC Chairman Michael Powell has repeatedly expressed his desire to apply light regulation to Internet-based calling, the latest technological rage.

Competitive market forces rather than prescriptive rules will respond to public need much more quickly and more effectively than even the best intentioned responses of government regulators, Powell said on Thursday. Indeed, our best hope for continuing the investment, innovation, choice and competition that characterizes Internet services today lies in limiting to a minimum the labyrinth of regulations and fees that apply to the Internet.

Regulators face an uphill battle applying minimal regulation because in part VoIP calls frequently cross the public switched telephone network controlled by the four regional Bells and other local phone companies. The public network is subject to a mountain of rules, including regulations governing how much phone companies pay one another to interconnect their networks. Billions of dollars in revenue between carriers is at stake in the VoIP rulemaking.

Basically they [FCC commissioners] are laying the groundwork for a philosophy that says if its a pure play Internet call then it will be treated like an e-mail without regulation and fees and taxes, independent analyst Jeff Kagan says. However, if it touches the public phone network in any way it will be subject to some level of regulation, fees and taxes in direct proportion to the level it utilizes the public telephone networks.

As part of the rulemaking, the FCC also must resolve the hullabaloo over whether Internet phone companies must contribute to the Universal Service Fund, and specify how they will support enhanced 911 services.

The pending rules have ramifications extending far beyond the telecommunications industry. Federal law enforcement agencies have expressed concern with being able to wiretap Internet-based calls, and the FCC yesterday said it plans to initiate a rulemaking proceeding related to compliance with the Communications Assistance for Law Enforcement Act (CALEA).

"While we are excited about the potential VoIP technology holds for the industry, those providers using IP protocol to offer telecommunications services should be held accountable to support the universal service program, as well as CALEA and enhanced 911 requirements, says Michael E. Brunner, CEO of the National Telecommunications Cooperative Association. They also should pay their fair share for accessing the national network.

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