ACCESS CHARGE REGULATION OF VoIP SAID DOOMED

March 15, 2004 by Louis Trager|Miscellaneous

SAN FRANCISCO -- The growing support among regulators and companies, including ILECs, to subject all voice traffic connecting to the PSTN to access charges is misguided and doomed, Cal. PUC Comr. Susan Kennedy said Fri. “This is certainly the simplest path… because it largely maintains the status quo, keeps funding for social programs intact and leaves pure Internet telephony alone.”

“But this solution can only be a temporary one because (A), it will not solve the universal service problem in the long run and (B) it will seriously disadvantage one network platform -- the PSTN -- compared with the cable network, the cellular network and now the Internet,” Kenney told Law Seminars International’s Voice over IP conference here: “Because, as we've just seen with cellular, it won’t be long before you don’t need the PSTN to connect most calls. Between cell-to-cell, peer-to-peer computer calling and the 800 pound gorilla of cable telephony, it will not be long before the PSTN is just one relatively minor player in a huge multiplatform network.”

“We have a small window of opportunity -- while the PSTN is still the dominant network platform for voice services -- to develop a new regulatory structure,” Kennedy said. “In order to even have this discussion, states must be willing to forgo any litigation over what is a telecommunication service versus an information service using the current definition. The distinction between them may not even be salvageable in a new framework.”

“I'm a supporter of using phone numbers as a demarcation line,” Kennedy said. “Designate any voice service that uses phone numbers from the North American Numbering Plan as a primary voice communication medium. All primary voice communication as such would be subject to 911 requirements [and] CALEA and pay into the Universal Service Fund on a per number basis, in addition to whatever other explicit charges we apply through intercarrier compensation.”

VoIP changes almost everything about telecom regulation -- many of the bedrock assumptions, but not the need for some govt. rules, Kennedy said: “Will telephony regulation become irrelevant? The answer is ‘No, not by a long shot.'” Nevertheless, “VoIP changes everything we know about telecommunications today -- the technology, the regulations, the economics, even the language… It’s a new world, and we need a new attitude and a new set of regulations.”

“The current intercarrier compensation system must be scrapped and replaced with something more simple and rational,” Kennedy said. “We should eliminate dual jurisdiction for pricing. We should explore one price for interconnection, perhaps based on the capacity of the pipe, with all else being some form of bill and keep. Universal service would have to be weaved into this new system in some explicit way.”

“There is no more line between telecommunications and information services as defined by current law,” Kennedy said: “There is no longer any relevance to the total element long-run incremental cost of replacing one hundred year old infrastructure. There is no difference between interstate and intrastate, between local, long distance and international… The only distinctions that exist now are those that are created by and for regulators to facilitate the status quo… And companies that are fighting to maintain any semblance of the current intercarrier compensation regime, including access charges, are taking a protectionist stance until they can figure out how to get their footing in this new world.”

The entire regulatory universe revolves around who provides and who pays for voice, Kennedy said. But now “we are rapidly moving to a world in which voice service is nothing more than another application that will travel over any medium that today can carry an instant message, a photograph or a song. And it will be free… Peer-to-peer networking in my view is going to do to the telephone industry what file-sharing did to the music industry.” -- Louis Trager

VoIP Conference Notebook…

States continue trying to regulate VoIP, and jurisdictional tussles may persist even after the FCC concludes its IP-enabled services NPRM, Seattle lawyer Brooks Harlow said. Incumbent local carriers realize their business will be ever more eroded by VoIP -- because it, like wireless, offers mobility their fixed lines can’t -- and they will keep pushing state commissions to shore up their positions, he told Law Seminars International’s Voice over IP conference in San Francisco. The incumbents are fighting “a losing battle… 5 or 10 years down the road,” even if they win favorable state rulings, because regulation ultimately can’t overcome the efficiencies of the new technology, Harlow said. Sixteen states have waded into the controversy, with 10 undecided and Colo. saying it doesn’t want to regulate, he said. Five state commissions have made moves to regulate, but they include Cal., whose position is tentative; Fla., which said it agreed with BellSouth that phone-to-phone IP telephony was equivalent to traditional calling but decided the issue wasn’t ripe; and Minn., whose decision to regulate Vonage was enjoined, Harlow said. The Commission’s Feb. Pulver.com ruling may have left room for the states to regulate IP voice whether it moves over the Internet or private networks, he said. But the FCC has also left itself the argument that -- even if packet-based calls can’t be pegged as interstate commerce -- they affect such commerce enough that state regulation is impermissible and the Commission should pre-empt it under the “dormant Commerce Clause” doctrine, Harlow said. Many states would fight this stance in court but it’s unclear NARUC would participate, he said. “This a whole new wave of litigation,” he told the assembled attorneys. At stake in VoIP regulation is whether the U.S. will disadvantage itself by hobbling new technology, said Harlow, who represents CLEC and cable. But if ILECs don’t get a piece of VoIP revenue, the universal service model could collapse, Harlow said: They could pull out of rural areas or demand to drastically raise rates that don’t begin to cover costs there, Harlow said.

VoIP service providers may be obliged to provide 911 access, but they face logistical hurdles, said the regulatory affairs director of Intrado, which sells 911 systems and services. VoIP meets all 4 criteria the FCC posed in its 911 Further Notice of Rulemaking, except perhaps that supporting 911 be technically and operationally feasible, said Cindy Clugy: VoIP numbers are mobile, so emergency service would depend on location notification by subscribers. To support 911, VoIP providers need access to switching and database elements, she said; incumbents providing monopoly 911 services should open them up, regardless of the certification status of companies that seek to participate. Because of current technology restrictions, functionally equivalent alternatives should be available to VoIP providers to meet service quality standards, Clugy said. But her company agrees with the public safety officials who are upset by proposals for VoIP users’ calls to be delivered over standard 10-digit lines instead of 911, whose systems are integrated with computer-aided dispatch, she said. Fairness and consistency must govern assessments to finance 911 service, she said. With technical limitations inhibiting fully enhanced 911 for VoIP, the current 911 infrastructure will be stretched and needs to be redesigned, Clugy said. A modernized system should build in IP applications, which could automatically supply emergency personnel with data such as callers’ severe medical conditions or the presence of dangerous materials next door to a fire.