Powell Calls for Implementation of Internet Freedom Principles

BOSTON -- Addressing the VoIP industry in a packed room at the VON conference here, FCC Chmn. Powell stressed that realization of the “Internet consumer freedom” principles he outlined this year and subjecting VoIP to exclusive federal jurisdiction were key to promoting the VoIP revolution. In an emotional speech interrupted several times by applause, Powell compared migration to IP technology with “the great American Revolutions” and said as he was giving his keynote he had “a sense of how our first President, General George Washington, would have felt standing before the Minutemen that would form the Continental Army.”

Powell had been expected to make 2 significant announcements at VON, but industry sources said they seemed to have been omitted in his speech: (1) The FCC is ready to grant the Vonage petition asking to exempt its VoIP service from state regulation. (2) The FCC expects to adopt 4 net neutrality principles, which Powell outlined earlier this year. One industry source said although Powell did refer to the Internet consumer freedoms, he “didn’t apply [them] in any specific ways. I am somewhat disappointed that we didn’t hear anything bigger, given that it’s a major keynote opportunity at VON.”

Powell stressed it was important to “ensure that a willing provider can reach a willing consumer over the broadband connection” to realize the innovation potential of IP communications. “Ensuring that consumers can obtain and use the content, applications, and devices they choose is critical to unlocking the vast potential of the Internet,” he said.

Powell urged the industry to adopt the Internet freedom principles. He said Internet freedom would empower consumers and promote innovation by “giving developers and service providers confidence to develop applications that will reach consumers and run as designed, and also serving as an insurance policy against the potential rise of abusive market power by vertically integrated providers.” The 4 components of the Powell’s freedoms relate to: (1) Access to content. (2) Use of applications. (3) Attaching personal devices. (4) Obtaining service plan information.

VoIP should be subject to exclusive federal jurisdiction, Powell said, eliciting applause. “We cannot avoid this question any longer,” he said: “To hold that packets flying across national and indeed international digital networks should be subject to state commission economic regulatory authority is to dumb down the Internet to match the limited vision of government officials. That would be a tragedy.” Powell said he would work with states, as well as other countries, to “ensure that a minimal, well-harmonized regulatory environment is applied to VoIP services.” The FCC is sending a proposal on VoIP jurisdiction to the commissioners to vote on, but Powell said the final order wouldn’t come out before the presidential election.

Powell told us there was “going to be roles for states [on VoIP], but I say that very broadly, because state is everything from a governor to a utility commission… Of course, there is going to be a whole [spectrum] of important issues like E911, over time at least.” He said he also expected to see a lot of debate about taxation. Referring to state commissions, he said: “If what you are really worried about in a state is revenue collection, I think that is a legitimate worry… But don’t distort regulation just to keep it in a category so that you can. The government has more than enough power to make an independent decision about whether VoIP should be taxed. You don’t have to make it a common carrier just to do that, because that can potentially crash the service… We have hundreds of regulations that automatically apply if you are a telecom service provider.”

Powell said treatment of VoIP would likely have “some of the farthest reaching consequences of anything the Commission will consider in the near future. The Commission is not simply considering minor adjustments to specific regulations -- the Commission is considering the future of electronic and optic communications for many years to come. And we have to get this right.” Noting that many regulators had disagreed the change was needed, saying VoIP was just a different way to make calls, Powell said: “But isn’t that the point! It is a different way, and it deserves a different regulatory structure that reflects its unique qualities. It’s wrong, just plain wrong, to not recognize the potential of VoIP, or to see it through the lens of the old telephone network regulatory model. VoIP is a data application and as such has all the hallmarks of the Internet itself.”

In answer to a question, Powell said the network that applications ride on “has to be fairly paid for.” But he said it was important to reform the intercarrier compensation system: “I think the most important thing the government needs to do going forward is to radically reform the intercarrier compensation system. It was broken before you all showed up… This is not a VoIP issue, this is a distortion of the entire communications system.” Powell said the challenge was “not whether VoIP should pay the same kind of charges that currently exist in the network; the real question is all of those charges need to be brought to a rational structure… and then technology neutrality and healthy competition, not regulatory arbitrage, will decide who wins.”

Asked what the FCC will do to protect last mile access to legacy copper, especially in light of the recent fiber-to-the-curb decision, Powell said: “The Commission tried to balance 2 interests. On the one hand, we recognize this country needs to radically migrate to a much more advanced infrastructure and architecture if it hopes to go from 10th to first in the world… So, we are trying to [bring about] incentives for construction… But we also want competition, we also don’t want to do so at the [expense] of solidifying the monopoly.” Powell said the FCC in its original Triennial Review Order tried to “strike that balance between legacy copper infrastructure, and I assure you that same dynamic we are going to reach in a decision in this Triennial. And we will do so, and will probably justify it more thoroughly and more carefully… That’s what we are going to be focused on in a remand, which we will finish by the end of this year.”

Asked about the direction in which the Commission’s CALEA rulemaking was going, Powell said: “You should have no illusion that there is one thing that a government always has as a responsibility -- and that is to protect its citizens from harm. It’s not an economic question… Particularly in this world of a terrorism threat, there has to be an answer to how this works. So the suggestion to leave it alone… is misguided.” Asked whether the Commission was going to address a directory listing for VoIP customers, Powell said: “I haven’t thought about it.” He said there was going to be a lot of “questions that will arrive as you try to move from traditional telephone services to VoIP services. We are going to deal with them as they come about… Every issue that comes up we will treat with the same bias, which is we want to prove that you need us, not to make you prove that you don’t.”

Pulver.com CEO Jeff Pulver asked whether the Commission was considering creating an IP Communications Bureau, but Powell said: “I don’t think that will happen… A lot of reasons why we have [different bureaus] have to do with ministerial things… But the truth to it is that most of the decisions today are [made] around the table of interagency groups… Nothing is done bureau- solely anyway.”

Powell’s presentation brought a generally positive reaction. One industry source said it was of interest to him that Powell stressed the importance of the Internet freedom: “That is vital. That’s going to be the key to success of VoIP industry if VoIP providers can compete as edge players without discrimination from underlying broadband platforms, namely the ILECs or cable companies. He made that point again which is helpful and useful. But there are concerns about how can you enforce that. That aspect of it is still unclear.”

Jim Kohlenberger, exec. dir.-VON Coalition, said the speech was “pretty amazing. My one word was ‘wow!’ I think he really got the revolutionary [nature] of this technology.” He told us “one big takeaway was on jurisdiction. What he clearly told us is that [VoIP] does not have geographic boundaries… You can’t stifle that type of innovation by putting it in a box… That’s a very important step forward.” Another takeaway, he said, was that “that you can’t automatically apply broken intercarrier compensation system to this new technology. These 2 things are critical enablers of VoIP in unleashing the revolution he talked about.” VON Coalition spokesman David Svanda, former NARUC pres. & Mich. PSC comr., told us “the fact that [Powell] was talking about the need to think about [VoIP] in terms of revolutionary activities is important, especially on the intercarrier compensation… Having him think in those terms was very exciting.” Wayne Fonteix, AT&T dir.-regulatory affairs, said he agreed with Powell on the need for immediate action by the Commission on jurisdiction, as well as other aspects of the IP- enabled services proceeding.