FCC Bureau Chiefs Preview IP Services Order, Wrestle with New Policy Frameworks

SAN JOSE -- An extensive order addressing some issues in the IP-enabled services rulemaking should be ready for FCC consideration at the end of May, Wireline Bureau Chief Jeffrey Carlisle said at the VON Conference “town hall” here with Policy Development Chief Robert Pepper. The order will deal with jurisdiction over and classification of VoIP and “give indications” on VoIP players and regulatory social obligations such as E-911 and disabled access, Carlisle said. He told the audience he hoped the Commission would issue the order in the next several months. But he added that it depended on the FCC’s composition, since Chmn. Powell is leaving this month and Comr. Abernathy is thought likely to depart soon.

The focus of the first report and order will be on voice, Carlisle said. Video over IP has been “thrust before the Commission,” but it doesn’t have a large record on the subject. “It may be we're only in a position to ask more questions on this, but our hand may be forced” to go further, Carlisle said: “The Media Bureau is going to be the primary input” on the issue, “which is very much going to be a Title VI consideration.”

Still, Title II concepts carry over elsewhere, Carlisle said. It would be “problematic intellectually” if the FCC, having established for some purposes that “a bit is a bit” didn’t carry that through to video, Carlisle said. Video could come to a head if a municipality tried to shut down a telco’s service and the carrier came to the Commission, Pepper said. The U.S. is learning more from foreign countries and dictating to them less, Carlisle said. The U.S. is just getting to broadcasting over IP, which Japan was grappling with over the last year, he said.

Interconnection is “the hardest nut to crack” in FCC policy on VoIP, Carlisle said: The Commission can impose 911 and other requirements even if VoIP is an information service. But the Telecom Act is clear that interconnection obligations are confined to telecom services, and for these purposes if VoIP is an information service it’s considered an end user. He said some congressional proposals define a few specific duties for VoIP without classifying it in a conventional category. “That legislative approach has something to say for it, and that would be a useful approach,” Carlisle said. He also said Congress didn’t get the need for policy certainty on VoIP. Those on the Hill see cable getting into telephony and don’t appreciate the importance of potential billions in capital sitting on the sidelines, Carlisle said.

A better model is needed to encourage new technologies than the information/telecom services distinction, Carlisle said. The regulatory framework also should create a level playing field for different kinds of providers, he said. Unbundling facilities is crucial for competition -- but it involves regulators in competition “until the end of time, which is what UNE-P contemplated,” and works only if Congress and the courts move in the same direction as the FCC, Carlisle said. The net result of the Commission’s enormous effort was that customers could get for $54.95 from AT&T what would cost $59.95 from Verizon, Carlisle said. “That’s not the sweet spot for competition for voice,” he said: That spot is 30-40% off incumbents’ prices, which is what VoIP offers.

The U.S. approach on IP-enabled services is much more similar to the European telecom regulation structure than their divergent terminology would suggest, Carlisle said. The U.S. is distinguishing between common carrier economic regulation of monopoly providers and broader social obligations, he said. This tracks the European distinction between the social obligations imposed on public telephone services and the regulation imposed only on companies with market power that could be used to harm consumers, Carlisle said. The VoIP industry has done yeoman’s work on CALEA, E-911 and universal service that are obscured by charges that the sector seeks to avoid all responsibilities, Pepper said.

Even if the FCC imposes rules on VoIP, it’s better than 51 sets of regulation, Carlisle said, alluding to the state and D.C. actions that could have resulted had the Commission not taken preemptive action. But Pepper said the new environment is “an opportunity to redefine the partnership with the states… There are important consumer issues that don’t go away.” He warned VoIP against seeking affirmative help from the FCC. “The FCC is a political agency,” Carlisle said. “They might help you out for a year. But they might not help you next year.”

Using technology layers as a regulatory approach is a “useful tool” but shouldn’t “be set in stone,” Pepper said. There’s a tendency to presume bottlenecks or insufficient competition in the physical layer, and therefore a bias toward regulation there, he said. Also, the lines between layers are dynamic and tricky, Pepper said. “Possibly a regulatory solution” could be required to address anticompetitive behavior by broadband providers, but regulators should be cautious while the market is shaking out, Carlisle said. He said broadband consumers will know when they're prevented from using applications: “People not only have more selections, they're more aware of the selections they have.” Pepper said retailers, such as those selling VoIP adapters, wouldn’t hesitate to steer customers away from restrictive ISPs so the stores can make their sales.

The FCC’s action against rural telephone company Madison River Communications over interfering, through port-blocking, with VoIP use was remarkable for its speed, Pepper said. From Vonage CEO Jeffrey Citron’s visit to the Commission to complain to the consent decree took 3 weeks. “I don’t think the FCC has ever acted that quickly on anything,” Pepper said. Audience members expressed skepticism about the consent decree, saying it didn’t spell out why Madison River was paying $15,000 or clearly state that Madison River wouldn’t resume the port blocking. “That’s the effect of it,” Pepper assured the audience.

VoIP companies should be active on federal policy- making and not fatalistic, Carlisle advised. The FCC’s Pulver.com and Vonage decisions minimizing VoIP regulation so far have received short shrift because they've been treated as essentially no-brainers, he said. But the outcomes are important and they weren’t foregone conclusions, Carlisle said. “Don’t underestimate the power of a single concept” -- in this case, that IP telephony, regardless of its potential to replace all conventional voice service, should be looked at “from the Internet paradigm” and largely unregulated, rather than regulated within the traditional phone framework, he said.

“Voice over IP has moved from small to big” very quickly, Pepper said. “It’s now mainstream.” Vonage has 500,000 customers, he said -- but what knocked him back was being told the largest group of paying VoIP users were those of Xbox Live, Microsoft’s online game service. “We're still trying to figure out the 911 aspect of that,” Carlisle quipped.

The VoIP sector should be on guard concerning the ITU’s next-generation network initiative, the officials warned. Resulting rules could limit operators’ range of action not just overseas but within the U.S., Pepper said. The FCC is examining the effort together with companies as well as the rest of the federal govt., he said. “The ITU did quite a bit to stymie private networks in the late 1970s and ‘80s” by producing very restrictive national standards that allowed national telcos, known as PTTs, to keep them out, Carlisle recalled. “The ITU is driven by the traditional carriers” still, Pepper said.

“There is no official FCC position” on state restrictions on municipal broadband, Pepper said. His position is that private build-outs are preferable, and the existence of 6,000 wireless ISPs suggests capital is doing the job. But Pepper opposes state legislation restricting municipal action, especially those like a Tex. bill he said would prevent public-private partnerships. “That’s frankly really overreaching,” he said. “Some of the most creative WISP deployments have been public- private partnerships… The WISP community should be very concerned about legislation that would [restrict] them as private firms.”