VoIP Can't Wait for Telecom Reform

WASHINGTON -- Exempting Internet telephony from state regulations can't wait for Congress to pass an overall telecom reform bill, U.S. Representative Chip Pickering told fellow lawmakers Wednesday. While several bills to exempt Voice over Internet Protocol (VoIP) from state regulations have been introduced in both the House and the Senate, lawmakers have been reluctant to carve out a special niche for VoIP from the overall reform of the 1996 Telecommunications Act planned for next year. "At a minimum from today, [telecom reform] will take three years," Pickering told the House Subcommittee on Telecommunications and the Internet studying telecom reform. "We need to do pre-emption now. If we wait, it will be three years and the market can't wait." Pickering is the sponsor of a bill preventing the FCC from delegating VoIP regulatory authority to state and local officials. The legislation also exempts VoIP applications from the FCC's access charge regime. John Sununu (R-N.H.) is sponsoring similar legislation in the Senate. "We should have three policy objectives: promote broadband investment, promote competition and protect consumers," Pickering said. "We should not have a patchwork of 50 states with different regulations." Tuesday's House hearing drew an overflow crowd to hear an unusually large panel of witnesses, which included officials from the Federal Communications Commission (FCC), BellSouth (Quote, Chart), Vonage, At&T (Quote, Chart), Covad, Level 3 (Quote, Chart) and Cablevision (Quote, Chart).

"We will never know VoIP's tremendous potential if we saddle it with unwarranted government regulation," Subcommittee Chairman Fred Upton (R-Mich.) said. "For instance, given VoIP's reliance on the Internet, which respects no state or local boundaries, VoIP is truly interstate in nature."

How VoIP should be classified by regulators is one of the key issues in the debate over Internet telephony. Most VoIP providers route calls from leased local telephone lines to a gateway server that converts analog voice into data packets. From there, the data packets move over the public Internet or a private backbone to its destination, where it goes through another gateway, rolling over to a local line.

State regulators are concerned that the FCC, which is examining the appropriate regulatory framework for VoIP in a year-long study, will rule all Internet telephony is an interstate information service no different than applications like e-mail. Such a ruling would put VoIP beyond the taxing and regulatory reach of the states.

While VoIP is clearly a phone service, providers say they shouldn't be regulated in the same manner as the public switched network telephone carriers since they don't traffic in voice packets. Minnesota and New York have already attempted to tax VoIP services as they would traditional telephone service, only to be rebuffed by the courts. California is also considering regulating VoIP as a telephone service.

"While the commission deals with many significant issues, it is very likely that treatment of VoIP will have the farthest reaching consequences of anything the commission will consider in the near future," said Jeffrey Carlisle, senior deputy bureau chief of the FCC's Wireline Competition Bureau.

Carlisle said that while the FCC has some ability to "fine tune" treatment of new technologies, the FCC "must still act within the bounds of the Communications Act, which require us to apply regulations depending on whether a new technology is considered a telecommunications service or an information service."

He also told the lawmakers, "If you believe VoIP and other new technologies are working changes in the telecommunications market such that new regulatory approaches are necessary, you may have to consider whether the tools the commission has today are sophisticated enough for the task."

Only Rep. John Dingell (D-Mich.) seemed reluctant to take up Carlisle's suggestion, noting that he found "troubling" the notion of classifying VoIP as an information service.

"I would like to take this opportunity to remind the FCC that it is a creature of the Congress, and the Congress never intended that voice services be deregulated at the whim of the FCC," Dingell said. "There is nothing in either the 1996 act nor its legislative history which suggests that Congress ever intended the dominant voice service be classified as an information service."