CONGRESSIONAL DILEMMA: BILL OR ACT?

Bills recently introduced in both houses of Congress that call for voice-over-IP applications to be largely deregulated appear to have some initial support, but concerns that VoIP should be addressed in next year's expected effort to rewrite the Telecom Act could prevent either proposal from becoming law.

Under two generally similar bills introduced by Sen. John Sununu, R-N.H., and Rep. Chip Pickering, R-Miss., VoIP applications used to originate or receive a call would be classified as information services subject to limited FCC oversight and no state-level regulation or taxation. Both bills call for VoIP providers to participate in social policy efforts such as contributing to the universal service fund and being subject to FCC rulings on E911, access by the disabled, and standards of security and reliability.

Perhaps most importantly, both bills address only VoIP applications, not the underlying broadband networks needed to transport such calls. “We avoided [addressing network issues] so we don't get into the old telecom battles,” Pickering said in an interview with Telephony last week.

There are two key differences in the bills. Sununu's proposal would exempt VoIP applications from access charges until the current intercarrier compensation regime is revamped, while Pickering's bill calls for the FCC to rule on the issue within six months of the bill's passage.

Law enforcement surveillance access for VoIP calls is another area of disparity. Pickering calls for CALEA-like access if the FCC deems it is “technically feasible” — something the House leadership “feels very strongly about,” he said. Meanwhile, Sununu's legislation calls for VoIP providers to allow law enforcement only as much access as required of other information service applications.

“It would be a mistake to take the legislative provisions written for copper-based, circuit-switched networks and apply them to this technology,” Sununu said in an interview.

This philosophy is evident throughout Sununu's bill and reflects the light regulatory touch for VoIP favored by the FCC and most in the industry.

“We're supportive of the Sununu legislation,” said an AT&T spokeswoman. “If you look at how the FCC is dealing with phone-to-phone VoIP, it looks like they're starting to regulate this new technology under the legacy regime.”

Because there is a large degree of consensus that VoIP applications should not be burdened by regulation, Pickering said “this may be legislation where the stars are aligned” in a manner that would allow for approval this year.

Meanwhile, Senate Commerce, Science and Transportation Committee Chairman John McCain, R-Ariz., has expressed support for Sununu's bill and reportedly plans to conduct a hearing and markup of the legislation.

Potential substantive opposition to the bills will come from rural carriers concerned that the Sununu proposal will eliminate their all-important access revenues and from law enforcement, which likely will seek E911 and CALEA guidelines that mirror those required of telecom carriers.

But the greatest source of opposition likely will come from state and local government entities, which would not have any authority to regulate or tax VoIP applications, which are expected to be the future of voice communications.

State and local governments annually receive a combined $26 billion from taxes on telecom carriers, and the prospect of not having the ability to tax VoIP calls could create revenue shortfalls that would be difficult to offset, according to Sen. Lamar Alexander, R-Tenn. But Sununu said that does not justify taxing VoIP applications.

“It's a mistake to build policy based on protecting regulatory jurisdictions or taxing authority,” Sununu said. “States do not have an inherent right to tax people's voice conversations.”

Meanwhile, the National Association of Regulatory Utility Commissioners believes fears that states will create burdens on VoIP if allowed to regulate the technology are overstated. “The premise of these bills is that the states have their knives out for VoIP — and we fundamentally disagree with that premise,” a NARUC press release stated.

But the greatest hurdle for these bills may have less to do with their content and more to do with their timing.

Trying to get legislation passed while members of Congress are distracted by re-election campaigns is always an uphill battle. This is compounded by the fact that House Commerce Committee Chairman Joe Barton, R-Texas, and Sen. Ted Stevens, R-Alaska — expected to be chairman of the Senate Commerce Committee next year — have announced plans to attempt a rewrite of the 1996 Telecom Act beginning next year.

Many believe Congress should tackle VoIP issues when it rewrites the Telecom Act, Pickering said.

“There is broad consensus that VoIP should not be regulated, but some people say, ‘I support you in substance, but I think that should be addressed in broader legislation,’” Pickering said.

That's because it is almost impossible to write legislation regarding VoIP that doesn't impact other telecom issues such as intercarrier compensation and universal service funding, according to Blair Levin, managing director of regulatory strategy at Legg Mason and the FCC's chief of staff when the 1996 Act was written.

“Telecom is a like a quilt — once you pull one string, the whole thing tends to unravel,” Levin said. “The legislation implicates a number of other policies. Of course, if you do it holistically, it could take years to pass anything. That's the dilemma.”

Indeed, any attempt to rewrite the Telecom Act will require an extended period of hard-fought negotiations with no promise that a law can be enacted, according to Precursor CEO Scott Cleland.

“There's wide consensus that there's a problem, and no consensus what the solution is,” Cleland said.

But the market won't wait for Congress, which is why VoIP legislation should be considered immediately, Sununu said. A lack of clarity regarding VoIP already has resulted in considerable litigation and a significant FCC backlog of disputes — problems that promise to get worse as large telcos and cable operators deploy large-scale VoIP solutions.

In addition, the regulatory uncertainty surrounding VoIP has created hesitancy for investors that otherwise might be anxious to financially support companies offering solutions for the voice communications technology of the future, Sununu said. And Congress recognizes the fact that the inherently mobile nature of VoIP providers allows them to move their operations — and their jobs and taxes — elsewhere if they do not believe the U.S. regulatory environment is conducive to their businesses.

“It would be a mistake to wait for the momentum to build for rewriting the Telecom Act,” Sununu said. “There are already efforts to apply outdated regulations written for copper-based, circuit-switched networks. We can't be backward-looking in the treatment of this new technology.”