RESPONSES TO FCC PROCEEDING CLARIFY BATTLE LINES ON VoIP

Comments filed with the FCC over the past several weeks in response to the commission's voice-over-IP rule-making clarified the lines of arguments various parties are expected to pursue vigorously before the FCC takes action sometime in the next year.

Although the proceeding is designed to address all IP-enabled services, the focus of comments submitted clearly was on broadband-based VoIP, which is expected to hit a growth curve that hasn't been predicted for any technology since the dawn of DSL (see graphic).

Almost all comments generally called for VoIP providers to be subject to “light” economic regulation but adhere to social policy goals such as universal service, E911 and surveillance access by law enforcement. But the manner in which these goals should be achieved differed significantly in comments, offering varying barriers of entry to newcomers.

The National Association of Regulatory Utility Commissioners, representing commissioners in most states, is leading the call for voice over IP to be treated within the same regulatory regime as circuit-switched telephony services. NARUC's filing suggests that VoIP represents the latest evolution of telephony and should be subject to the same regulatory framework as the traditional voice services it is expected to replace.

“Any other approach runs the risk of the regulator effectively choosing technology winners by allowing inter- or intra-jurisdictional regulatory arbitrage — rather than allowing markets to sort out the most efficient competitors,” NARUC's filing states. “By mandating technology-neutral determinations, Congress intended that functionally similar services, like basic telecommunications services, be classified similarly.”

Of course, NARUC's position would maintain state commissions' regulatory jurisdiction. Meanwhile, the notion that “similar services should be treated similarly” also is featured in comments offered by RBOCs, but with a much different conclusion.

While agreeing that calls touching the public network should be subject to access charges and that VoIP providers should comply with CALEA, the U.S. Telecom Association's filing argues that the feds should have sole regulatory jurisdiction.

“The Commission should find that the VoIP market is interstate in nature and thus not subject to state regulation,” according to USTA's filing. “Uniformity in regulation, not regulation under 50 disparate state authorities, will provide the regulatory clarity that will foster continued development and use of VoIP and other IP-enabled services.”

Tossing states out of the regulatory mix also is a key goal of non-facilities-based VoIP providers such as Vonage, which claim regulation beyond the FCC would hamper the business models for start-ups wanting to enter the field (see sidebar). Vonage's filing called for a layered approach to regulation, in which the VoIP application would be treated as a largely unregulated information service while the network would be regulated separately.

CLECs, weary that VoIP deregulation may result in deregulating incumbent carriers' networks to the point where competitors lose access, favor a similarly layered approach.

Advocates of federal-only regulation may have reason to be optimistic. A majority of FCC commissioners have indicated they believe VoIP is an interstate service not subject to state regulation, because packets for even local calls can be routed on servers located throughout the world.

“While I'm certain the states would vigorously challenge that position, I think the FCC ultimately would prevail,” said Andy Lipman, a telecommunications attorney with the law firm of Swidler Berlin Shereff Friedman.

NARUC general counsel Brad Ramsay acknowledged that his filing is a “lone voice crying in the wilderness” by advocating a significant state regulatory role. While it may not be a popular sentiment, the position may have legal precedent on its side, according to Rick Brecher, a shareholder in the law firm of Greenberg Traurig.

“You determine jurisdiction by where a call originates and terminates. Case law says you don't look at the route,” Brecher said, dismissing the argument that VoIP is inherently an interstate application.

Although the FCC has vowed to address law-enforcement surveillance issues quickly, the commission is not expected to act on the IP-services proceeding until after the November elections, when the makeup of the commission could be significantly different.

Because of the uncertainty that would come from states' legal challenges to an FCC decision claiming sole jurisdiction over VoIP, most believe the cleanest way to prevent state regulation would be for Congress to pass a law clearly stating the FCC's authority. There are two such pieces of legislation proposed, but getting them passed will not be easy, according to Legg Mason telecom analyst Blair Levin, who said he believes states will have at least a consumer-protection role in VoIP.

Lipman also agreed that it is doubtful federal lawmakers will pass a bill that will allow the FCC to avoid making the hard decision regarding the states' role.

“I personally think it's going to be difficult for Congress to address that issue, in part because it's hard to keep legislation narrow,” Lipman said. “Once you open that door a crack, you swing it wide open.”