Committee vote underscores telecom regulatory problems

Senate Commerce Committee amendments to the voice-over-IP bill sponsored by Sen. John Sununu (R-N.H.) probably will prevent the legislation from becoming law, meaning it will be up to the FCC to formulate VoIP policies for the near future.

Sununu's bill originally called for a very light regulatory touch upon VoIP at the federal level, with state and local governments being pre-empted from regulating or taxing the nascent technology at all.

At the heart of Sununu's bill is the declaration that VoIP is an application that should be treated as an information service. Amendments placed on the bill--most notably, state-regulated access-charge and universal-service obligations--essentially would treat VoIP as a telecommunications service.

While there certainly are valid arguments for calling VoIP a telecommunications service, doing so significantly reduces the chance that this bill will become law. Crucial to the success of this bill was maintaining its narrow focus, butintroducing ideas such as state universal-service obligations opens the door to a plethora of legacy issues that seem destined to entangle the legislation in the time-honored arguments that have stagnated telecom numerous times before.

That means the FCC likely will determine the near-term treatment of VoIP, as the agency has three proceedings pending that could address the issue. However, pre-empting state regulators--a key aspect of the FCC majority's expected position on the subject--is going to face a tough road, as the Sununu mark-up is a clear signal of the political risks involved in taking such action.

Pre-emption also carries significant legal risk. A Congressional mandate that VoIP is an interstate service would be difficult to challenge, but now that doesn't appear to be in the offing; a similar declaration by the FCC means we're probably looking at two years of litigation before an answer emerges.

There are other questions with legal implications. If a VoIP call is carried over privatelyowned networks--and most will be to ensure quality -- does that really qualify as an "Internet" application that is deserving of a free pass on many taxes and regulations? If routing VoIP calls through other states makes them inherently interstate, will long-distance be allowed to bypass intrastate access fees on traditional telephony calls simply by routing the call through a switch in a neighboring state? In both cases, that's not an easy argument to make.

And the 911 debate creates another set of questions. VoIP proponents say you can't subject the technology to the current access-charge regime because the location of a VoIP phone cannot be tied to the phone number. They also adamantly state that they will develop an industry solution so that E911 can be offered. But if a phone's location can be determined for E911 purposes, can't the same technology be used to determine whether a call is local, intrastate or interstate?

As is the case with almost every telecom issue, it appears that we're looking at another cycle of FCC rulings followed by legal battles, with the entire effort being subject to trumping by comprehensive Congressional action years down the road.

VoIP providers hoping for regulatory clarity so they can make investments should get comfortable. This is going to take awhile and promises to be a bumpy ride in the process.

E-mail me at djackson@primediabusiness.com.