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the regulatory definition of VoIP
THE BATTLEFIELD DRAWN
By E A Maldonado, Esq. & M Schulman |
No other regulatory issue in telecom has drawn as much attention
as the October 2003 announcement that the FCC may re-consider its
regulatory forbearance of VoIP as early as 2004. Being now placed
on the table for FCC fact-finding hearings is how VoIP should be
permanently defined, or exempted, in the process of transporting
voice conversations. Since 1998, VoIP has enjoyed steady growth
and wide use in the industry under an FCC forbearance premised upon:
1) a benefit being conferred to all Americans by allowing the technology
to first penetrate the market in order to lower the cost of services
to consumer, and 2) it being necessary in order to clarify VoIP’s
unique characteristics in comparison to traditional principles used
in regulation. Thereafter the FCC has officially remained silent
as to the substantive issues regarding regulating and defining VoIP,
until now.
HELPFUL DEFINITIONS IN THE VOIP DEBATE:
Forbearance: Forbearance is the power of a regulator
not to regulate a service or market if it believes the market is
“workably competitive”.
VoIP: Voice over Internet Protocol. The technology
used to transmit voice conversations over a data network using the
Internet Protocol. Such data network may be the Internet, a corporate
Intranet, or managed networks typically used by long and local service
traditional providers and ISPs.
PTN: Public Telephone Network important for access
to the phone company “end office”, also connects the
long distance network, and delivers the voice calls to the destination
premises.
This silence has not been entirely golden. Although an immediate
federal benefit befell some carriers using VoIP networks, the weight
of defining VoIP shifted to the individual states and their public
utility commissions who have moved in a variety of different directions.
The operative words here being “different directions.”
An array of legislation and regulations has been promulgated and
acted upon regarding VoIP at the state level — largely addressing
VoIP carrier issues. For example, in May of 2003, Florida enacted
a law that generally prohibited state regulation of VoIP as a technology
but also distinguished that if the carrier used VoIP to provide
services to the consumer, then those services would still be regulated.
The Florida law also contained language that would nullify the law,
if, and when, the FCC ruled or defined VoIP to the contrary. Another
state, Minnesota, is an example where moves to regulate VoIP carriers
resulted in litigation in federal court based on constitutional
claims that such regulation would be an encroachment on the powers
of the federal government, namely the FCC. In the case of Minnesota,
the state commission has been specifically ordered not to address
VoIP and Internet carrier issues until the matter is finally settled.
As of October 2003, New York began a fact-finding process to claims
that certain IP carriers were providing “telephone service”
in New York without any regard to New York law or regulation over
such services. That process is still open in New York. The California
Public Utility Commission formally requested six IP providers (SBC
IP Communications, 8x8, Net2Phone, Telverse Communications, Vonage
and Voice Pulse) to apply for certification as telecommunications
utilities as required by California law. Examples, such as these,
will continue to grow as legislation and enforcement actions regarding
these VoIP will likely be advanced in Illinois, Arizona, and Wisconsin
in 2004. The end result is that the current state of regulatory
environment will consist of a patchwork of approaches to VoIP, and
VoIP carriers, based upon diverse findings, principles or criteria
— and not a single set of norms consistently applied nationwide.
Large carriers have seen this effect, and have been keen to advance
regulatory strategies to address both the FCC forbearance and state
uncertainties. This has been largely in the arena of regulatory
fees and taxes. In the case of Minnesota, Denver-based Qwest Communications
announced its strategy to challenge state regulatory fees related
to rural-phone subsidies and subsidies to state programs targeted
to traditional telephony based upon the statutory inapplicability
of such fees to internet services such as VoIP. In the case of FCC
forbearance of VoIP, MCI and AT&T are currently embattled in
Federal Bankruptcy Court as to the applicability of Access Fee Charges
for VoIP calls. At issue, how should the subject matter be addressed
in light of FCC forbearance, and more importantly, who ultimately
should bear the fees. Again, these are issues that impinge upon
the federal definition of VoIP remaining unresolved.
Seemingly, the FCC’s silence ended with Chairman Powell’s
2003 October announcement to re-evaluate the issue of VoIP through
fact-finding hearings. The caveat in this process is where exactly
will the battle lines of this debate be finally drawn. There are
a number of players and interests advocating a variety of positions
poised to move in this 2004 process. Not all of these interests
merge, or even form distinguishable fronts from one another, in
the debate. Perhaps it is wiser to consider the battlefield drawn
before deciding where to base our expectations for the future regulatory
definition of VoIP.
THE HEART OF THE MATTER
From a technical definition, VoIP is a technology used to transport
voice conversations over a data network, be it the Internet, corporate
Intranet or a privately managed network. The transport of VoIP is
achieved through the conversion of the analog elements of voice
conversations into digital packets, which can be transmitted over
a data network at an efficient level, its actual transmission, and
re-conversion back into an analog conversation at the receiver’s
end.
VoIP does not change content of the conversation or the analog elements
of the dialogue of the speaker. VoIP is the part of the generation
of transport technology in a line that includes Voice over ATM,
and Voice over Frame Relay (VoFR). While it’s purported to
be American consumers who utilize VoIP most in the form of personal
computer to personal computer communication, the fact is that the
majority of VoIP users are either corporations using their own gateways
in an intra-company fashion or carriers transporting long distance
calls that the consumer may be unaware, by the use of VoIP.
In recent years, a considerable area of growth for VoIP providers
and carriers has been Hybrid VoIP (or what can be called H-VoIP).
An H-VoIP network completes a voice transmission utilizing one or
more interconnections between an IP network and a traditional PTN
(Public Telephone Network) network. H-VoIP is an application bridge
between traditional telephony and VoIP technology, and describes
many of the networks being developed today. If a voice transmission
begins as VoIP, is transmitted as VoIP, and terminates as VoIP,
never having been transmitted as voice over a PTN network, then
it is VoIP in its purest form and not H-VoIP. If, at any time during
the transmission, the packets are converted from pure VoIP packets
to non-IP voice packets, and transmitted over a Public Network,
then it would be H-VoIP. Many long distance carriers today transport
calls in an H-VoIP fashion due to costs and logistics in transporting
calls through the PTN. The majority of the battle to keep the present
policy for FCC forbearance also vests in the H-VoIP class of carriers.
The PTN (Public Telephone Network) is important for H-VoIP because
it allows access to the phone company “end office,”
connects through the long distance network, and delivers the phone
call to the destination premises. Originally, the PTN was analog
(2-wire) from end to end. Digital technologies have replaced almost
all analog systems in the infrastructure and transmission portion
of telephony networks, but most local loops, from “end office”
to the customer premises are still “2-wire.” “Analog
to digital conversion” technology using special modems for
devices such as faxes and computers, enable “2-wire”
connections to handle “digital signaling,” and newer
technologies such as ISDN and DSL enable true 2-wire digital transmission
to the customer premises. Digital local loops (4 wire, fiber-optic,
coaxial or wireless) utilize digital technology and are installed
from “end offices” to customer premises that require
higher capacity connections. In either case, the “end office”
is the hub in the local loop portion of the network. As the PTN
migrates from Analog to Digital, the regulatory status of the PTN
will not change – it is still regulated as the public telephony
network providing end-office assess. Whether the digital transmission
protocols are synchronous or asynchronous, FDM or TDM, FM or QAM,
they are all regulated the same when it comes to voice transmission
over the PTN. Therefore, H-VoIP conversations transported over the
PTN will still need to deal with regulatory issues associated with
that network. This is not because of something intrinsic to VoIP
or H-VoIP directly, but because of the existing regulatory nature
of PTN itself.
THE PROPONENTS BEHIND THE CURRENT DEBATE
Not surprisingly, there are numerous opinions on the topic of VoIP
and whether FCC forbearance should continue. These cover a full
spectrum of views. There are, however, four loosely defined camps
that seem to be forming in this debate around definable principles
in the VoIP. These camps are based either upon elements of the technology,
or elements of how the PTN has been, and is, regulated. The following
comprise those who we have been able to identify with relative consistency:
• The Internet Separatists: In the debate over forbearance,
the operative word for this group of advocates is the Internet component
of VoIP. The Separatists see VoIP as a digital technology developed
for, and utilized over the Internet and should be free of government
regulation as are other Enhanced Services associated with the Internet.
When dealing with issues related to “voice conversations”
in VoIP heavier emphasis is placed on the technical conversion of
analog voice into data packets as a critical factor distinguishing
the service as enhanced. In essence, the activity in question in
VoIP is the transport of data, not voice conversations, and this
should be free of regulation. A good portion of this group are VoIP
equipment manufacturers.
• The Old Guard: For this group, the forbearance issue is
straightforward: “voice transmission is voice transmission,”
no matter how you transmit it, and it needs to be treated uniformly.
While this group recognizes the elements of the process of VoIP,
any and all contact between VoIP and the PTN places the matter squarely
back to traditional principles of regulations. This also includes
regulatory fees. Again, the operative word defining VoIP for the
Old Guard is the Voice element which can be aligned with existing
regulatory schemas. Therefore, VoIP could be regulated based upon
concepts applied to its predecessors of Vo-ATM and VoFR. A critical
aspect of their VoIP argument for removing or partially lifting
forbearance is the “end office” access of the PTN.
• The Regulators: This group is comprised of policy makers
from both the federal and state levels. Of particular interest in
this group are the state regulators. Should the FCC continue to
forbear on regulating, they will become more deeply entrenched in
the defining of VoIP for their specific jurisdictions. This includes
promulgating state legislation and regulations that incorporate
VoIP providers into contribution structures for state regulatory
fees. Both federal and state mandates will require this of them.
In terms of their own power to rule VoIP at the state level, jurisdictional
and constitutional issues will be pushed to the FCC to avoid continued
problems such as those now in litigation in Minnesota between federal
and state powers. This may be later used to clarify what the FCC
is thinking behind the forbearance and state regulation in court.
A large part of this group’s concerns will be resolving conflicts
with state regulation of the PTN and H-VoIP providers.
• H-VoIP Providers: This group will advocate a status quo
as they are the ones likely to benefit most from VoIP being undefined.
This group is comprised of both Common Carriers and ISPs that are
providing H-VoIP. The bottom line is that neither of them wish to
see increased regulation no matter how minor. The problem is that
if the FCC forbearance is heavily lobbied and continued, then individual
state regulation may take its place, and this is a more costly lobbying
effort in order to prevent regulation. For this reason, H-VoIP providers
may advocate a position more attuned the Internet Separatists. Another
potential problem for this group is that not all of them are ISPs.
Some common carriers, that are already regulated, may see positions
taken by the FCC in this fact-finding process as not harmful to
them, for they are already in compliance with those rules or requirements.
This is particularly true for soft issues such as international
reporting. This has potential to split their interests with the
ISPs who are now entirely unregulated.
THE FCC FACT FINDING PROCESS: CONCERNS TO BE VOLLEYED
While the above constitutes the technology, its use, and its proponents,
the likelihood of some tough questions being raised, aside from
the particular positions of the proponents, during the fact-finding
process is clear. Chief among these is the question of regulating
measurements. In TDM, switched systems were able to record usage
based upon time increments, usually minutes. In the case of VoIP,
such measurements are not necessarily the case. Measurement of usage
can be programmed to increment in a number of ways. To date, there
is no clear standard for regulatory purposes.
Similarly, no definition of VoIP can occur without further defining
“Enhanced Services” for the purpose of the 1934 and
1996 Telecom Acts. This may not be as easy as it seems. Recent development
and growth in the area of video applications for computers, cellular
phones and video conferencing has pushed the final element of convergence
– simultaneous video – back into the “Enhanced
Service” definition. Should this be an issue for forbearance?
The answers are not clear, however, this topic for debate clearly
is.
LAY OF THE LANDSCAPE
So then, what is next in the VoIP debate? The year 2004 stands to
be an important year for VoIP. Keep track of activity of the FCC
on this topic at www.fcc.gov. Also keep track of the activity at
the state level. Should the FCC forbear on VoIP again, the frontline
of this battle will shift quickly. The trends at the state levels,
either in terms of legislation, PUC fact-finding proceedings, or
defenses raised to constitutional questions on jurisdiction over
VoIP will forecast how VoIP will be defined in those specific jurisdictions.
Also, familiarize yourself with the proponents taking shape in the
debate. There may be shifts among them depending on how the FCC
rules in the fact finding process. And finally, remember that the
battlefield of this debate over VoIP is now unveiling at a much
faster level than before. What is known today may change tomorrow.
•• Ed Maldonado is a principal of Maldonado & Glenn,
a telecom legal firm. He can be reached at info@4counsel.net.
Send all of your Legal Line questions to legalline@prepaidpress.com.
•• Matthew Schulman is a principal of the Regnum Group.
He can be reached at mschulman@regnumgroup.com
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