U.S. Senate Considers VoIP and Reform of Telecom Act

"It has been nearly eight years since the passage of the 1996 Telecommunications Act," said Senator John McCain (R-AZ), "and in that time the telecommunications industry, the technology it relies on, and the services it offers have all changed dramatically." Speaking at a U.S. Senate Committee McCain urged a reexamination of the 96 Telecom Act, beginning with a look at VoIP. McCain acknowledged that "the emergence of VOIP has very little to do with the pages and pages of law written by lobbyists, or the thousands of regulations spawned by the Telecommunications Act. VOIP is borne out of advances in technology -- something that is nearly impossible to legislate."


"We must recognize that state and local governments have interests that must be preserved," observed Senator Lamar Alexander (R-TN) -- especially concerning Internet taxation. Alexander noted that states are already collecting more than $20 billion in taxes on telephone service and service providers annually, according to the Congressional Budget Office. In his state of Tennessee, the $361 million collected is more than 5% of its general revenues. In Texas, more than $1.2 billion is collected. "In light of the significance of these revenues to state and local government, as Congress and the FCC begin to consider how to handle these issues, I think that it is most important to raise a red flag on federalism at this time. In dealing with the growth and regulation of the telecommunications industry Congress has generally respected the tradition of strong state and local governments."


In his prepared testimony, FCC Commissioner Michael K. Powell said "restraining from regulating the economics of Internet applications has served us well. The creativity and innovation of the marketplace has been breathtaking and dynamic, bursting at the seams with entrepreneurial spirit. Consumers are enjoying more choices, better value, and more personalized products. There is little compelling evidence that heavy economic regulation of these vibrant services is warranted. I do, however, believe we must preserve and advance venerable social and security policies. Paramount among them are universal service, 911, law enforcement and disability rights. I recognize that IP services ride atop a physical layer that, in many parts of our country, is still expensive to build and maintain. I am committed to ensuring that the entire nation has access to affordable communications services, as more and more communications move to IP networks."


"VoIP is still in its infancy," said Jeffrey Citron, CEO of Vonage. He said Vonage's service is an "information service," like email, and urged lawmakers not to force the technology into rigid regulatory boxes. Citron also spoke against "a patchwork of 51 sets of regulations" that would result from state action.


"Advances in VoIP give Time Warner and other cable operators the ability to fulfill the vision of the 1996 Telecommunications Act by bringing true facilities-based competition in the marketplace," testified Glenn Britt, and I am Chairman and CEO of Time Warner Cable. The development of IP-based telephony services also gives the few cable operators that have not yet upgraded their systems another reason to do so. Time Warner's VoIP-based "Digital Phone" in Portland, Maine currently serves some 12,000 users. Time Warner Cable is the nation's second largest MSO, serving nearly 11 million video subscribers and over 3 million broadband subscribers in 27 states. Britt said the absence of a clear regulatory framework for VoIP poses a dilemma for Time Warner Cable. The company could assert that VoIP was an unregulated information service and risk challenges from state PUCs and incumbent telephone companies. Alternatively, Time Warner could abide by the regulations applicable to more traditional telephone services and risk becoming saddled with a legacy regime in which IP technologies and service offerings do not fit precisely and that, therefore, is inappropriate to the unique character of IP-based telephony. In the interests of rolling out our service in the smoothest possible manner, Time Warner decided to obtain state regulatory certification for our VoIP offerings and to comply with traditional telephony requirements while expressly reserving its right to revisit this issue when the FCC and Congress establish the appropriate regulatory structure for VoIP services.


"It is the incumbent local phone company alone that must provide service to all users, that remains price regulated, that must open its network to all competitors, and that shoulders the full responsibility of meeting state and federal regulatory obligations," testified Glen F. Post, III, CEO of CenturyTel. Post observed that VoIP service providers cannot deliver their services without utilizing and relying upon someone else's network. "Their ability to compete depends in large part on the network in which we have invested to make broadband connections available to rural America. They do not concern themselves with the capital-intensive task of building and maintaining a broadband-capable network that universally serves all customers. We cannot lose sight of this fact as we consider the effect that the regulatory treatment of VoIP will have on the continued availability of telecommunications service in all markets," he wrote in submitted testimony. Post argued that any discussion of VoIP must also consider the issues of universal service, intercarrier compensation, competition, public safety and customer service.


"State commissions want VoIP to succeed," testified Stan Wise, Commissioner with the Georgia Public Service Commission and President of the National Association of Regulatory Utility Commissioners (NARUC). Numerous states have opened dockets or informal investigations to gather all the facts before deciding how to proceed on VoIP regulations. State commissioners also plan to play a pivotal role in ongoing dialogues about how to reform intercarrier compensation and universal service. Wise observed that the consensus among State commissioners, as indicated by their resolutions, is that public interest obligations of a service derive from the functional nature of that service -- not from the technology used to deliver it. "If a service originates and terminates on the PSTN, it is a telecommunications service. If a company controls bottleneck facilities for basic telecommunications services, neither VOIP nor any other technology should shield it from oversight."


"We are witnessing the most significant change in telecommunications since Alexander Graham Bell called out for Mr. Watson," testified Kevin Werbach, founder of the Supernova Group, a consulting group. Werbach said there are three kinds of policy obligations that potentially impact on VOIP: 1) economic regulation to ensure effective market competition; 2) Universal service policies designed to achieve social goals for availability of telecommunications itself; and 3) policies to support other social goals, such as law enforcement, access for people with disabilities, emergency services, local taxation, and consumer protection. http://www.senate.gov