Pulverising VoIP

Iain Stevenson, Principal Analyst

One small step for VoIPkind

The Federal Communications Commission (FCC) has finally ruled on Jeff Pulver's petition to have his Free World Dialup (FWD) VoIP service classified as not a telecommunications service. It represents progress towards clarifying the regulatory issues for VoIP but seems to raise as many issues as it solves. Although the FWD ruling can be applauded in the short term it hasn't pushed forward the boundaries of VoIP regulation by more than a few millimetres.

Much of the regulatory debate about VoIP over broadband is focused on a narrow range of issues associated with parity between today's telephony market and an emerging VoIP alternative. In reality, VoIP solutions go further than traditional telephony in many areas and should not be shackled by historic telephony regulation. The FWD ruling has not addressed this issue and may even have complicated the situation by adding a distinction between FWD and other secondary line VoIP services.

What is Free World Dialup?

Free World Dialup (FWD) helps people who have VoIP equipment to contact each other across the Internet. Without FWD, communication is still possible but you need to know the IP address of your correspondent - not very user friendly. FWD provides both a switchboard function and a web based directory. Contacting another user becomes simply a matter of finding a user's ID (allocated by FWD at sign up) - using the web directory if you do not already know it - and then "dialling" that ID through a VoIP client.

The FCC has ruled that the service is an unregulated information service subject to federal regulation. This is indeed good news for FWD since it is now effectively free from the threat of being closed down by regulators.

Why be gloomy?

Although I am by no means a fan of telecom regulation, the FCC ruling seems to be weak on the technology leaving room for future challenge. With FWD the user does exchange signalling information with FWD needed for call setup and in some cases the voice traffic must also transit a switch in the FWD network. So by my reckoning the FWD service is not entirely an information service but contains some elements that many people would regard as being a telecoms service. In short, the FCC ruling has favoured the market without addressing the technical "grey areas". Good news in the short term but not a major help in the ongoing VoIP regulation debate.

What's the future for VoIP?

The FCC ruling is an encouragement for independent consumer VoIP providers such as Vonage and iConnecthere. They provide equivalent functionality to FWD but charge for their services and provide breakout to the PSTN. These subtle differences make them the target for more regulation since they are commercial and have a broader overlap with traditional telcos. I don't see much difference between an "on-net" call placed between two subscribers to these services and one placed through FWD. So a good part of an independent provider's business is, by the terms of the FCC, in "information services".

That leaves the telephony part. The real threat to VoIP telephony services stems from "Old World" thinking. Unfortunately there's a lot of this about fuelled by short-termism and vested interests. From an end user perspective ie you and me at home wanting to make a phone call, the support of emergency numbers and lawful intercept are not uppermost in our minds yet regulators are mightily exercised by them. If you want emergency number support keep a fixed line phone or a mobile! Given that the global commercial secondary line VoIP over broadband market is small - about 500,000 users - I think there is plenty of time to address these issues. Regulators should keep their hands off this nascent market as they have done with FWD.

What should regulators do?

The real debate is not about the intricacies of VoIP protocols or emergency number support it is about the future shape of the telecom market. As carriers are moving to IP based voice systems VoIP becomes the telephone service and the existing circuit switched networks fade into history. This will cause a change in the balance of market power between incumbents and competitive carriers. The notion of the "Universal Service Obligation" will need redefining as the incumbents are no longer majority providers of "telecom" services. That's a real hard nut for the regulators to chew on - in the meantime, hands off VoIP please!

To find out more about Ovum's expertise in this area go to Broadband@Ovum or contact Iain Stevenson directly on ias@ovum.com.