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Regulators want a piece of the VoIP pie

ATLANTA -- The Federal Communications Commission recently announced it would hold a hearing to investigate the ramifications of voice over Internet Protocol (VoIP) for the U.S. communications landscape.

At TechTarget's recent Networking Decisions conference, SearchNetworking.com expert Carrie Higbie, who is also network applications market manager for The Siemon Company in Watertown, Conn., detailed those issues and discussed how companies can avoid VoIP pitfalls. In this interview, she elaborates on these topics.

There's been a lot of government interest in VoIP lately. What's happening?
Regulation. If you look at everyone that has a hand in traditional voice communications, it is easy to see why these entities want a piece of the VoIP revenues. In traditional telephone companies, each service is tariffed. A portion of the taxes and fees collected -- from either standard voice or cellular customers -- supports services, such as 911 and community outreach.

The universal services fee that is on every telephone bill is supposed to assure that each and every home has phone service capability, whether they choose to pay for them or not. This is particularly important in rural America. Is that an issue with VoIP services?
With VoIP, things are a bit different. A user with an Internet connection could, in fact, place a call from anywhere, with the proper equipment. Geography would not be an issue, but current tariffs are based on the origin of the call and the service. If the origin moves, how do you maintain its starting point? With new Session Initiation Protocol [SIP] technology, you can call someone based on a URL, rather than a physical phone number. Add to that the tax revenues that are paid by voice carriers, which would definitely shrink with an increase in voice over IP traffic, as opposed to pay-by-the-minute long-distance traffic.

Each state has a public service commission that is responsible for regulating telephone service within the state. The FCC is responsible for interstate exchange carriers and all licensing of radio bands (such as cellular). Have there been any legal battles involving VoIP yet?
Some forward-looking regional Bell operating companies [RBOCs] are providing VoIP and IP telephony through their central offices. The companies with more mature end-user applications have been challenged in court by some of the state public service regulators, which feel that they should have to be tariffed just like traditional voice circuit providers. As of yet, they have not been successful.

A similar legal challenge happened several years ago, when cable companies wanted to provide Internet service over existing television and/or cable channels. They were identified as 'entertainment' services, and Internet traffic was labeled as 'data,' so initially they could not combine the two. But the FCC later decided otherwise.

Now the phone companies are trying to offer video on demand over DSL phone lines. Both cable and phone companies are working harder to offer all types of services over their own wires. What types of fees do carriers charge, and why?
Local exchange carriers charge interstate carriers a fee at the call origination point and another at the termination point. These fees are generally passed on to consumers. This is part of the universal connectivity fee, which assures that all people have access to phone services. The responsibility for maintaining these lines will not go away, and the local exchange carriers will still be expected to maintain them, regardless of whether they are in use or not.

Cellular companies have similar fees for 911, etc. It is hard to argue that VoIP will replace voice service, as not all people have PCs and IP phones. I would imagine that there is a segment of the population that will never have these tools. What can we learn from our European counterparts?
Europe took a slightly different approach than the U.S. The [European Union] stated that VoIP is not voice quality service and, as such, is not subject to voice tariffs. In order to escape the fees, VoIP, in effect, has to remain a 'substandard' service to voice. At the time that it reaches the quality of circuit switched networks, it will be re-examined. Who's behind the regulation fervor?
It's predominantly state public service commissions and state tax entities. Phone companies are also interested, as any alternative to traditional phone circuits stands to impact their revenues and long-distance fees. They have already seen a shift, with people forgoing traditional home phones for cell phones and VoIP.

It is interesting from a business standpoint, however. Companies rely heavily on point-to-point circuits and pay premium prices for high-speed Internet access at speeds greater than a T1 line. By utilizing these circuits for voice and bypassing traditional public switch telephone network [PSTN] lines for long-distance, they stand to save a significant amount of money. RBOCs also are pushing for these fees to help offset their maintenance fees for the lines. If VoIP could be tariffed as regular voice traffic, it would be subject to universal connectivity fees and 911 fees that would go into the same fund. Are VoIP tariffs something customers should worry about?
I personally don't see how [regulators] are going to make that system work for quite some time, as the back-end billing systems are not in place or standardized. Tariffs are not enacted overnight. And even if they do figure out a way to tax it, which they will, I expect it will be held up in the courts until all of the issues can be ironed out. Voice packets have to be identified separately from data packets, and this will be tricky.

If the FCC is strictly worried about universal connectivity fees and 911 fees, that would be a bit simpler, as they could be charged at the point of presence or customer premise. What are some of the key issues that companies investigating VoIP should be aware of?
First and foremost, not all equipment is equal. While a piece of equipment may perform in compliance with a standard, that is not a quality assurance. It merely means that their packets and signals will operate with another piece of equipment that operates within the same standard. Do not rely on brand name recognition only and, in every instance, try it on a limited scale before doing a sweeping rollout.

Also, if you expect to power your phones over your Ethernet connections, your power-supplying device must utilize the cable pairs that your phone expects. There are two cable pairs in the IEEE standard that can be used for power.

Another key thing to consider is your general network health and its ability to handle the additional traffic load. Bandwidth is key, and you must have enough. If an organization is preparing to deploy VoIP, what should they do?
One can always check with their state public service commission and with their state representatives to find out what is on the horizon. I would rather see efforts spent on tougher laws for those who launch viruses and other beasts onto the Internet that are destructive and costly.

FOR MORE INFORMATION:

Read a SearchNetworking.com news exclusive: Former FCC chairman blasts agency's 'suspicious' VoIP actions.

Need a VoIP refresher? LearnIT: VoIP -- the basics.

Learn how to prepare your network for VoIP.

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