FCC Considers Regulating Internet-Based Phone Calls

The Federal Communications Commission yesterday began formally considering regulation of Internet-based phone calls, a process that could affect both the costs of the service and the speed at which it is made available to consumers.

Internet calls can closely resemble conventional phone calls, except that Internet calls are converted into digital packets and transmitted over a high-speed Internet network, then reassembled at the end to sound like the caller’s voice.

But Internet traffic, unlike voice traffic, is not regulated.

A majority of the commissioners said yesterday they favor minimal regulation and that the new technology should be allowed to flourish and enhance competition in the local phone markets.

“This is the curtain going up on a new era in communication,” said Michael K. Powell, chairman of the FCC, at yesterday’s meeting, noting that the commission should steer clear of imposing “unnecessary regulation” on new Internet-based services.

Internet calling raises a thorny set of questions as to whether federal and state governments should be able to collect billions of dollars in fees they currently collect on telephone service, and whether local telephone companies should be compensated when an Internet call reaches its destination using their networks. The FCC will also have to determine whether the source of Internet calls will need to be identified by the emergency 911 system.

Separately, the FCC said it plans this spring to consider rules forcing Internet calls to comply with rules allowing law enforcement agencies to tap phone calls.

Yesterday the commission granted one Internet phone company an exemption from regulation. Three of the five commissioners, including Powell, agreed that Free World Dialup, a free service with 150,000 members that is owned by Pulver.com, is not a telecommunications service, because it transmits information through the same channels as e-mail or instant messages. Free World users can “call” each other from computers using numbers assigned to them, but their calls never pass through a conventional telephone network.

Similar, free services that are transmitted solely over the Internet will be classified in the same way, said William Maher, chief of the FCC’s wireline competition bureau. Details of the rules will be released within the next week.

Dissenting commissioner Michael J. Copps criticized the Free World decision, calling it “too hasty,” and said it undercut the commission’s broader effort to determine how to handle Internet calling. The commission should determine how to deal with law enforcement concerns about its ability to tap phone calls made over the Internet before granting deregulated status to such services, he said. Commissioner Jonathan S. Adelstein partially dissented. He agreed that the service was not a telecommunications service but said he did not believe it should be classified as a fully deregulated information service.

The biggest growth in Internet telephone service is likely to come from cable companies such as Time Warner Cable Inc. and Cablevision Systems Corp., which have already launched Internet telephony in their regions, with companies such as Cox Communications Inc. and Comcast Corp. also promising to introduce the service.

Meanwhile, companies are using many different forms of voice-over-Internet.

New Jersey-based Vonage Holdings Corp. sells a system that transmits calls over an Internet network for part of the call but often interconnects with the local telephone network. In a petition filed in September, Vonage asked the FCC to bar states from regulating its service as a telephone service.

Long-distance giant AT&T Corp. carries some of its traffic over the Internet, but the calls begin and end as traditional calls. They are converted to digital bits in between. AT&T filed a petition in October 2002 asking the FCC to agree that AT&T should not pay other carriers to help deliver its Internet-based calls.

The AT&T and Vonage petitions are pending.

Even local telephone companies such as SBC Communications Inc. and Verizon Communications Inc. are using the Internet to transfer calls to their customers because doing is more efficient than routing it on the old systems.

In a separate move yesterday, the FCC proposed to change rules so that power companies will be able to provide high-speed Internet access through the power grid. Such a service, which would allow consumers to plug into the Internet through an electrical socket, could mean broader deployment, especially in rural areas.

Reported By TechNews.com, http://www.TechNews.com

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