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Internet Telephone Service is Promoted, With Caution

Posted on: Sunday, 17 October 2004, 06:00 CDT

Oct. 17--Cheap, exciting and complicated, or expensive, stable and simple. Which is more important?

That will be the choice facing consumers in Pennsylvania and across the country as they decide whether to adopt a new form of telephone service called Voice Over Internet Protocol, or VOIP.

The Internet service offers much lower-priced telephone service than what is available now, as well as some really nifty bells and whistles. But if you go this route, you will give up the security and stability of what the industry calls Plain Old Telephone Service, or POTS, the technology both you and your great-grandparents used to make telephone calls.

In the advertisements already coming from Vonage and other Internet phone carriers, you are likely to hear only about the cost savings and bells and whistles. You are much less likely to hear about how an Internet connection will go down during a power failure (traditional telephones don't, at least not right away) or might not work well or easily with your home security system or if you have to make a 911 emergency call.

"While it has the potential of offering consumers more choices, more features and potentially lower costs for their telecommunications services, there are many practical, regulatory and legal issues that need to be addressed as we move forward," Public Utility Commission member Kim Pizzingrilli told the Senate Communications and Technology Committee recently.

State Consumer Advocate Irwin Popowsky believes Internet phone service is the future of telephone calling, but remains cautious because of the potential problems it creates.

"My goal is to seek to ensure that in achieving this potential, the General Assembly not lose sight of other important societal goals that must be maintained, such as the preservation of universal basic telephone service and the availability of safe and adequate emergency 911 services," he told the same Senate committee.

So what exactly is Internet phone service?

Traditional analog telephone calling is known as "circuit switching" in the industry, according to Newton's Telecom Dictionary. When you pick up the receiver and dial a number, telephone company switches between your home and the person you are calling create an exclusive "circuit" for your use. It is all yours until the call is completed, even during lulls in the conversation.

With Internet phone calls, your conversation is broken up into digital "packets" and sent out over the telephone network to find the quickest route to travel. The packets are reassembled at the end of the line, all in a fraction of a second.

Packet-switching is an economical way to run a telephone network and, in fact, is the way the Internet handles data. Because packet-switching makes more efficient use of lines and switches, a telephone company does not need to build as many as it would for a circuit-switched system. That saves money.

To use Internet phone service, you first need a broadband connection. It can be either DSL, which runs over the regular telephone line to your house, or a cable modem, which runs over the same line as your cable TV. If you're thinking about Internet phone service, you probably already have one or the other.

Second, you need a computer to manage your Internet account and take advantage of some of the bells and whistles. A few Internet phone companies still require customers to make calls through their computers using a headset or USB phone, but most let you make Internet calls over your regular telephone.

Third, you need to plug in an analog-digital converter. This device connects to your telephone receiver and your broadband line and converts the conversation to those digital packets. The converter is supplied by your Internet phone carrier.

OK, you've done all that. What happens now?

First, the good news. You're going to save a lot of money with Internet phone service. At least for now, but maybe indefinitely.

A typical monthly, local/long-distance calling plan from a traditional telephone company, such as MCI or Verizon, costs between $60 and $70 today after the usual $15 or so of taxes and fees are added in. Telephone service has long been one of state government's favorite sources of tax revenue.

In contrast, monthly Internet calling plans offering unlimited local and long-distance calling in the United States and Canada range from free -- yes, free -- to $39.95 a month. Most plans are priced between $19.95 and $29.95 a month. The free plans from Skype and Earthlink are computer-based, while the other plans work with your regular telephone.

One of the big advantages Internet phone companies have is that they aren't legally required to collect any of the taxes and fees charged by traditional telephone companies. That includes 911 fees, universal service fees and the various state and federal taxes.

Why? Internet phone carriers make two arguments. One is that they are an information service, like AOL or your local Internet service provider, not a telecom company like Verizon. Second, they argue they do most of their business across state lines, not within a single state like Pennsylvania.

"We purchase services as end users, not carriers," explained Staci L. Pies, vice president for government and regulatory affairs for PointOne, an Internet phone carrier based in Austin, Texas, in testimony to the Senate committee last month.

Internet phone carriers also don't pay access fees to companies like Verizon or Sprint to complete calls now, she said. That's another economic advantage for the new companies, and one that has the traditional companies squawking. Nor are they subject to the same consumer protection regulations as traditional telephone companies.

Will Congress and state legislatures stand by and allow a major source of tax revenue to wither away as Internet phone service becomes more popular? Will Verizon, Sprint, and other traditional local telephone companies willingly give up their access fee revenue? Stay tuned.

Now for the bad news about Internet phone service. First and foremost is the 911 issue -- whether someone with only an Internet phone can get help from their local 911 emergency center. The answer so far is an unreassuring "maybe." Your 911 call may get to the right place, but the operator won't be able to instantly see on his screen who and where you are.

Dauphin County 911 already has had problems with a few Internet phone calls, according to Rob Wentzel, director of the county Emergency Management Agency.

"There is one major problem," he said. "Unlike with a regular phone, if a call to us is made using a VOIP line, we have no way of tracking where the call is coming from."

Internet phones can be used anywhere there is a broadband connection, meaning you can take your phone on the road. In addition, customers can often pick the area code they want their number to be in. That's an advantage for a person, say, who lives in Harrisburg but has a lot of family or business contacts in Cleveland.

Both features, however, create other problems for the 911 system. Wentzel offered the example of a Dauphin County resident who takes his Internet phone along on a business trip to Arizona, then needs to call 911. Unless he has changed his location on the database maintained by his Internet phone provider, the call will go back to Dauphin County 911.

Stephen Meer, chief technology officer for Intrado Corp. of Longmont, Colo., which provides 911 infrastructure for all types of telephone service, says that when an Internet caller dials 911, Intrado's database -- which knows the boundaries of all 911 emergency center service territories -- routes it to the correct emergency center for the caller's location.

But the call goes to a separate line from other 911 calls, he said, and the 911 operator, unlike with calls received from traditional telephones, won't see the name and location of the caller. That can become critical if the caller is a child or someone about to black out.

Meer said because Internet phone companies are legally considered information providers and not telecom companies -- the same status that frees them from collecting taxes or paying access fees -- they aren't allowed to have access to the 911 modems controlled by companies like Verizon.

Technology already exists to give VOIP calls to 911 the same status as other calls, Meer said, but until the regulatory issues are resolved, it can't be used.

Most Internet phone carriers see the need to provide so-called "e-911" service, but there is a nearly religious fervor among both industry and legislative proponents of Internet calling to keep the new technology tax- and regulation-free, unlike traditional telephone service.

House Bill 30, the telephone industry bill languishing in the state House that would reauthorize the sunsetted Chapter 30 broadband law, would also permanently bar any regulation of Internet phone service, including consumer protection regulation. No state or local taxes or fees could be levied until 2015. It would require Internet phone carriers, however, to pay access fees to the big traditional telephone companies.

Consumer Advocate Popowsky worries that HB 30 is so broadly worded that large parts of traditional telephone company service also would become regulation- and tax-free, such as Sprint's successful packet-switched telephone service in Perry County.

Another safety question, whether Internet phones continue to operate during a power outage, has a rather simple answer -- they don't.

"911 Dialing and Vonage service DO NOT function during an electrical power or broadband provider outage," Vonage warns on its Web site.

Traditional telephones, the kind that plug directly into wall jacks, will continue to work for quite a while if the power goes out. That is because they can draw dial tone over the telephone line itself from huge batteries and diesel generators that Verizon uses to back up its system, according to Verizon spokesman Harry Mitchell.

Telephone users have been weaning themselves from this security for quite some time, whether they know it or not, and may not be as bothered about this as they once might have been. Cordless telephones, which are widely used, won't work during a power outage because the base station needs electricity to operate.

Cell phones, which are powered by internal batteries, are the backup for many people, at least in urban areas. Just remember to keep it charged. During the recent flood in Harrisburg's Shipoke neighborhood, a common sight was residents standing in the street talking to their insurance adjusters on mobile phones.

Verizon Wireless spokeswoman Laura Merritt said her company's cell towers have backup generators. The main problem during disasters, she said, tends to be too many people trying to call at once.

Internet phone users can purchase home battery backup units at electronics or office supply stores or over the Internet. They tend to be pricey -- the APC 1500VA unit for sale at Staples.com for $199 offers 110 minutes of backup. But it should keep your Internet phone service operating long enough for you to call for assistance in a storm-related crisis. <144>

Other issues center on using Internet phone lines with home security services, satellite TV service, and TiVo players (digital video recorders), all of which require a telephone connection to one extent or another. So do some medical monitoring devices.

VOIP discussion groups on the Internet contain posts from people who have had problems with Internet phone service and their TiVo player, for example, and from those who have had no problems at all. Some have clearly found a way to make Internet service work with phone line-dependent devices and systems, but not every customer is comfortable with that level of tinkering.

"Essentially, we recommend against customers using VOIP," said Ann Lindstrom, a spokeswoman for ADT Security Services, Inc., which is owned by Tyco and is one of the country's leading security system providers. "To communicate with a digital line is not the most reliable means of alarm transmission."

DirecTV spokesman Bob Marsocci said the television signal and the programming guide comes in from the satellite dish and is not dependent on a telephone line. But ordering pay-per-view movies is impossible, he said.

"The modem does not call out," Marsocci said. "Our boxes do not support VOIP."

TiVo spokeswoman Jessica Van Pernis said Internet phone service does not have enough bandwidth to support a connection for a TiVo player. But the TiVo Series2 DVRs can connect to TiVo via a broadband connection instead of a phone line, she said.

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