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FCC Policy-maker Lays Out VOIP Problem – FCC Commissioners Unite in asking for competition in the Telecommunications Market

VOIP in the Enterprise SANTA CLARA, Calif.— A Federal Communications Commission policy-maker underlined the financial implications of voice over IP in a speech here Tuesday.

For months, FCC Chairman Michael Powell has argued that the government should take a hands-off approach to VOIP, which uses the Internet Protocol (IP) to transmit voice information. But if VOIP takes off, the government will lose an important source of revenue that is being used to fund the communications needs of the poor, said Bob Pepper, chief of policy development for the FCC during a speech at the Voice On the Net show.

By Mark Hachman

http://www.eweek.com/article2/0,1759,1558144,00.asp

The problem is that universal service, used to provide a basic level of telecommunications services to underserved markets, is funded through interstate calls. Calls made between states can yield only a few cents in fees per call, but the total obviously adds up, Pepper said. In 2001, $99.3 billion worth of interstate calls were made, Pepper said. And, as wireless and VOIP calls become more popular, the source of universal service funding will decrease.

The habit is affecting American culture, Pepper said. "The only time I ever pay a long-distance bill is by accident," he said. "I use a cell phone. The incremental cost to call long distance is zero; I think of it as free. Why should I pay $4.95 a month and then get charged by the minute when I can call on my cell phone for free?"

While universal service costs the government $700 million per year, interstate calls also subsidize rural telecommunications providers to the tune of $3 billion or so annually, plus an additional $2.2 billion for libraries and $16.7 million for rural hospitals.

Meanwhile, the agency faces five petitions, all of them by companies looking to be exempted from federal fees. The most notorious is Vonage; a Minnesota judge overturned a ruling by the state’s Public Utilities Commission and labeled Vonage an "information service" that runs on top of the wired infrastructure, and thus should not be subject to access fees.

AT&T and Level 3 Communications are asking the FCC to rule that if they use IP networks to route calls, even between PSTN switches, that the companies should also be exempt from fees. SBC, meanwhile, is arguing that even if its own services aren’t subject to regulation, the company should be exempted, Pepper said.

The problem with labeling VOIP as an "information service," rather than part of the "telecommunications" infrastructure or a "telecommunications service," is that it paints VOIP as just another protocol, like HTTP. By doing so, the definition risks not only losing a valuable source of revenue but also begs the question of which federal agency, if any, would regulate the industry, Pepper said. Requirements like e911, the ability to locate calls for emergency personnel, and CALEA (Communications Assistance for Law Enforcement Act of 1994) compliance with law enforcement agencies would also be called into question, Pepper said.

"We need to separate economic regulation and local policy," Pepper said. "We’re going to achieve those goals and find new ways to do that." Comments on the Review of Regulatory Requirements for IP-Enabled Services are due May 28.

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COMMISSIONERS UNITE IN ASKING FOR COMPETITION IN THE TELECOMMUNICATIONS MARKET

All five FCC commissioners signed a letter to telecommunications carriers and trade associations urging them to begin a period of commercial negotiations designed to restore certainty and preserve competition in the telecommunications market. Ongoing litigation has unsettled the market. To address this uncertainty, the commissioners asked all carriers to engage in a period of good faith negotiations to arrive at commercially acceptable arrangements for the availability of unbundled network elements. To provide additional time for these negotiations, the FCC intends to petition the D.C. Circuit for a 45-day extension of the stay of its decision vacating its unbundling rules. The Commission will also request that the Solicitor General seek a comparable extension of the deadline for filing a petition for certiorari. The express, limited purpose of this request is to allow these negotiations to take place and for the parties to reach commercial agreements. The commissioners asked the carriers to indicate by Tuesday, April 6 whether they will participate and will support a stay of the court’s mandate.

[SOURCE: FCC Press Statement]
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-245631A1.pdf

Additional remarks of Commissioner Copps
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-245636A1.pdf

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