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FCC Begins Consideration of VoIP Services

The Federal Communications Commission held a well-attended forum December 1 to begin considering whether and how voice over IP services should be regulated. The forum was attended by all five FCC commissioners and representatives of states and companies associated with voice over IP technologies and services also participated.

Among the issues that were discussed was how to protect universal service revenues as businesses and consumers shift to newer, unregulated technologies. The universal service programs, including the E-rate program, are funded at about $6 billion annually, from assessments on bills for more traditional phone services.

Both the FCC and industry leaders who addressed the forum appeared to be strong supporters of continuing the universal service funding mechanism, but that left open the question of how "telecommunications services" would be defined over the next 15 to 20 years and how they would be taxed and regulated.

Phone services already are being redefined now, one panelist said, citing the new number-portability rules that took effect on November 24, which also included provisions that allow consumers to transfer their wireline phone numbers to their cell services and forego wireline telephony at home altogether. Charles GianCarlo of Cisco Systems told the forum that his company recently sold its 2 millionth Voice Over IP telephone. He and other panelists suggested that it's time to consider charging customers fees based on "bandwidth usage and services" – and not the long-held traditional factors of "distance and time usage."

Earlier this year, the Schools and Libraries Division eliminated voice over IP services and dark fiber from the FCC-approved list of products and services eligible for E-rate discounts as of the 2004 funding year, pending a determination by the FCC as to whether they are telecommunications services. Voice Over IP equipment remains eligible in the internal connections category.

At the forum, FCC Chairman Michael Powell was adamant that government not regulate VoIP services merely because they are new and vulnerable. His remarks were widely interpreted as signaling to the states that regulating (and possibly taxing) Internet-based services within their respective jurisdictions could cripple the outgrowth of VoIP services. In fact, some states, notably Minnesota and California, have been seriously considering how to take advantage of emerging VoIP services to generate additional revenues. The head of the California Public Utilities Commission contended at the forum that the states do have an obligation to regulate their own telephony services, regardless of the technology used in transmission.

At the forum, Powell announced that the Commission will begin a Notice of Proposed Rulemaking on VoIP that "will force us to consider several issues," including VoIP's effect on universal service obligations, as well as other competitive issues. Powell also said he formed an FCC Internet Policy Working Group to help the Commission in "identifying, evaluating and addressing policy issues that will arise as telecommunications services move to Internet-based platforms."

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