FCC Shields VOIP From States

Vonage Holdings Corp. avoided what it calls "strangulation by regulation" on Tuesday as the Federal Communications Commission (FCC) found that its DigitalVoice VOIP service is not subject to state public utility regulation (see FCC Rules on Vonage). The Commission also found that other types of services, such as those offered by cable companies would be exempt as well -- a huge victory for IP-based communications.

The decision was seen by many as the first step to determining that the FCC, not individual states, has the final say over interstate communications. Vonage has been battling with state regulators, which are demanding the company obtain state certification, be subject to rate regulation, and offer emergency 911 services comparable to landlines.

Vonage CEO Jeffrey Citron said in a statement that without relief from the FCC, IP-enabled services would be subject to different rules from each state. “The direct result [of regulatory relief] will be explosive growth of an industry that delivers cost-savings and innovation to consumers,” Citron says.

But will Vonage's VOIP service be classified as an unregulated “information service” under the '96 Communications Act or a telecommunications service? That question will be handled in the Commission’s IP-Enabled Services proceeding. The proceeding, which has been going on since February, will also address whether VOIP providers must provide access to the disabled, pay intercarrier compensation, and contribute to the universal service fund.

Vonage's victory, of course, is a victory for all VOIP providers. Securities and Exchange Commission (SEC) filings reveal that Packet8, for example, has been told by the Public Service Commission of Wisconsin (the WPSC) last year that it needed certification to offer intrastate telecommunications services and that if it didn't get certification, it might have to pay back the service fees it charged to residents of the state.

Reaction to the ruling by incumbent carriers, arguably the most threatened by a company like Vonage, was positive.

“Consumers will clearly benefit from a national policy framework that eliminates regulatory roadblocks to the rollout of new-generation networks and services,” says SBC Communications Inc. (NYSE: SBC) senior VP, James C. Smith. “Today’s ruling appears to be another positive step forward in developing a national policy that ensures consumers will receive innovative and low-priced IP-based services. These services could be delayed or stymied altogether, if 50 states are permitted to saddle these emerging technologies with a hodgepodge of inconsistent and conflicting regulations.”

Jonathan Banks, BellSouth Corp.'s (NYSE: BLS) VP of executive and federal regulatory affairs says, “The FCC took a critical step towards encouraging the deployment of IP-enabled services, such as VOIP, by recognizing the inherent interstate nature of such services.

"The future of these and new, innovative, IP-enabled services depends critically on investment in next-generation network facilities. We encourage the commission to complete in short order the work it has started here by establishing a similar regime for all IP-enabled networks and services in its 'IP-enabled' rulemaking proceeding. Such a decision would go a long way toward eliminating uncertainty and allowing quicker introduction of new and more efficient services."

— Chris Somerville, Senior Editor, Next Generation Services

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Frank 12/5/2012 | 1:06:13 AM
re: FCC Shields VOIP From States I think the FCC is reaching to achieve new highs in inconsistency and arbitrary decision making. Through the rental of a surrogate (parner?) CLEC's switch partition, Vonage places calls over the public switched telephone network (PSTN) using the same numbering plan (1+dialing) and the same SS7 system for call setup and tear down as any other CLEC or ILEC. I think that this qualifies them to be classified as a CLEC. As such it would follow that they should be subject to all of the same in-state PUC rules as any other CLEC. What have I missed? Perhaps the CLEC that they are using for the switching function already bears the burden of that status? I'll have to check. But I think what we're looking at here is a foo foo decision by the FCC over a set of circumstances that is emersed in anachronistic thinking right from the very start. To come to this ruling at a time when ALL inter-carrier compensation and universal service fund matters require re-writing is a curious thing in itself, I think.

CNBC had a segment on this today, and one of the tic-tac-toe squares gurus was arguing that this is an internet connection, and converts voice into ones and zeros, as opposed to regular voice, which he claimed didn't. Wrong. All voice today is digital, consisting of ones and zeros, and this dates back to the Sixties. So, why did the FCC in its ruling today deem it necessary to create a new term for VoIP, calling it "DigitalVoice," when voice for the most part has been digital for decades?

What do you think?

Frank Coluccio
rjmcmahon 12/5/2012 | 1:06:09 AM
re: FCC Shields VOIP From States What have I missed?

Commissioner Powell wants all regulators out of the price setting business. He seems to believe consolidating regulatory power into the hands of the FCC, an FCC which is a pawn to cable cos and RBOCs, will begin to enable "market" driven price setting. The fallacy in his belief system is that he assumes a competitive market exists when it doesn't. Which means at the end of the day consumers will be paying higher prices and capital investment into the problem areas, e.g. access and metro infrastructure, won't occur.

CNBC had a segment on this today

A bunch of jokers - as bad as FOX and their Iraq coverage. At best, it was no more than advertising for a hopeful Vonage IPO.

What do you think?

I think we need real broadband which enables new applications and services. The FCC doesn't seem to be helping. Nor are most State PUCs. Don't know what it takes to turn them around so they will begin to help democratize communications in our country.
slayer666 12/5/2012 | 1:06:09 AM
re: FCC Shields VOIP From States I think I hear a pin drop!
Was that not the start of Digital Voice? MCI as I recall...or just the first to make an add about it. Early 80's as I recall...

VOIP should get some advantage to spur on a new thechnology, but if you are just doing VOIP to POTS that does leave things open...As you say, their POTs provider must be covered by the regulation.

It's an enigma wrapped in a riddle!
paolo.franzoi 12/5/2012 | 1:05:59 AM
re: FCC Shields VOIP From States Ignoring the stupidity here....I guess every RBOC (other than the former US West - which is being slowly destroyed) announcing a massive new network upgrade is not getting "the real broadband" out.

Vonage voice service is physically carried in a broadband pipe. Now Vonage does not even have to be in your state and yet you would get your "local" service from them. In fact, their is no reason your VoIP local service provider would need to be in the US. I think those are the technical challenges here to why states are going to have a hard time regulating this business.

It would become very hard for Vonage as well. Its switches could sit in a central location and serve customers nationwide. To track 50 sets of rules for them is additional work at no definable benefit.

Now Minnesota wanted and the FCC concurs that 2 major things have to be added to VoIP. 911 support (which is going to be VERY hard) and CALEA (which might be even harder).

911 - People are told (and do) take their IP Phone adaptors on the road. So, it will be hard to locate them.

CALEA - Once the packets are in the network, going to be hard to locate.

Both of these technical issues point to monitoring by the access provider not the switching provider, which is different than it is today.

rjmcmahon 12/5/2012 | 1:05:58 AM
re: FCC Shields VOIP From States I guess every RBOC (other than the former US West - which is being slowly destroyed) announcing a massive new network upgrade is not getting "the real broadband" out.

Making press announcements and empty promises doesn't cost much and it seems to fool some regulators and many on Wall St. Notice the difference between the VZ announcement about purchasing, for $3B, spectrum licenses from NextWave? That will be real money and something VZ will act upon. Their fiber initiatives seem to be nothing more than trials.

<>Vonage voice service is physically carried in a broadband pipe. Now Vonage does not even have to be in your state and yet you would get your "local" service from them.

Two things. The first is one you harp about. Vonage hasn't invested much in infrastructure. They're not adding much value to the problem areas. Second, Vonage will always be slaves to the local access providers, that's why all the access companies don't see them as a real threat. The 1996 Telco Act and the CLECs were more of a threat and that's why the incumbents are using the feds to gut it.

Both [911 location and CALEA] of these technical issues point to monitoring by the access provider not the switching provider, which is different than it is today.

I think encryption will limit what the access provider can achieve, without consent, in these areas.
paolo.franzoi 12/5/2012 | 1:05:55 AM
re: FCC Shields VOIP From States Wow, rj you are on drugs. Vonage and ATT CallVantage have a MASSIVE threat to the LECs. Imagine that all voice moves to Cable VoIP over Call Vantage. What business does the RBOC have?

Now, these press releases (including the picking of vendors) are real. Ask the people of Keller Texas. Its not trials, they are rolling out new technology at warp speed.

By the way Encryption worked on TDM systems before it worked on Packet systems....and we still have 911 and CALEA.

paolo.franzoi 12/5/2012 | 1:05:40 AM
re: FCC Shields VOIP From States
I have heard a rumor that BT blocks SIP packets.

Now, to the point you have raised:

1 - DOCSIS and DSL VOIP (and FTTP VoIP) offerings should place COS/QOS markers on the voice if they are offered by local company equipment. This should help them maintain quality.

2 - Theoretically, VoIP carrier VoIP is carried as best effort Internet. Will there be a market for switched Higher CoS marked packet transit?

There is not a technical reason it should get and stay better. There is no reason it will get treated than a download of a porn site.

Frank 12/5/2012 | 1:05:40 AM
re: FCC Shields VOIP From States All very interesting observations, but I think a larger issue looms that we're not focusing on here, yet. That is, with the commercialization of VoIP we'll probably see a dramatic form of winnowing or drastic paring of fortunes from any of the pioneers we've been discussing.

These generally fall under what has been dubbed Parasitic VoIP offerings, as nicely described by Fred Goldstein on his www.ionary.com site. The majority of the spoils (albeit at greatly reduced revenue levels due to the inherent discounts associated with the animal, on even slimmer margins, comparatively speaking) going to the incumbents.

A question was raised here recently that I don't think was ever completely answered, and that is:

Are the cable operators and telcos obliged to carry parasitic VoIP services on their broadband lines? If not, then the obvious should raise its head, although I don't see that happening anytime soon. But it's a possibility. But if they are obligated, then the potential exists for the cablecos and telcos exercise preferential treatment to their own PacketCable and POTS VoIP services, respectively.

I've been chatting by voice with someone who recently moved onto a VoIP service that is being supported over his cable operator's system and I've been noting that the service has been gradually deteriorating, quality-wise, as indicated by the level of clipping and drop-outs that I am now hearing, where none existed only two months ago.

What incentive does the cableco (or ILEC, as it were) have to remedy such a situation, when its other DOCSIS functions are working properly, especially since this operator happens to be offering voice over cable services of its own?

This morning Bruce Kushnik posted an interesting view of the above on the cybertelecom discussion list:

----begin bk:

From: Bruce Kushnick <[email protected]> Sent: Thu Nov 11 0:48

To: [email protected] Priority: Normal

Subject: [CYBERTEL] the death of VOIP Type: Text

As savvy telecom consultants would say --- "if the commercial markets are talking about the product it already died."---

A possible future is as follows -- Mike Powell killed off wireline ISP and broadband competition removing line sharing, UNE- prices to competitors become non-profitable for voice competition, the Bells get exclusive use of any upgrades of fiber-optics in the networks, which stops all competitors from using anything but 64K.

The cable companies are closed to any ISPs or competitors currently, and for the forseeable future. And the cities and munis have to go to battles to try to regain their rights to rewire their own territories.

The Bells and cable companies own the broadband markets, and the Long distance and voice phone markets are kept by the Bells through predatory pricing of bundles.

VOIP has no play, since:

a) the Bells and cablecos require that you buy voice from them (who cares if its VOIP) --- So they own voice and data services.
b) the Bells fiber is a myth and never reaches very high speeds -- why bother, they won't have to extend the fiber to the home, just 500 feet from the home after competitors are gone.
c) the Bells and cablecos give any competitive VOIP offering inferior access --- or competitors are left to scrounge.

Who cares if the Bells sell VOIP or any other phone or data service... yawn.

The Bells also own wireless, which is both an enhancement of the current telco products, as well as a cannablizer -(70%+ of the US has a cell phone while only 3% of customers have left their wireline phone)- but since there won't be more than 2 or three left -- Cingular -(which is SBC and Bellsouth) bought AT&T , and Verizon (which is NYNEX, GTE, Bell Atlantic and the wireless products of the original Pac Bell and Qwest through Vodaphone) -- simply expanding their monopolies or duopolies.

Everything is cross subsidized and being paid for by the local telco product, which is still getting a great deal of revenues, and lines are going up, since customers drop lines when they get DSL (thus a loss of a second line but not the revenue), but they also got long distance, a new product, which is now on 50% of their lines through packages --- more revenue per customer -- who cares about wires.

Competitive LD dies or is eaten because it can't compete with packages priced at predatory levels.

Wifi and wireless broadband will increase in niches where there isn't serious rollouts of other products, underserved areas, ---but there are still problems with deployments because the spectrum is limited.

Vonage, etc -- who cares? If the Bells and cablecos force everyone on broadband to buy their own offerings, these companies are toast ---- just as predicted years ago by consultants who realized that voice and broadband consolidation is the real issue.

VOIP will also be killed by Powell because he won't keep the networks "open", and he gave away the networks VOIP rides over... duh...

And what's left of VOIP will be limping, since any price arbitrage will be taken away once the taxes and surcharges are laid-on like too much cheap makeup.

And one thing most analysts always seem to forget -- Don't listen to industry wisdom, it's created by heavy-telecom-users who don't represent the average public. Watch daytime TV and look who has the advertising budgets -- which is what the consumer will know of available products and services. Also, this is about power and control, not technology --- look who controls the agenda through campaign finance of the state commissions, leglistatures, congressmen, and has a bevy of fake think tanks, astroturf groups, and enough money to drown out public interest.

Congressmen like former Billy Tauzin, former Chair of the Commerce Committee, who nominated Powell, who's son and fundraisers worked for BellSouth, who's staffers were from the phone companies and broadcast industry, and who created various bills and positions, helped to move the agenda to this point. ---

and defending the competition is..... ?????

Since Powell has given the Bells their wish list, and regulatory capture is the Republican's idea of deregulation --- The FCC's name is changed to "Forget Customers and Competitors."

The current decision --- Yawn. Let's make VOIP interstate to keep it away from the states --- but let's make sure it can be charged other fees when it hits the phone networks, and given inferior status because the customer-funded networks are in control of private companies with exclusive use....

Early adopters, reporters who quote press releases, paid-off politicians and pundits claim that VOIP is going to change everything... again. Then Congress adds new taxes and surcharges. the customer calls Verizon to order his DSL or cable modem and is told they have to order voice and LD, is offered a sucky wireless package with hidden charges -- but that's all they know or were offered... Who else is advertising? Who can afford to compete?

Bruce Kushnick, Teletruth
---end bk

Frank Coluccio
[email protected]
</[email protected]>
fgoldstein 12/5/2012 | 1:05:38 AM
re: FCC Shields VOIP From States Common carriage is under attack. At this point in time, parasitic VoIP is just part of Powell's litany of excuses, along with BPL, WiFi, and other access technologies that all together don't add up to a hill of beans. But they give PFF speechmakers a cover story to show pretend "competition".

Answering Frank's issue, no, there is absolutely no obligation on the part of an "ISP" to carry anything. They're information services, and as such, they are technically expected to make decisions that a common carrier couldn't make. ILEC nut groups like ARIC already want to reclassify ISPs as common carriers, talk about a non-starter, but as non-common-carriers, ISPs are quite free to "protect" their networks or "customize" their services as they see fit.

There has been good techical justification, under some circumstances, for blocking streaming applications, which inlcude VoIP. But I won't give away the store here. Old-time TCP/IP protocol heads understand the issues. Said technical justifications are rarer and rarer nowadays, of course; the prime motivation to block VoIP is commercial. I can't speak to antitrust law, but from a telecom perspective (disclaimer: IANAL), it appeare to be perfectly legal for a telco or cable ISP to cut off Vonage by the knees. And equally fair for customers to resort to technical means around that (non-standard ports, VPN encryption, etc.). Whether a contractual prohibition on same would stand up in court is not my area of expertise. But then the ISP-subscriber relationship is already a bit tricky: How many owners of multi-node home networks, behind PAT/NAT routers, let their ISPs (especially DSL/cable) know?

Misbehavior by an ISP is today acceptable precisely because there is so much competition. The ILEC DSL services are technically common carriage, so multiple ISPs can be reached that way. Speakeasy, for instance, has a devoted following. They're pricier than ILEC-affiliated DSL, but they explicitly allow servers and networks, for instance. Very geek-friendly.

BUT all such ISPs are at grave risk right now. Powell wants to abolish common carriage. He proposed it in CC 02-33, which didn't win a majority and so has languished. Now BellSouth has filed a Forebearance Petition calling for both Computer II and Common Carriage for all broadband access services to be abolished. Only LECs are subject to then nowadays. CLECs are largely dead meat in the consumer DSL market anyway, due to the loss of line sharing and the stupid new FTTC rule which allows Universal DLC with 24 kbps modem speed limits to be treated as "broadband" and not unbundled, so that leaves ILECs as the sole common carrier. BellSouth thinks that's unfair, and wants to disintermediate away the ISPs. Which is asinine, but they own Powell lox, stock and bagel.

The cablecos are about to roll out telephony big time. They can use PacketCable over the DOCSIS 1.1+ reserved-bandwidth channel, providing full POTS quality (not parasitic quality). The ILECs generally require you to take their POTS to get their DSL, or in some cases pay a naked DSL surcharge. So where does that leave the parasitics? Basically a second-line service, or a cheap LD service for heavy LD callers who are willing to trade quality for price. Competition at the fringes, but no threat to the big money. Such trivial threats are most valuable in stirring up support for the threatened. So the allegedly-threatened ones (in this case, the RBOCs, but you can see similar analogies to how "terrists" were used to get the U Sap At Riot act passed) want to keep the threat alive, to show it off, while exaggerating its threat.
rjs 12/5/2012 | 1:05:38 AM
re: FCC Shields VOIP From States I gather from rj and Frank's posts that the
real issues that need to be addressed are getting
swept under the rug.

Nobody wants to bell the cat. That is the problem.
The funny thing is that, if one were told that common carriage laws are the obvious way to go, almost everybody would agree in principle. The
only issue at hand is "not in my market!"

If you told an RBOC that from tomorrow onwards the RBOC truck that they use for truck-rolls can't
use the local/state/federal highways because it is not owned by them, they would be up in arms.
We take common carriage for granted. The interstate authorities get their expenses through a regulated overhead. It is common sense. It is for the larger good.

But SBC wants me to get their (NEW! Lower price!)
local phone service which is "competitive" for only 19.99, albeit, after paying 49.99 for additional features that are going in the market for much less or I really don't care for. Reminds me of "wise guys" in Brooklyn.

DUDES! The emperor is walking naked! Face it.

I have absolutely no mercy for the RBOCs, but my heart goes out to their employees though. They got sold out by their upper management and did not keep up with the changing times. The lower rung employees ended up paying the price for the idiots at the top or will be doing do so in the near future.
Nobody learns from history. All you got to do is
look at the remnants of the steel industry in the US. Sad, very sad ....

I am very happy with my VOIP service, but I know it will not last. Access is king, and as long as you are at the mercy of the firm that holds your access and is allowed to compete in the same market, they one vertically integrating the access and the service will win and kill all the other competitors. The RBOCs and cable MSOs know this.
Mr. Powell doesn't or is intentionally trying to ignore it.

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