FCC to Redefine VoIP Landscape?

In the waning days of the Bush administration, the Federal Communications Commission has the opportunity to make a number of significant regulatory decisions, any of which could have a significant impact on the Voice over IP community.

The question on the table is one of clarity and whether the FCC will at last put forth regulations defining certain key terms and relationships within the VoIP world. With many smaller providers having established themselves and larger carrier beginning to delve into IP, some observers say the time is ripe for the FCC to lay out some basic conventions.

“We are almost at the point that it will be helpful to have clearer rules of the road,” said Andy Lipman, a partner in the D.C. office of Boston-based Bingham McCutchen.

Questions about VoIP are wrapped up with in a sweeping overhaul agenda known as comprehensive intercarrier compensation reform—an effort to review rules governing the money that changes hands when carriers originate, transport, or terminate traffic across networks. The effort has drawn attention throughout the telecommunications world.

Earlier this year, such diverse signatories as AT&T, CompTIA, the Information Technology Industry Council, New Global Telecom, PointOne, Sprint Nextel Corp., T-Mobile, and Verizon signed onto a letter to the FCC urging “policies that will help spur the continued evolution to more advanced IP and broadband networks.”

Lipman said it is unlikely that comprehensive intercarrier compensation reform will come up in the December meeting of the FCC board: A too-short period for public comment has many complaining that the question has not had sufficient time to percolate. If it does not come up in December, then a number of key issues likely will roll over into the next administration.

First there is a definitional question: What exactly is IP communications? Is it an information service, or a telecommunications service? It may be that the FCC has deliberately put off making a definitive ruling on this, in order to give the emerging VoIP sector a chance to establish itself in the marketplace, Lipman said.

If and when the commission does rule, its decision could have major ramifications in terms of how VoIP is regulated and taxed.

Then there is the financial picture and the matter of intercarrier compensation. The VoIP world has been waiting for some guidance as to whether IP-to-TDM (or TDM-to-IP) calls are to be treated as traditional TDM calls in terms of charges and reciprocal compensation. Depending on how such a ruling might pan out, VoIP providers “may have to tweak their business models a little bit,” Lipman said.

“Clearly the biggest question mark over the next few weeks is whether the FCC is going forward with comprehensive inter carrier compensation reform,” Lipman said.

If the commission does not get to these issues in a formal meeting before the new year, certain key measures might be enacted internally, “by circulation,” which is the mechanism by many FCC decisions are made.

Failing this, everything would be up for grabs. With the new administration expected to appointed new commissioners, including a new chair, it likely will be mid-2009 before the FCC takes up these issues.

In the meantime the country likely will continue slogging through its present economic crisis. As a backdrop to discussions of definitions and compensation, the nation’s financial woes likely will play a role in the FCC’s deliberations, though perhaps not as great a role as one might expect.

“The FCC is clearly aware of the economic situation, but of course every party filing comments justifies their position as a consequence of the economic situation,” Lipman said. Some will point to the economy as a reason to keep down end-user rates, for example, while others will say the financial crisis demands new incentives for the deployment of ubiquitous broadband.

Money does matter here. For small and mid-size VoIP players, the FCC’s decisions regarding compensation could have significant impact in the long term.

“If the [major carriers] are going to be offering an entire platform as IP providers, what obligations will they have to interconnect with other providers and under what terms and conditions? These access charges are terribly important because they will determine the rates that the IP providers will have to pay,” Lipman said.

FCC guidance would give smaller players a chance at clearer expectations. It also could help rising stars get their hands on needed capital.

“IP entrepreneurs have had questions for some time now from venture capital firms regarding what the regulatory risks are,” Lipman said. “To the extent that those issues are addressed and set forth clearly, it will help in that department.”

Still, the FCC has shown itself persistently capable of not addressing these issues to date, and it remains to be seen whether the commission will rise to the challenge of getting compensation reform settled in this, or even the next, administration.

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