Voice over Internet Protocol, also known as VoIP, converts voice signals into data packets and transmits them over the Internet. VoIP services still stand on the cusp of being included in the list of services to be regulated by the Federal Communications Commission (FCC). As is well-known, the public switched telephone network has been under the scrutiny of the FCC for the latter part of it’s existence. This paper will explore if a similar approach can be taken for VOIP, this form of telecommunications through information services, and what the ramifications of such an approach will be. Many contend that VOIP is the future of voice transmission, with potential improvements over voice clarity and reducing costs of transmissions. This is preceded by the traditional method of voice transmission that is through towers that aggregate and distribute signals, and cables and wires that transmit signals. VoIP services over the world have been gaining traction, and this has been particularly true in the United States. Over the past decade, there has been a surge in the popularity and usage of VoiP for everyday communications; a PEW study corroborates this fact, showing that more than half of all American businesses use it for their communications. One of the main reasons for the increasing rates of adoption is the relatively low costs of both domestic and international calls, and mobile applications that facilitate VoIP calls. Due to the sudden surge in popularity, VoIP has come under the scanner of the FCC. When it started out, VoIP was categorized under the Internet Technology segment, rather than Telecom technology, which is its true function. This has led to VoIP being exempt from the taxes and regulations that regular telecom carriers like AT&T and Verizon are subject to. The sole reason that VoIP has not been subject to these regulations is that the FCC has till now been unable to precisely define, and consequently tax this technology of the future (Barbagallo).

The FCC seeks to regulate data service providers with three segments, where telecom providers fall under the Title II of the Communications Act, wireless carriers under Title III, and cable operators falling under Title VI. But now each of these providers overlap with each others, and the FCC definitions are fast proving to be redundant. These redundancies seem to offer a business advantage to certain carriers over the others. New players in the market who offer phone services over the internet, do not need to pay heed to the rules that the older players who are still dependent on traditional methods of data transmission. Companies like AT&T and Verizon need to offer their services to all residents. This is mandated under state law, as is meeting standards for dial tones, a confirmed connection, and staying connected in times of adverse environmental conditions. The new players are not bound by these conditions (Barbagallo).

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The NCTA is the National Telecommunications Cooperative Association). They represent rural telecom providers, and they have filed a petition last year. They want for the FCC to make a rule, which allows for the examination of a means of promoting and sustaining the improvement of the public switched telephone network into an IP based infrastructure through means of custom-made economic incentives. These incentives would allow the phone companies to cover for the costs of carrying IP traffic on their airwaves. These incentives would also facilitate adequate universal support for providing service support for taking broadband internet service to rural America.

On the other hand, AT&T has petitioned that the FCC must establish test zones where none of these old regulations must apply. They also want for VoIP networks to be subject to minimal regulation only at the federal level (Wise, 2913). Their main bone of contention is that any form of regulation of the interconnection between VoIP services would be excessive and potentially harmful. They also go far as to state that FCC lacks the needed authority under the Title II of the communications act, to bring under regulation any interconnection between two ISP entities, which are classified as information services — the same category under which VoIP falls (Wise, 2013). However, an pro-regulation advocate has contended that any exchange carrier, regardless of the interconnecting medium, are bound by the duty to carry out negotiations for interconnection agreements in good faith (Wise, 2013).

A large portion of the members of Congress, with S. Rep Chip Pickering at the forefront, have impelled the FCC to declare themselves as the ones with the sole jurisdiction to regulate VoIP services. The lawmakers had written a letter to the Chairman of the FCC, Michael Powell, stating that VoIP services cannot be subject to a patchwork of state rules and regulations, as they are inherently interstate in nature (Mark, 2004). Pickering sought to argue that VoIP is the future of telecom communications, and the end benefits would stay with the consumers in terms of advanced services and reduced costs, as VoIP grows in efficiency. He went on to reaffirm that VoIP is clearly interstate in nature, and must hence be subject to the sole jurisdiction of the FCC. In an effort to provide jurisdictional and regulatory clarity on the subject, he wanted for the FCC to expedite their ruling on the subject (Mark, 2004).

While all this has been going on, the FCC has not been dormant. They are currently in the middle of conducting a study on VoIP. Pickering and Sen. John Sununu have already introduced legislation that seeks to exempt VoIP services from carrier access charges, state taxes and local regulations. If these were to be passed as a bill, it would render the FCC unable to delegate regulatory authority to state and local officials; however this legislation was stalled from being passed. (Mark, 2004). This legislation was a specific request, to expedite a ruling pertaining to Vonage, an independent ISP, who had requested to be classified as an interstate information service, akin to services such as e-mail. If that had been passed, it would have put VoIP beyond the tax and regulatory reach of the states. This petition in particular, would have put VoIP services under the sole jurisdiction of the FCC, regardless of the fact if the service traverses the public internet or privately managed IP networks, because they would be interstate in nature. They have announced in December that an inquiry would be launched whether regulations would be needed for the VoIP sector, whereas the FCC has stated repeatedly that they would use only a light regulatory approach (Mark, 2004).

The FCC has already exempted Free World Dialup by Jeff Pulver in its VoIP review. The free calls that customers make are routed entirely over the internet, and never touch the public switched telephone network, so they have seen fit to exempt it from state regulations. Using only their broadband connection, users of this particular service can talk to each other through their computers. But in sharp contrast to lax regulations, the FCC believes that VoIP must also come under the wiretap laws that apply to traditional telephony (Mark, 2004). This puts VoIP providers in the same position of having to comply to laws that telephone carriers currently do. In addition to that they also have to comply to regulations regarding to emergency services and contributions to the Universal Service Fund.

Old-school telecommunications providers such as Comcast and AT&T are not in line with the nationwide Wi-Fi plan, which poses a serious threat to them. They do not want to lose their business to free services which include VoIP, with the wireless industry purported to be worth about $178 billion. These seek out technicalities like the difference of definition premise — for traditional players; VoIP cannot be sustained over a period of time by being given away for free. But for the new players, improving internet infrastructure means reduced long-term costs (FCC Eyebals VoIP Service).


The infrastructure that VoIP depends on to transmit its data is not unique to only itself. The service bears no direct relation between itself and the physical infrastructure it runs on. This means, in the absence of proper encryption, anyone can access this transmission and damage or corrupt it based on their will. To provide privacy to their end users, VoIP have to provide a level of encryption that may not be completely fool-proof, but provides a level of privacy on par with regular telephony. However, it will prevent authorities from lawfully tapping the VoIP communication. This is a complex problem requiring a delicate solution. This problem is not unique to VoIP, these kinds of security issues will threaten to bog down internet services in the future. Also, asking VoIP service businesses to provide batteries for each customer for SOS services would add an undue amount of capital cost to the VoIP providers, and will make the reach of the services to rural areas very slow. In addition to all this, the environmental costs of supplying and maintaining power supplies are staggering. The debate continues whether this could be made optional or not (Regulatory Implications of VoIP).

Quality of service is the measurable metric that can help define the effectiveness of this service. With the current crop of providers who use PSTN calls as data distributed over the network. For automated and best effort calls through VoIP, the QoS will depend solely on the bandwidth and server capacities if the network in question. Because this is a relatively new technology, the effectiveness is mandatory to be proved to showcase the sustainability of the service. The QoS needs to be a transparent metric. However, a best effort service provider cannot guarantee the QoS, especially at the network level – the only thing they can do is to offer competitive pricing to differentiate themselves from the competition. However, the end users have the need to know the levels of QoS available (Regulatory Implications of VoIP).

Sometimes, the availability of QoS to non-facility-based operators depends on the willingness of facility-based operators to offer access to QoS. In some countries of Europe, there is no QoS provision in the wholesale access products offered by the old players. IP networks are built as layers, upon which the services and apps operate. So QoS for VoIP needs to be indicative of the network and the VoIP service. The ITU has been working on setting commonly accepted standards for IP networks; this appends important performance parameters which dictate what the QoS for both ends of the service should be like. These are also international regulations. However, it is up to the national industry-level regulatory bodies to change the current crop of y.1542 reference architectures and performance quotas into a nationally accepted architecture with standard network elements. Network elements would include access and transit networks and end-user equipment. An independent body would then monitor the adherence of these guidelines. VoIP is an amorphous definition, and can include several services even without seeming to do so. According to Kevin Werbach, founder of the Supernova Consulting group, this is one of the FCC’s key challenges. Even games and IM products allow the users to communicate with each other (Gross, 2003).

Compare and Contrast

Independent phone companies posed a severe threat to AT&T around the turn of the 19th century. This was when most of AT&T’s patents expired. Businesses smaller than AT&T targeted local households and businesses to connect them to each other, and slowly expanded from small to mid-sized towns. From time to time they would also create regional long-distance networks. In fact, they had a lot more local lines than AT&T did, although AT&T still managed to hold on to their monopoly in the long-distance connections. AT&T would never liaise with the independent business owners, which meant that many users had to follow the harrowing process of subscribing to two different networks which weren’t interconnected and had to be manually linked (Economides). The main reason given by AT&T for this was that they were not convinced about the quality of the independents. They made offers to incorporate the business owners, which made it seem like AT&T had other business reasons for refusing to deal with the independents. The independents stood to gain more from incorporation than AT&T would, because all they had to offer the large company was their mostly residential customer base. This is where network economics comes into play, although it is not clearly elucidated in those exact terms. According to modern economics, when firms of different sizes chose to interconnect with each other, the incentive depends on the value and size of the new demand that is created after the interconnection happens. So going by that logic, a large firm would stand to gain less from interconnection than a small firm would. This means that the larger firm has the upper hand in deciding the fate of smaller firms when the question of interconnection is brought up (Economides).

The prices of basic local services were kept artificially low by regulators, trying to achieve the concept of universal service, which entailed including a majority of households into the telecom user base. They did this at the cost of efficiency, with the sole intention of increasing the user base. Universal service also hinged on the fact of the customers being able to receive calls, and make emergency calls. In this day and age, telecommunication is taken for granted, but that was made possible only through regulation, which made it inexpensive and accessible. This was borne out of two antitrust lawsuits that the U.S. Department of Justice brought against AT&T and the Bell system. This signaled the beginning of the regulation of the U.S. telecommunications market (Economides).

The first of those lawsuits, United States vs. Western Electric, was filed in 1949. This suit claimed that Bell bought production equipment and customer premises equipment only from Western Electric – thereby practicing illegal exclusion, as Western Electric was a part of the Bell System. The government prescribed a divestiture of Western Electric. This did not happen; the case was settled with AT&T retaining ownership of Western Electric by agreeing to not enter the computer market. AT&T was the subject of another anti-trust lawsuit in 1974. The FCC unanimously ruled that VoIP service providers must offer emergency services, just as telecom providers do. However, they were given only 120 days to bring this change into effect. Industry advocates were of the opinion that this was anti-competitive, and would stamp out the innovation(s) that made VoIP effective in the first place, along with higher costs to be passed to the consumers. This was a landmark ruling that marked the end of the FCC as enabler of VoIP development as a promising technology that wasn’t constrained by federal or state regulation. Michael Powell, the VoIP friendly FCC chief, was replaced with Kevin Martin during the Bush era; for the latter, the main point of contention was that 911 callers needed to be routed to emergency operators. Martin was responsible for leading the commission that enforced emergency calling provisions on VoIP providers (Schuk & Com).

The requirements are as follows herein. All VoIP providers must be able to deliver emergency 911 services and deliver emergency calls to specific operators, with specific targeting situations where 911 calls were routed to administrative numbers. Also, there were technical limitations that were inherent to VoIP services, and so providers must give customers a provision to be able to be informed of any limitations, if any, of their emergency services. Finally, the ILECs must provide access to their 911 infrastructure to any telephone carrier. All this needed to be complied with, within 120 days of the order being issued, along with a letter detailing their compliance within that time (Schuk & Com).

Telecommunications Law and Theory Applied

The Telecommunications Act of 1996 has been hailed as the first consequential change in telecom law of the last century. The law sought to make it easy for anyone to enter the communication business, and to make competition fair and simple among businesses in these markets. Because telecommunications play such an important, yet invisible, part in our lives, any law that makes a major change in the functioning of telecommunications will ensure that it impacts our personal lives as well as business lives. It will change the face of telephone services along with cable and other video services. The FCC is the mediator for all this data being exchanged and needs to be a fair player for all this cut-throat competition (FCC-Telecommunications Act).

With the old laws, the Communications Act of 1934 (as amended), AT&T, Verizon, and ILECs need to work out interconnection agreements under the obscurely termed ‘good faith’. That requirement does not depend on what technology the interconnectors use — TDM, IP or any other technology. Section 251(a) of the Act requires all telecom carriers to interconnect their networks directly or indirectly with the facilities and equipments of other carriers without reference to the technology or protocol used in such networks. Sections 251(b)(5) lists that local exchange carriers should establish reciprocal compensation arrangements for the transport and termination of telecommunications, without any technology limitations (Barbagallo).

However, the commission’s authority was challenged by AT&T through a filing with the agency in late January. The regulation to interconnect two providers of IP-based information services as Voice over Internet Protocol and other ISPs is now classified. Section 251(a) prescribes that every telecom carrier must directly or indirectly connect with other telecom carriers (Barbagallo). AT&T seized this moment to point out that Section 251(a) is inapplicable where both ends for the calling parties are communicating via VoIP or similar IP services. It also does not apply to IP-to-IP interconnections, because they don’t have any interconnection rights under the Subsection (c)(2), as it has been described (Committee Reports).


In this paper, we have looked at both sides of the regulation coin. One point-of-view was that FCC should go easy on the regulation so that the technology can take its own course and be allowed to mature. This would be beneficial for the consumers, while providing them a wide choice of VoIP service providers.

The other view is that FCC must bring in regulation to have standardized protocols; however, there seems to be no unanimous verdict about what the regulations should be. A lot more clarity from the regulating authorities is required for this argument to hold water.


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