Internet Telephony: A Regulatory Oxymoron

By | July 1, 2012 | Telecom, Via Satellite

When Internet telephony came on the scene in the 1990s, the U.S. Federal Communications Commission (FCC) did not give it a regulatory classification. Today that is still the case. From a regulatory standpoint, the term “Internet telephony” attempts to fuse contradictory terms in that traditional voice is regulated while the Internet is not.

Satellite service providers offer voice over the Internet Protocol (VoIP) as a standard product. Sometimes VoIP is bundled with other services, while other times it is offered stand-alone. Whichever the case, it is critical to understand the regulatory implications of offering VoIP. 

Types of VoIP

Generally, there are three types of VoIP:

1. Peer-to-Peer VoIP: involves voice communications through a computer. Users subscribe to a service that requires proprietary software loaded on their personal computers. This type of VoIP does not require a connection to the Public Switched Telephone Network (PSTN). The PSTN is bypassed. The early Skype service offered this kind of voice.

2. IP-in-the-Middle VoIP: involves traditional voice communication where the core (middle) of the network has been upgraded to IP. The ends, however, remain unchanged. Traditional phones are still used by end users. In fact, end users cannot tell the difference because nothing has changed for them. Calls are placed through the PSTN.

3. Interconnected VoIP: involves voice service delivered via a broadband connection (e.g., Vonage). While traditional telephones can be used, an adaptor is required to connect them to the broadband router. Interconnected VoIP, as the name implies, connects to the PSTN. Users are assigned a North American Numbering Plan Administration (NANPA) phone number, and can make and receive calls to and from the PSTN. 

How VoIP is Regulated

In U.S. communication law jargon, an “information service” is unregulated while a “telecommunications service” is heavily regulated. Peer-to-peer VoIP has been ruled an information service. Hence, while still under FCC jurisdiction, peer-to-peer VoIP is unregulated. In this sense, it is treated much like the Internet or an Internet application.

On the other hand, IP-in-the-middle VoIP has been deemed a telecommunications service, like traditional voice. Providers of IP-in-the-middle VoIP must comply with common carrier regulations — the type of economic regulations intended to keep monopolies on a leash. From the standpoint of the user, IP-in-the-middle VoIP is no different from traditional telephony.

Interestingly, Interconnected VoIP remains unclassified. The FCC has neither said that it is an unregulated information service or a regulated telecommunications service. 

Interconnected VoIP

The popularity of Internet telephony can be tied to the exponential growth of interconnected VoIP services. Every year, traditional telephony loses market share to interconnected VoIP. In light of this phenomenon, and while abstaining from making a classification, the FCC has gradually imposed public safety and consumer protection regulations on interconnected VoIP. Interconnected VoIP service providers are now required to: contribute to universal service funds, open their networks to legal wiretapping, interconnect to emergency 911 databases, protect consumer privacy, notify the public of intention to disconnect, pay state access charges, comply with disability regulations, abide by local number portability rules and report major outages. Therefore, while interconnected VoIP remains unclassified, it has been subjected to a rising number of regulations, making it almost a de-facto telecommunications service. 

Conclusion

Internet telephony may be unregulated, regulated or semi-regulated — the devil is in the details. It is important for satellite service providers to examine their VoIP services in order to determine whether, and the extent to which, these services may be regulated.

Raul Magallanes runs a Houston-based law firm focusing on telecommunications law. He may be reached at +1 (281) 317-1397 or by email at raul@rmtelecomlaw.com.

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