NEW YORK - As Internet telephony blurs the distinction between voice and data services, federal regulators are facing an entirely new set of challenges.
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Should they require Voice over Internet providers to offer 911 service? What about compelling them to help subsidize rural phone service as traditional phone companies must?
Bottom line: Should Internet telephony providers be regulated like the local phone company or rather classified as a data service provider and left alone, much as cable TV companies have been?
Feeling threatened by the lower-cost competitors, traditional phone companies argue that Voice over Internet Protocol service should be subject to the same oversight and fee requirements that they face.
There is no indication, though, that the new Federal Communications Commission chairman, Kevin Martin, intends to depart from the largely "hands-off" approach charted by his predecessor, Michael Powell, in an effort to encourage innovation.
The FCC has said, in seeking comment on possible VoIP regulation, that it would start from the premise that "IP-enabled (Internet Protocol) services are minimally regulated."
Nonetheless, some regulations are likely.
The FCC has already indicated it will require modification to Internet phone equipment to enable police wiretaps, addressing law-enforcement concerns that criminals could use VoIP to bypass any surveillance.
But because VoIP data packets get mixed in with e-mail, Web traffic and even neighbors' Internet calls, isolating a specific conversation isn't simple, said David Sobel, general counsel with the Electronic Privacy Information Center. There's a high risk, he said, of individuals beyond those covered by court order being monitored, jeopardizing their constitutional rights.
Less clear is how the FCC will apply rules related to surcharges.
Currently, long-distance companies must pay access fees to local phone companies to complete calls. The Internet, however, removes the distinction between local and long distance.
Also, all traditional phone companies now pay into a Universal Service Fund to subsidize phone and Internet services to poor and rural areas, schools and libraries. The FCC must decide whether VoIP providers must pay, too, and if so, whether the Universal Service Fund should also subsidize the high-speed connections needed for Internet calling.
If VoIP providers are not required to pay, and the number of traditional phone lines continues to decline, the government might need to charge traditional phone users more to ensure that the Universal Service Fund has enough money.
Martin's past statements may offer a clue.
He has advocated assessing Universal Service fees based on active telephone numbers rather than revenues. That would cover most VoIP services, which use regular, 10-digit phone numbers to make and receive calls.
The FCC also must consider rules for 911 emergency services.
Rick Jones, operations issues director for the nonprofit National Emergency Number Association, said 911 availability varies by region and among VoIP providers.
Further, even when VoIP providers offer 911 service, they don't necessarily offer emergency dispatchers location information, a common feature on conventional phone lines that can prove critical when responding to a caller who can't speak.
Some VoIP providers can't hook up with the local 911 system at all and instead call a 10-digit administrative police line that isn't always equipped for emergencies.
The FCC has already taken some VoIP-related action:
It recently prohibited states, namely Minnesota, from applying traditional telephone regulations to VoIP provider Vonage Holdings Corp., and it nixed state rules that forbade BellSouth from refusing to sell DSL Internet access to customers who don't buy its telephone service.
The FCC also suggested it won't tolerate efforts by phone companies that provide Internet access to block or slow down VoIP traffic. Madison River Communications LLC, a North Carolina-based company, recently agreed to a $15,000 fine in a first-of-its-kind settlement to such allegations.
But the FCC's jurisdiction may be limited when it comes to cable companies and other Internet service providers. Furthermore, what's to stop another country from imposing bans - as Panama tried to do in 2002 before its Supreme Court interfered?
Though the FCC banned states from regulating VoIP companies, state wiretapping laws may still apply to actual calls. About a dozen states, including Massachusetts and Pennsylvania, require the consent of all parties when phone calls are recorded.
Last month, United Virtualities Inc. announced a software product called HotRecorder for recording VoIP conversations on computers. The company is leaving it to users to decide how laws might apply, but the software is offering a way to instantly warn others by voice that "if you don't agree, hang up now."
On the Net:
http://fcc.gov/voip
