The regulation of Voice-Over-Internet-Protocol in the United States, the European Union, and the United Kingdom

Journal of High Technology Law, The, July, 2005 by Stephen E. Blythe

ABSTRACT

The objectives of this study are to: (1) define Voice-Over-Internet-Protocol ("VoIP"), its typology, and switching characteristics; (2) present, in some detail, U.S. VoIP law and policy and the major issues surrounding it; (3) briefly cover the highpoints of E.U. and U.K. VoIP regulation and compare it to that of the U.S.; and (4) draw conclusions pertaining to the future development of VoIP law and policy.

VoIP is a technology allowing the user to make telephone calls over the Internet. In the U.S., the Federal Communications Commission ("FCC") is presently engaged in rulemaking pertaining to many VoIP-related issues: jurisdiction, regulatory criteria, whether to maintain a bias toward non-regulation, rate of substitution, degree of divergence in rules for different classes of firms, recent innovations, disability access, provision of "911" services, access charges, universal service charges, consumer protection, economic regulation, wireless-based service, cable-based service, rural service, and law enforcement surveillance. On November 9, 2004, the FCC ruled that it has jurisdiction to regulate VoIP, not state public utility commissions.

After VoIP-regulation in the European Union and in the United Kingdom is concisely covered, a comparison is made among the U.S., E.U., and U.K. In all three, VoIP has enjoyed the luxury of being virtually unregulated; this deliberate bias by the respective regulatory bodies in favor of non-regulation has been made in order to foster its growth. Looking to the future, however, the three regulatory bodies agree on this point: As VoIP service continues to improve and becomes a viable substitute for traditional telephone service, the greater the likelihood that VoIP regulation will increase.

TABLE OF CONTENTS

I. OBJECTIVES OF THE STUDY                                     164

II. WHAT IS VoIP?                                               64
Four Types of VoIP Calling                                     165
  Computer-to-Computer
  Computer-to-Telephone
  Telephone-to-Computer
  Telephone-to-Telephone
Circuit-Switching vs. Packet-Switching                         165

III. VoIP LAW AND POLICY: THE UNITED STATES                    166
VoIP: An "Information Service"                                 166
VoIP: Doesn't Contribute to Universal Service Fund             167
VoIP: Doesn't Pay Access Charges                               168
The Unsuccessful "VoIP Regulatory Freedom Act of 2004"         169
The FCC's Present Rulemaking on VoIP                           169
  Regulatory Criteria
  Bias Toward Non-Regulation While Keeping it as an Option
  Different Rules for Different Classes of Firms?
  Recent Innovations
  Disability Access
  "911" Services
  Access Charges
  Universal Service
  Consumer Protection
  Economic Regulation
  Wireless-based VoIP
  Cable-based VoIP
  Rural VoIP Services
  Law Enforcement Surveillance
F. The FCC Decisions of November 9, 2004                       174

IV. VoIP LAW AND POLICY: THE EUROPEAN UNION                    176
The Draft Notice                                               176
The Status Notice: Four Regulatory Criteria                    176
The EU Directive: Services vs. Networks                        178
Future Regulation?                                             178

V. VoIP LAW AND POLICY: THE UNITED KINGDOM                     179
Before 25 June 2003                                            179
After 25 June 2003                                             179
Current Rulemaking                                             180

VI. TOWARDS AN INTERNATIONAL REGULATORY
SCHEME FOR VoIP                                                180

VII. CONCLUSIONS                                               181

I. OBJECTIVES OF THE STUDY

The objectives of this study are to: (1) define Voice-Over-Internet-Protocol ("VoIP"), its typology, and its switching characteristics; (2) present, in some detail, U.S. VoIP law and policy and the major issues surrounding it; (3) briefly cover the highpoints of E.U. and U.K. VoIP regulation and compare them to that of the U.S.; and (4) draw conclusions pertaining to the future development of VoIP law and policy.

II. WHAT IS VOIP?

VoIP is a technology allowing the user "to make telephone calls using a broadband Internet connection instead of a regular (or analog) phone line." (1) Some VoIP services allow the user to only call those using the same service, while others allow the user "to call anyone having a telephone number--including local, long distance, mobile, and international numbers." (2) Some services only work through the user's computer or a special VoIP telephone, but other services allow the user to use the traditional Public Switched Telephone Network ("PSTN") with an adaptor. (3) VoIP's popularity is booming; business usage is increasing at an annual rate of 71 percent, and Vonage (a leading VoIP provider) reports it is adding 20,000 new customers each month. (4)

A. Four Types of VoIP Calling