davidson by liuqingyan


 FCC Forum – December 1, 2003

       Charles M. Davidson
Florida Public Service Commission
       Regulatory Uncertainty
• Country is at a crossroads–policymakers must
  choose: either let the market work for the benefit
  of consumers or subject vibrant new technologies
  to legacy regulation.

• Florida has taken a “hands-off” approach to VoIP.
  New legislation mandates that VoIP be free of
  “unnecessary regulation … regardless of the

• Other states, like Minnesota and California (at
  least pre-Schwarzenegger) appear willing to
  regulate VoIP.
    VoIP – Contextual Issues
• The environment surrounding today’s emerging
  IP network is completely dissimilar to the
  environment in which the wireline telephony
  market developed. In that world:

• Networks were built at the local level…then
  connected across localities…then across
  states…the circuit-switched network could be
  understood on a state-by-state basis.

• In the nascent telephony market (this time last
  century) connecting competing phone cos. in
  cities across the U.S. was impossible absent a
  company with the resources and economies of
  scale/scope to “connect the dots.”
     Contextual Issues (cont.)
• American Telegraph & Telephone had the ability
  to provide long distance connections between
  local networks.

• The quid pro quo…AT&T was given a regulated
  monopoly over most of the local and LD
  network in return for economic regulation of the

• A strong state role based on…physical nature of
  circuit-switched network, presence of local
  monopolies, and overall intrastate nature of local
           Key Facts re VoIP
• VoIP is a nascent technology….

• VoIP is a “borderless” technology…unlike the
  circuit-switched network, the IP network is
  “connectionless”…traffic is global and no longer
  defined within the limited jurisdiction of states.

• VoIP is part of an IP network that is being built-
  out and interconnected by robust intermodal
  competition…there is no one dominant player.

• VoIP is spurring price competition and new
  service offerings…(e.g., Cablevision offering
  unlimited enhanced VoIP service and e911 for
  $34.95/mo…¾ of broadband customers taking).
          Guiding Principles
• Salute Capitalism. In a competitive market,
  economic regulation is a disincentive to the
  investment that will be required to build-out the
  IP networks of the future.

• Competition Benefits Consumers. Policy should
  recognize & respect that intermodal competition
  (i.e., phone vs. cable vs. VoIP vs. wireless)
  benefits consumers.

• Emerging Technology. As VoIP is an emerging,
  competitive technology, VoIP providers should
  not be subject to rules designed to forge
  competition in established, monopoly markets.
    Guiding Principles (cont.)
• No Economic Regulation. Where VoIP is
  provided purely as an application over a
  broadband network (pure VoIP), there should be
  no economic regulation (i.e., regulation of prices,
  service quality, etc.).

• Regulatory Parity. VoIP providers – whether
  new firms, IXCs, or LECs – should be subject to
  the same (de)regulatory regime.

• Interstate in Nature. Because VoIP technology
  is borderless, VoIP services should be presumed
  to be inherently interstate in nature (at least
  absent clear evidence to the contrary in a
  particular case).
     Guiding Principles (cont.)
• There’s VoIP and Then There’s VoIP.
  Distinctions between pure VoIP providers and
  POTS providers that use VoIP merely as means of
  transport may call for policy differences.

• Limited “Necessary” Regulation. VoIP providers
  do not have to be classified as CLECs, and VoIP
  need not be subjected to full range of telecom
  regulation in order to address public safety and
  welfare issues (e.g., E911 and USF).
         Devil is in the Details

• Access Charges     • Consumer Protection

• E911               • Numbering

• Service Quality    • TDD Compatibility

• USF Issues         • VoIP as Transport
            Access Charges
VoIP Scenarios:

•   Pure VoIP: VoIP Phone/Computer to VoIP
    Phone/Computer without touching the PSTN.

•   POTS: Plain old telephone to telephone with
    IXC using VoIP for transport in the IXC’s

•   VoIP Phone to Plain Old Telephone: VoIP
    is used to transport portion of the call, but the
    PSTN is relied upon for delivery of the call.
      Access Charges (cont.)
• The entry of new providers & new types of
  providers is an opportunity for reform of rules,
  but in the meantime…

• Access Charges Should Only Apply to VoIP
  Where PSTN is Accessed (and Only to Extent
  Accessed)…Intercarrier compensation/access
  rules would apply to that portion of a VoIP call
  that relies upon the switched network.

• Simple “But For” Test Could Apply. If a VoIP
  call could not be made but for access to the
  PSTN, then the VoIP provider would be subject
  to access charges under this approach.
• Guiding Principle # 1 – Public Safety Argues for
  a Ubiquitous 911 System. Consumers want 911
  services. At the time of need, callers may forget
  they are using a VoIP phone. A child in danger
  should not be deemed outside the 911 system
  because her parent opted for a VoIP system.

• Guiding Principle # 2 – Those Utilizing the 911
  System Should Support the 911 System. A VoIP
  provider that transfers calls to the 911 system
  should bear its “fair share” of maintaining the
  911 system. Regulatory parity argues that those
  who use the system should, regardless of the
  platform used, support the system.
               E911 (cont.)
• Guiding Principle # 3 – Afford a Reasonable
  Opportunity for Industry to Develop Standards.
  Public safety regulation ultimately applied to
  VoIP should allow a reasonable opportunity for
  providers to develop & implement solutions
  (e.g., for syncing VoIP with the circuit-switched
  e911 system).

• Guiding Principle # 4 – Shared Responsibility.
  Industry has responsibility to fully inform
  consumers. Consumers have a duty to educate
  themselves and understand that their use of a
  competitive, emerging communications service
  may have a different 911 functionality than their
  plain old telephone.
           Universal Service
• The Debate: Nascent technologies should not be
  burdened with old taxes, but the country has
  established universal service policies that require

• The Problem: As consumers increasingly turn to
  substitutes for a taxed service, not subjecting
  those substitutes to universal service fund
  obligations picks winners and losers. Some
  competitors but not others would bear the brunt
  of funding the program.

• The Need: Reassess how competitive market
  should impact universal service business plan.
     Universal Service (cont.)
• Guiding Principle # 1 – Expansive Regulation is
  Not Required. VoIP (like wireless) does not have
  to be subjected to the full range of common
  carrier/telecom regulation in order to require
  VoIP providers to contribute to the USF.

• Guiding Principle #2 – Revenue Neutrality. Any
  extension of USF obligations to VoIP providers
  (or others) should not constitute new/additional
  revenue or a new/additional tax. Rather, it
  should reflect a reallocation of a burden amongst
  some group of similarly-situated competitors.

• Guiding Principle #3 – Regulatory Parity.
  Those who make contributions ought to be
  considered for distributions.
    Challenges for Regulators
• Understand that the rules addressing the
  combination of established networks & regional
  monopolies are not suited to (and not intended to
  govern) emerging technologies.

• Where a competitively available service may
  substitute for basic local exchange service, resist
  the urge to regulate the new service like the old
  and consider deregulating the old.

• Resist the notion that regulators can “create”
  competition and innovation between market
  participants if they just keep tweaking the model.

• In short…let the market work.

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