The Web: Toward a regulation-free Internet

By GENE J. KOPROWSKI, United Press International  |  May 12, 2004 at 10:58 AM
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A weekly series by UPI examining the global telecommunications phenomenon known as the World Wide Web.


CHICAGO, May 12 (UPI) -- Earlier this year, Michael Powell, chairman of the Federal Communications Commission, said he had embraced the idea of keeping a portion of cyberspace -- Internet telephone calls -- regulation-free.

"If you're going to say to me that (Internet telephony) is something that needs regulation, then you're going to have to explain to me why e-mail isn't also, or streaming video or instant messaging is not also," Powell said at a news briefing at the World Economic Forum in Davos, Switzerland.

Still, many experts wonder whether Congress shares Powell's regulation-free instincts, and if his colleagues on the FCC -- not to mention state telecommunications regulators -- hold similar tendencies.

"It's a question of whether the rhetoric matches the reality," James Stenger, an attorney who is active in telecommunications issues in Washington D.C., told United Press International.

One problem is Congress has not moved forward with legislation that would define, legally, when a telephone call is an Internet call, and when it is not.

If the call moves over any part of the traditional telecom infrastructure, some experts contend, the concern is it no longer may be a pure Internet communication, and therefore it is subject to state and federal telecommunications taxes, just like regular phone calls.

The FCC itself has also issued a call for comments on how Internet telephony -- the technical term is Voice Over Internet Protocol -- should be regulated. State and local municipalities last month prevailed upon the U.S. Senate to allow them to continue to tax certain kinds of VOIP -- though the House has not agreed to that provision.

"State and local regulators are using the emergence of VOIP to extend fees to networks they've never taxed before," said Stenger, with the firm Thelen, Reid & Priest.

Internet experts said this raises some sensitive legal issues, because many companies offering VOIP are not even based in the United States.

"A lot of politicians are not up on this technology," Rich Tehrani, editor-in-chief of Internet Telephony magazine, located in Norwalk, Conn., told UPI. "They make statements about having all VOIP providers contribute to the universal service fund, which provides money for rural areas to develop telecommunications networks, based on fees from other telephone companies. But how can they do that with an overseas company? These companies are often located overseas -- even as far away as Australia."

That also raises a fairness issue for American companies, such as Nuvio Corp., an Internet telephony provider in Kansas City that already pays into the fund and is subject to other, stringent FCC regulations.

"There has been an attempt by some in politics to portray VOIP providers as free riders, or freeloaders," Jason Talley, chief executive officer of Nuvio, told UPI. "But that's not true; fundamentally, there are some issues with the system. It needs to be reformed."

Another regulatory issue for Internet-based phone calls is whether they should be subject to search warrants, from the police and Federal Bureau of Investigation, just like regular phone calls. The FBI has petitioned the FCC to give it the ability to tap online phone calls, causing a stir among civil libertarians, who are claiming that Big Brother is coming to the Internet.

The issue has arisen since the events of Sept. 11, 2001, when it was discovered that some Islamic terrorists purportedly had used the Internet to plan their atrocities. However, sophisticated technologists said the very nature of the Internet may prevent the government from listening to all online calls.

"We have no problem providing access to law enforcement," Talley said, "with the appropriate caveats of warrants or court orders. But there are some technological issues. We have literally no idea where the customer connects. We have an (Internet Protocol) address, but that is not geography-centric. That is a larger, underpinning issue here."

Internet telephone technology also might enable some organizations previously regulated by state and federal telecommunications bodies to escape new regulation in the future. That could save them millions of dollars over time.

For example, a government body in Maryland is dumping its local phone carrier and setting up high-speed, Internet telephony access through a technology vendor, which it then will offer as an amenity to businesses seeking to relocate to the area, said Hunter Newby, chief strategy officer at Telx Inc., an Internet telephone connection service located in New York City.

"Chairman Powell knows that the FCC can't regulate what it can't see and can't tax what it can't clock," Newby told UPI. "Corporations have been building private voice networks for years. On Wall Street, they do this to connect to trading desks. Technically, they are data applications and not taxable, as no minutes of usage, or clock time, are kept and are not historically regulated."

Talley worries that different states and municipalities may, in the absence of federal government guidance, establish a morass of conflicting requirements for Internet telephone service.

"That would be devastating," Tehrani said.

Talley said he recently partook in a forum before the Missouri public service commission, and discussed Internet telephony there. He said he is concerned the same process may occur in all 50 states, creating a nightmare for small service providers like his company.

To save the Internet telephone business, the FCC may have to regulate it, Talley said, offering an argument that might drive some strict Internet libertarians mad.

"This might require some light regulation," said Talley. "What happens if Minnesota says, 'You can't sell VOIP here.' What do we do if we sell to a customer who then goes there?"

Some observers suspect this kind of thinking betrays a willingness to give in to the demands of government over the interests of consumers, who want lower-cost, regulation-free phone calls over the Internet.

Even Stenger, the telecommunications lawyer, frets about federal "bills that are Trojan Horses" and may stifle Internet telephony on the national level.

"It could be a case of, 'I'm from the government and I'm here to help,'" Stenger said.


Gene Koprowski covers telecommunications for UPI Science News. E-mail

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