ABERNATHY URGES FCC TO ACT ON AT&T PETITION SOON

In her speech, Abernathy said she hadn’t made up her mind on a regulatory framework for VoIP, but she believed: Not any use of IP technology necessarily would transform a circuit-switched service into VoIP. She said a new regulatory framework for VoIP was necessary for “services that use Internet protocol over the last mile, at least on one end of the call.” She specified that a call that started and ended on the public switched telephone network (PSTN) didn’t necessarily need regulatory treatment different from other circuit-switched calls “simply because a long distance carrier used IP technology at some midpoint in the network.” Abernathy said the Commission should provide clarity on how intercarrier compensation rules should be applied to those phone-to-phone services as soon as possible. “Most businesses would prefer even an adverse decision to no decision at all,” she said.

An AT&T spokeswoman said it was “unwise” for the FCC to create regulatory distinctions among VoIP offerings “in an effort to protect the local phone company’s revenues… If VoIP innovators are made to pay access subsidies to the Bells, the result will stifle investment by competitors and the Bells alike.” She argued that Bell companies wouldn’t have any incentive to invest and upgrade “if they are allowed to collect inflated access charges for any call that begins and ends on their existing circuit-switched network regardless of the investment and upgrades made by their competitors between those 2 endpoints.”

Abernathy also expressed views that: (1) VoIP inherently is an interstate service and should be subject to regulation, if at all, primarily at the federal level. “When it comes to VoIP, concepts such as federal verses state jurisdiction may be obsolete,” Abernathy said: “When people make calls over the Internet, the bits usually travel from router to router across state -- and often national -- boundaries… In such a situation, a predominantly federal regime seems imperative, recognizing, of course, that states will continue to have an interest in consumer protection issues and the like.” But when it comes to the regulatory framework, classifying VoIP services as interstate will allow policy-makers to craft a unified federal strategy, she said, adding that “providers should not be burdened with a patchwork of disparate state regulations.”

(2) Policy-makers should employ a “light touch” on VoIP. “It is clear that we should avoid imposing any kind of economic regulations,” Abernathy said. For example, she said she could “not discern any rationale” for regulating VoIP prices or service quality. “Rather than reflexively extending our legacy regulations to VoIP providers, we need to take this opportunity to step back and ascertain whether those rules still make sense for any providers, including incumbents.” She compared VoIP with early wireless services first introduced in the 1990s, saying the FCC then “wisely employed a light touch, and its restraint helped the wireless sector grow into a vibrantly competitive and highly innovative industry… The wireless experience suggests that VoIP services will flourish under a predominately federal scheme that employs a light regulatory touch.”

(3) Some regulatory intervention will be necessary. “Just as the FCC has regulated wireless services to… achieve social policy objectives, so too will regulation be necessary to ensure that VoIP providers fulfill such obligations.” Abernathy said she didn’t know whether the Commission should rely on industry best practices or impose prescriptive regulations, but said her basic approach was to “minimize regulatory intervention where possible, while ensuring that these critical policy objectives are met.”

Abernathy told reporters the jurisdictional issue was a priority for the Commission when dealing with VoIP. “All of the providers really want to understand” whether they would be regulated state by state or on a federal level, she said: “I think that’s a critical question that needs an immediate answer.” Some of the longer term transitional questions are related to “what can this technology do and how does this work with public switched network,” she said, and “those questions may take time to be answered because we may not have all information we need.”

The Commission probably will have to change the intercarrier compensation model to address the issues brought about by VoIP emergence, Abernathy said, but “I still don’t know how we are going to revolutionize intercarrier compensation to make it fit” in the new world. She also said that 911 was the “key piece” to be dealt with in terms of VoIP: “If we move to the world where we have a primary reliance on VoIP, then we need to solve that.” Responding to a question about Dept. of Justice concerns that the FCC’s possible hands-off approach wouldn’t ensure that VoIP providers complied with CALEA, she said: “What they are talking about is social policies and regulatory obligations,” as opposed to economic regulations. “We are aware of that issue… and are working cooperatively with the Department of Justice and the FBI,” she said.

Commenting on the suggestion of Verizon Senior Vp Thomas Tauke of a “fairly easy” scheme for regulating VoIP (CD Jan 22 p1), Abernathy said: “We can come up with… rules immediately” based on what is happening today, “but what you forget is that, as VoIP rolls out, it will change the market, so over time we are going to have to be flexible, we are going to have to adapt to how traffic is carried. I think it all rolls back to intercarrier compensation issues, which are [very complex]. So, we can’t really move forward with one without moving forward with the other. A Qwest official said Thurs. that “pseudo-VoIP services” that use IP protocol only as a transmission medium between circuit switches should be subject to access charges. Speaking in support of Tauke’s comments, Qwest said of the AT&T petition: “In this case, the customer originates the service over a traditional local exchange line, and experiences no difference whatsoever in the nature of the communication. Thus, from the customer perspective, no new or different service is being provided and access charges and other fees apply.”

Abernathy said that to encourage VoIP deployment the FCC must continue to promote broadband deployment and encourage investment. She cited the Commission’s latest broadband report, saying cable operators had nearly 14 million broadband lines and DSL providers served nearly 8 million lines, but “that is not enough. The Commission also must promote the deployment of other broadband platforms.” She said while cable and DSL providers served 22 million customers, “other platforms collectively serve only a small fraction of that amount… More robust broadband competition also may enable the Commission to dismantle economic regulation in this arena, and thus fulfill Congress’s goal of developing a procompetitive, deregulatory framework.”

The Commission also must continue to “break down other barriers to deployment” of broadband such as “right-of-way management,” Abernathy said. She said while local govts. had “legitimate interests” in regulating rights-of-way and recovering the costs of digging up streets, the Commission “should continue to play an active role in this area to ensure that right-of-way management does not become a barrier to deployment.” She also said while proceedings on cable and DSL Internet access had been delayed by litigation in the 9th U.S. Appeals Court, San Francisco, “the Commission will continue its efforts this year to harmonize the disparate regulatory regimes and provide as much certainty as possible.”