Senate Weighs Options for VoIP Regulation

U.S. lawmakers considering a bill that would let Voice over Internet Protocol (VoIP) communication services expand with minimal government regulation were told the technology could become an underground network for terrorists and other criminals to communicate without detection.

In a hearing on a bill filed by Sen. John Sununu (R-New Hampshire), members of the senate commerce committee also wrestled with how high fees should be to use the service and whether it could create a two-class system of phone users, with those unable to get broadband Internet access forced to pay higher rates for traditional land line use.

Known as the VoIP Regulatory Freedom Act of 2004, the bill would largely free IP telephony from regulation by the Federal Communications Commission (FCC) as well as from state and local oversight. In a statement, Sununu said a “light regulatory approach” is necessary in order to help the technology “grow to meet its full potential.”

Terrorism Issues

In testimony to the committee, Deputy Assistant Attorney General Laura Parsky said that unless providers of the service built networks that allow law enforcement to eavesdrop on calls, VoIP could become a “haven” for terrorists to plan attacks without detection.

“If legal loopholes allow criminals to use new technologies to avoid law enforcement detection, they would use these technologies to coordinate terrorist attacks, to sell drugs throughout the United States and to pass along national security secrets to our enemies,” Parsky said.

Sununu’s bill calls for VoIP carriers to be required to “provide access” to law enforcement agencies, much in the way that ISPs are already obliged to do. But the Justice Department said that without special technology to enable wiretaps, something telephone carriers now must provide, they will be unable to monitor telephony calls effectively.

Law enforcement hinted it would be forced to fall back on its controversial packet-sniffing technology, known as Carnivore, which enables the FBI and others to review almost every piece of data sent on the Internet.

Countering the government’s claims, James X. Dempsey, executive director of the Center for Democracy and Technology, told the committee that law enforcement will be able to monitor online calls without forcing providers to build the infrastructure to do.

Snuffing the Flame?

Lawmakers will likely have to hammer out the differences on the law enforcement before a final VoIP bill can be passed. A House version of the bill contains the provision requiring the installation of wiretap-friendly technology.

Analysts say one reason that VoIP has gained traction so far has been its low startup and usage costs. Analysts also say that regulatory requirements for investing in technology could put a serious crimp in its spread.

“For the smaller startups, what’s allowed them to get a foothold is a small capital outlay up front,” Infonetics Research analyst Matthias Machowinski told the E-Commerce Times. But, he added, several larger firms, such as hardware provider Lucent and cable giant Comcast, have started to enter the market, making it more likely companies could sustain the impact of such an expense and still grow the technology.

Fees and More Fees

While Sununu’s bill calls for VoIP providers to pay fees into the Universal Service fund, which helps provide access to remote and poor areas, some say higher fees are necessary to avoid driving up the cost of basic telephone service.

Not requiring fair payouts will “diminish the quality and drive up the cost of basic telephone service for those who simply cannot afford to switch to broadband,” the Consumers Union of America wrote in a letter to the committee.

Because the bill exempts VoIP from state and local taxes, some senators raised concerns about the ability of communities to fund basic and enhanced 911 emergency call services, which are often built out with local levies on telephone carriers.

Gartner analyst David Neil said the march toward VoIP among enterprises of all sizes will not stop — regardless of the regulatory environment — because the technology offers advantages that go beyond cost.

“This is the direction things are headed,” Neil told the E-Commerce Times. “Regulation may slow things down and complicate things, but it’s not going to stop it.”