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FCC likely to limit Net telephony regulations

The Federal Communications Commission reaches an agreement with the FBI permitting the commission to approve a VoIP company's request for limited regulation of its operations.

The Federal Communications Commission has reached an agreement with the FBI permitting the commission to approve an Internet telephony company's request to limit regulation of its day-to-day operations.

An FCC official confirmed Friday that the commission won't further delay a vote on the petition filed by's Free World Dialup, a voice over Internet Protocol (VoIP) provider, scheduled for review at next Thursday's monthly meeting. The commission is seen as likely to approve the petition, but that outcome is not certain.'s request, submitted in February 2003, asked the FCC to classify that calls on its VoIP network aren't subject to current telephone rules.

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As more conversations begin to flow through unregulated VoIP networks instead of the heavily taxed public switched telephone network, state governments stand to lose billions of dollars. Because Net telephony is not regulated, companies offering the service aren't subject to the vast thicket of taxes and regulations governing E911 and guaranteeing wiretapping access for police.

Worried that's request could lead to VoIP services being immune from wiretapping requirements, the FBI and Justice Department have stepped up their efforts to gain access to voice conversations carried across the Internet. The agencies recently asked the FCC to order VoIP providers to rewire their networks so that law enforcement officials could more easily listen in to VoIP calls. The two government organizations, along with the Drug Enforcement Administration, contend that criminals, terrorists and spies could potentially use VoIP's nascent infrastructure to evade legitimate surveillance.

Last week, the FCC sent a letter to Pulver executives confirming that all three agencies would jointly file a petition seeking comprehensive rules that apply the Communications Assistance for Law Enforcement Act of 1994 (CALEA) to Internet telephony services. The petition, which is expected to be filed within the next several weeks, will likely address a number of related issues, including what requirements should be subject to under CALEA, as well as the procedures necessary to bring those services and providers into compliance with that legislation.

While CALEA clearly requires "telecommunications carriers" to provide ready wiretapping access, it explicitly exempts "information services" from the same rules, presenting the FCC with something of a dilemma. If the commission concludes that CALEA does not apply to Net telephony providers, the debate would shift to Congress, which could decide to amend the law.

In an e-mail sent to CNET earlier this week, Free World Dialup Chief Executive Jeff Pulver responded to the FCC letter and expressed hopes that the police agencies would allow VoIP vendors to move forward as the details for any potential regulations are worked out.

"From my side, it would be great if our federal law enforcement authorities recognized the need to be reasonable, working productively towards a reconciliation of contending policy objectives, and in effect not to indefinitely stall broadband and IP communications proceedings that will give consumers and end users choice, innovation and lower prices," Pulver wrote.

Thus far, VoIP providers have made efforts to cooperate with law enforcement officials, with some vendors, including Level 3 Communications, backing the regulations the FBI has suggested. Other providers, such as BullDog Teleworks and PingTone Communications have asked the FCC to allow their ongoing VoIP projects to remain unfettered by any new wiretapping requirements.

The FCC is also slated to address the future of a special $2.25 billion-a-year tax--typically reflected in higher monthly phone bills--that provides schools and libraries with discounts on everything from Internet access to phone lines for fax machines and domain name registrations.

CNET's Ben Charny contributed to this report.