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Congress mulls new Net phone rules

Bill would bar states from regulating VoIP, turning it over to FCC instead. But this could still mean higher costs for Net phone calls.

Two key members of Congress announced legislation Tuesday that could create a sweeping federal regulatory framework for Internet phone calls.

Reps. Rick Boucher, D-Va., and Cliff Stearns, R-Fla., assert that the Federal Communications Commission--not state governments or regulators--should oversee rules regarding phone calls made over the Internet. Their bill would beat back attempts by regulators in states such as New York, California and Minnesota to extend their jurisdiction to the fledgling technology known as voice over Internet Protocol, or VoIP.

"It is now time to pass a law that is modernized for the digital era and contemplates the kind of regulatory treatment (necessary) for interactive, packet-switched, Internet-based communications," Boucher said in an interview. "We would declare that the service is an interstate service and subject it completely to the jurisdiction of the Federal Communications Commission."

VoIP, which has begun to draw close scrutiny from politicians in Washington, saves customers money because the technology sends phone calls over the Internet, rather than the traditional phone network that is heavily regulated and taxed. Drawbacks of VoIP include the lack of battery backup to phones, problems with the routing of 911 calls and spotty voice quality.

In an indication of growing legislative interest, a House telecommunications subcommittee plans to hold a hearing Wednesday titled "VoIP: Will the Technology Disrupt the Industry or Will Regulation Disrupt the Technology?" A subcommittee representative said scheduled witnesses include representatives from BellSouth, Vonage, AT&T, Level 3 Communications and the National Association of Regulatory Utility Commissioners.

The Boucher-Stearns proposal, introduced late Tuesday afternoon at a press conference in Washington, is not exactly laissez-faire. It would potentially increase the amount that customers pay for certain VoIP services by importing a handful of controversial taxes and regulations from the analog world. (Neither the states nor the FCC, however, would be able to directly set prices or rates for VoIP service.)

Under the bill, Boucher said, the FCC would have the option to regulate three key areas for VoIP companies that link with traditional phone networks. The three areas are enhanced 911, universal service, and access charges. Universal service fees come from taxes levied on telecommunications providers that are redirected to cover discounted phone service for rural and low-income subscribers, as well as school and library Internet connections. Access fees are paid by subscribers and long-distance carriers for the use of local phone networks while making long-distance calls.

A white paper released last month by the VON Coalition--which includes Microsoft, MCI, Intel and that because VoIP providers already pay universal service taxes and access charges "directly or indirectly" when they link to the traditional phone network, no changes to existing rules are necessary.

Boucher said that the bill he co-authored is intended to set broad guidelines and not try to second-guess the FCC's eventual decision.

"We're directing the FCC to put the issue under the microscope and figure out a reasonable way to have universal service apply to VoIP," he said. "What we are saying is that the commission shall apply universal service formulas to VoIP, and we leave it to the commission to make a decision on how to do that."

Adam Thierer, director of telecommunications policy at the Cato Institute said he favored the Boucher-Stearns approach of restricting state governments from regulating VoIP, but that he remained "concerned about all the carve-outs" giving the FCC authority to import 20th century access charges and universal service requirements.

"The problems is you've left a lot of room open for regulatory wiggling," Thierer said. "As long as the universal service door is open, regulators will drive a truck through it...If ever there was a chance to push the envelope and change the way we think about telecommunications regulation, it's now."

Rep. Charles Pickering, R-Miss., and Sen. John Sununu, R-N.H, also have introduced bills related to VoIP. The Boucher-Stearns bill is numbered HR4757.