FCC: Broadband top issue in 2004

His comments, made Friday at the Consumer Electronics Show here, come just weeks before the FCC is expected to make several important decisions about whether broadband phone providers, whose subscribers use their Internet connections to make calls, will have to pay the same taxes and obey the same century-old rules that traditional phone companies must follow.

The FCC is also expected to soon rule on several petitions seeking similar clarifications that were filed by telephone giant and soon-to-be broadband phone provider AT&T, plus upstart broadband phone providers Vonage and free Internet telephone service Free World Dialup.

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Based on his comments Friday, Powell has apparently sided with broadband phone providers who say that their technology is anything but a telephone service and that they are still too young to survive the financial burden that fees create.

Using VoIP (voice over Internet Protocol), calls are broken into bits of data using the Internet Protocol (IP), the world's most popular method for electronic devices to communicate. With IP, thousands of data packets are sent over the Internet at the same time using any open pathway they can find. Traditional phones use their own private networks and circuit switches, which waste network capacity by creating a constant connection.

Instead of regulations, which Powell called the "most acute threat" to the industry, he'd prefer to "wipe the slate clean" and craft either new regulations, a process that could take years, or drop the effort altogether. In the meantime, Powell would support the FCC playing the role of national "forum" that the telephone industry--both traditional and new--can turn to for direction. However, the FCC chairman didn't provide additional details,.

"We'd better realize that if you create a hostile environment, there is nothing that stops them from dropping that server in Italy," Powell told an overflow crowd at a CES session. "The minute they don't like it, they're gone. That's not what we want."

"The FCC has to demonstrate leadership; we're the best positioned to bring this all together," he added. In the case of broadband telephony, "that doesn't mean regulating it, but provide a forum to guide it."

Powell also took a backhanded swipe at states such as Minnesota and California, where public utility regulators have asked broadband phone providers to follow state telephone rules and regulations. Powell said regulators in these two states decided broadband phone companies were telephone concerns because of a "duck test," as in: Broadband phone services look and feel like a phone, so they should be subject to telephone regulations.

"It's the scariest thing I heard about VoIP," he said. "It's a scary impulse from the public policy perspective."

A representative from the Minnesota Public Utilities Commission had no immediate comment. California utility regulators were not available for comment.