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Net phones boom, unregulated

Net telephony has yet to be regulated, but the industry continues to expand with three new services being announced this week.

No one knows whether voice calls made over the Net will ever be regulated, but the industry still continues to boom with three new Internet telephony services being announced this week.

Today, NetUSA Telecommunications said it has sealed a deal with Net-phone maker A-Pro to develop an I-phone system called I-Talk. NetUSA plans to set up a call switch center that lets customers make voice calls using Net technology, with A-Pro supplying the hardware.

A start-up called Aplio also said today that its first product will convert regular telephones into Net-call devices. (See related story)

And as reported yesterday, the Internet telephony company ITXC Corporation, which is backed by AT&T and Net telephony firm VocalTec Communications, said by April it will launch a service dubbed WWeXchange that lets companies offer Internet telephone calls worldwide through a cooperative network. The enhanced infrastructure will essentially expand the range of places to which Net callers can connect. Usually, Net callers have to deal with separate companies to reach different cities.

But even as the Net telephony industry grows, there are still unanswered questions about whether the services will be regulated like traditional telephone companies.

I-phone conversations may not be as clear as regular phone calls, but for now they often are less expensive because users can skirt long distance charges. A recent study by Killen & Associates estimates that Net telephony has the potential to become a $63 billion market by 2002.

The new market no doubt threatens to cut into telephone carriers' profits. Small long distance carriers have complained to the Federal Communications Commission that new policies need to be drafted to address the increased competition and technological issues that have arisen with the advent of Net telephony. At least one proposal, submitted last year by America's Carriers Telecommunication Association (ACTA), asked the FCC to ban voice communications over the Internet until the issue was explored.

On the other hand, the Voice on the Net Coalition, whose members include Microsoft and VocalTec, petitioned the FCC in January to deny the ACTA's request on grounds that government intervention could stifle the Internet telephone market.

Frustrating both sides is the fact that the FCC has yet to decide the issue in the almost two years the request has been on the table. "We have never heard back," Sandy Combs, director of the Voice on the Net Coalition, said today.

An answer isn't expected any time soon, as four of the FCC's five commissioners were replaced in October.

"It's time to address the issue. Internet telephony is no longer some little service for computer geeks--it is going mainstream. It will have an adverse impact on telephone service congestion and on small-carrier competition," Chuck Helein, ACTA's attorney, said today.

"The old commission promised to take a look at it, and then bailed out and did not do their job," he added. "We don't have the answer, but they need to get some facts and information and quit ducking the issue."

No one at the FCC was immediately available for comment. In September, however, the White House advisor on telecommunications policy, Larry Irving, head of the Commerce Department's National Telecommunications and Information Administration, stated in a speech that the federal government should not regulate telephone calls over the Net--for now.