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VoIP finds foreign friends and adversaries

Net phone operators find a patchwork of regulations--some friendly, many not--as they surge outside U.S. borders.

Internet phone provider Vonage has all but tapped Singapore to start its expansion into Asia later this year.

The primary attraction? Singapore's utility regulators are "very friendly" to Net phone operators, Vonage Chief Financial Officer John Rego said during a recent interview. So too are public utility officials in Japan and Korea, which are also on Vonage's radar screen, Rego added.

As the New Jersey-based company's experience shows, U.S. Internet phone operators expanding beyond the hypercompetitive U.S. market are finding a world divided between nations that very much welcome foreign Net phone operators and those that don't.

Since 2001, that distinction has helped steer a sizable percentage of the $1.6 billion invested in Vonage and other voice over Internet Protocol (VoIP) providers to Western Europe, North America, Singapore, Korea and Japan, where intense competition is keeping phone prices low and innovation high.

But for every nation friendly to VoIP carriers from other countries, there's one like Mexico. When foreign telephone companies first attempted to sell overseas phone calls in Mexico, the local monopoly phone company allegedly fought back by cutting network cables. Decades later, Mexico's dominant carrier, Telmex, is allegedly resorting to another series of strong-arm tactics to crush competition from IP providers by sifting through Internet traffic to block commercial VoIP calls. A Telmex spokesman did not respond to a request for comment.

Also considered very much off-limits because of unfriendly regulators, or an all-powerful monopoly incumbent, are India, Panama and Qatar.

"It's very important now for a regulatory structure to fit," Rego said. "Anyone with a real entrenched incumbent, where telephony infrastructure is controlled by government, or a place like India, where it's controlled by the country, just don't want us to be doing it at the moment."

Telmex's practices most recently have attracted the attention of U.S. officials and prospective competitors over current accusations that the company is blocking broadband access to Telmex customers whom it suspects are using their Internet service to make VoIP calls.

"We are posing this question: If a company is port blocking, it's clearly a form of discrimination, but do you think this is appropriate?" said a U.S. trade official, speaking on condition of anonymity.

"Some international operators believe it's their broadband connection, so if someone wants voice over it, they need to use my service. We're very interested in learning if Mexico and others believe this is legitimate."