Regulators worry as Net phone service surges
After a long, dry spell, things are getting good for Internet entrepreneur Jeff Pulver -- if he can just keep the government from mucking it up. Pulver spent the past decade preparing for the day when the world would adopt a technology called Voice Over Internet Protocol, or VOIP, that transmits speech over the Internet as if it were e-mail. The tech bust of the past three years delayed the revolution, but it has finally arrived. Now Pulver wants help from the government, in the form of a good leaving-alone.
"We should not be taking any steps to drive people back to the nuclear winter we're slowly coming out of," he said.
Phone companies like VOIP because it greatly increases the amount of voice traffic a given cable can carry, and because routers cost much less than phone switches. Consumers like it because it's cheap.
Granted, early systems for routing voice calls over the Internet were difficult to use and sounded awful. But when connected to a broadband Internet connection, today's VOIP phones are nearly indistinguishable from the traditional kind. And today, about 20 million Americans have broadband connections at home.
No wonder VOIP's time has come. Pulver's VOIP phone company, Free World Dialup, boasts 150,000 subscribers, with 2,000 newbies signing up every day, said Pulver.
Vonage Holdings Inc., another company Pulver cofounded, has garnered 80,000 customers with its offerings of unlimited local and long-distance calls for $34.95 a month. And now traditional phone companies like Verizon Communications are rolling out multibillion-dollar plans to migrate much of their traffic to VOIP systems.
Awed by the explosive growth of VOIP technology, state and federal officials are trying to figure out how to take the regulations that govern traditional phone services and apply them to the Internet.
Pulver replies that the best way to regulate VOIP is not at all -- at least not yet. He's filed a petition with the Federal Communications Commission, asking it to declare that Free World Dialup isn't subject to federal telephone regulations.
Pulver might get his way. FCC chairman Michael Powell said last month that he's reluctant to regulate VOIP companies.
"No regulator, either federal or state, should tread into this area without an absolutely compelling justification for doing so," said Powell.
But other regulators can think of several justifications. For instance, the FBI is scared stiff of VOIP. There's a federal law that requires traditional phone companies to provide ways for law enforcement agencies to tap the lines. It's unclear whether that law applies to VOIP services, raising the specter of untappable rogue phone companies that cultivate a clientele of drug dealers and terrorists.
What about 911 service? If current regulations don't apply to VOIP systems, they'll be under no obligation to handle 911 calls. Besides, since the call is going over the Internet, it's far more difficult to design a 911 system that can pinpoint the physical location of the caller. Shouldn't the government require this of VOIP operators?
Then there's the reliability issue. Traditional phones are ultra-reliable, usually working even if the electric lines are down. The phones meet such high standards largely because state regulators demand it, but no such regulations are being applied to VOIP phones -- which, by the way, will not work during a power outage. Shouldn't the government do something about that?
Talk to the VOIP backers, and these concerns seem rather less ominous. John Rego, the chief financial officer of Vonage, said his company will cheerfully cooperate with law enforcement requests for wiretaps.
"We built our system so we can be compliant with that, without being regulated," Rego said. Pulver said the same, as did David Young, director of technology policy at Verizon Communications.
The 911 worry gets even shorter shrift. Consumers will demand phones with 911 service, the VOIPers say; we don't need the government to tell us that. Vonage has already added 911 to its service; Free World Dialup is working on it and Verizon vows to have it.
Verizon's Young firmly opposed any requirement that VOIP phones be as reliable as standard phones. Instead, he said, competition would weed out unreliable service providers. "People will go with brand names they know and companies they trust."
Back when each phone company was a local monopoly, you had to force them to deliver good service. When every VOIP phone provider faces five or 10 or 20 rivals, quality will just come naturally.
Curiously, Pulver and his fellow VOIPers aren't dogmatically opposed to regulations. They grant that VOIP services may have to pay taxes, and concede that some kind of 911 regulation would make sense. They just don't see the point of doing it all next week.
VOIP is where the Internet was in 1994 -- young, innocent, and rather feeble. A decade of benign government neglect gave us Google and Amazon, Yahoo and eBay. VOIP may turn out just as well, if the regulators can find something else to think about for, say, five or 10 years.
Hiawatha Bray can be reached at bray@globe.com. 