Cybertelecom
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Notes: VoIP

Notes > Applications > VoIP These notes are not complete and there is no guarantee that they are accurate. They are presented simply as notes. Feel free to use them but as with all material on the Internet Telecom Project, you should consider them a beginning to your research and not an end.

Jurisdiction Federal / State

Federal versus State Jurisdiction
Interstate Analysis

Mixed / Impossible

GeoLocation

Supremacy Clause / Preemption

FCC
States
Preempted
Not Preempted

47 USC 230 Unfettering
Sec. 706

Commerce Clause
Opposition to Multiple Jurisdictions Regulation

Definitions / Descriptions

VoIP
Caselaw
FCC
States
State - Not in Regulatory Proceding
Defined as Bypass
Various Designs
Free World Dialup
Vonage

Explanations

Telephony over Broadband
Dial Around
Interconnection to PSTN
Benefits of VoIP
Cost Savings
Arbitrage
Markets
Barriers to Entry
Adoption
Nascent Deployment

Classification

Functional Approach
Application of State Law
Facilities

Computer Inquiries: Basic v. Enhanced Services Dichotomy
Computer Inquires
Telecom / Information Service (Telecom Act)
Telecom Service / Info Service Mutually Exclusive
Steven's Report
Steven's Criteria
Classes of Providers
Duck
Steven's Report Criteria Applied
Computer to Computer
Phone to Phone
Phone to Phone Long Distance
Information Service Analysis
Telecom Service Analysis
Telecom

Layered Approach
Market Approach
Legacy Regulations on Nascent / New Network
Unfettered

Issues

Universal Service
Access Charges
911
Power / Emergencies
CALEA Wiretaps
Voluntary Calea
Consumer Protection
Access by Individuals with Disabilities
NANP

State Proceedings

Explanations

Telephony over Broadband

The ILECS maintain that in some instances, a phone-to-phone IP Telephony provider seeks to offer both local and interexchange service to its customers through a DSL or other high speed connection, which in some cases may also be used by a computer.
-- IN RE: Petition for a Declaratory Order regarding classification of IP Telephony Service. Order Establishing Declaratory Proceeding, DOCKET 29016, p. 2 (Alabama PSC August 2003) PDF

Dial Around

In other instances, the ILECs assert that interexchange carriers offer access to IP Telephony Service for the use of a standard telephone where the customer dials a seven digit local number, reaches the provider for a second dial tone and places the local or long distance call.
-- IN RE: Petition for a Declaratory Order regarding classification of IP Telephony Service. Order Establishing Declaratory Proceeding, DOCKET 29016, p. 2 (Alabama PSC August 2003) PDF

Interconnection w PSTN

The ILECs maintain that the IP Telephony Service provider typically connects to the network of the originating and terminating local exchange carrier at points of interconnection much like traditional IXCs.
-- IN RE: Petition for a Declaratory Order regarding classification of IP Telephony Service. Order Establishing Declaratory Proceeding, DOCKET 29016, p. 2 (Alabama PSC August 2003) PDF

Benefits of VoIP

Cost Savings

VoIP providers assert that they enjoy cost advantages over other providers because they need not build expensive switching facilities, can use the existing Internet infrastructure to handle voice transmissions originated by their customers, and are not required to amortize historic fixed costs. In addition, VoIP providers do not pay the same fees and charges applicable to other providers. VoIP providers often charge lower rates than either ILECs or CLECs. The potential benefit to consumers from the entry of VoIP providers may be significant.
-- Order instituting investigation on the Commission's own motion to determine the extent to which the public utility telephone service known as Voice over Internet Protocol should be exempted from regulatory requirements, CA PUC February 11, 2004 http://www.cpuc.ca.gov/published/agenda_decision/33960.htm

Arbitrage

3. The policy implications of VoIP are dramatic. The main reason telephone companies such as Vonage, Qwest Corporation (Qwest), and AT&T Communications of the Mountain States, Inc., are turning en masse to VoIP is to avoid costly taxes and subsidies, and regulation that is often irrational. Avoiding payment of subsidies and taxes is no small matter. If one lives in the Denver metro area, these charges make up over one-third of the telephone bill. The basic local service charge is about $15, but even if no other services (like caller ID or voice mail) are ordered, the ending tab is around $25. The first $15 goes to the service provider, the remaining $10 to subsidies and taxes. The subsidies support 911 services, assist low-income persons, and enable phone service for the hearing/speech disabled. But a large part of the subsidies are used to reduce the bills of customers in high cost areas. There are some areas in Colorado where the cost to serve each customer would be hundreds of dollars per month were it not for state subsidy (about $70 million) and federal subsidy (our state fraction of $5 billion) support. High cost customers pay rates comparable to metro area customers notwithstanding the cost differential.
4. Currently, use of VoIP technology not only enables companies to avoid the $10 of taxes and subsidies, it also allows avoidance of costs that are reflected in the first $15 charge. This is because the customer's local provider often must pay another phone company a variable charge when a customer makes a local call. Even more important, use of VoIP avoids intrastate and interstate toll charges that ordinarily must be paid to phone companies when a call crosses certain geographic boundaries. The end result is a massive arbitrage opportunity: a VoIP provider can offer phone service at a much cheaper rate than traditional phone companies burdened by taxes, subsidies, and intercarrier charges.
5. Companies using VoIP avoid traditional costs because the Internet is essentially unregulated. A voice data packet is indistinguishable from a text data packet, and there is no travel charge or regulation involving transmission of data packets. This is true even though VoIP often uses telephone wires to commence and terminate a call.
--In The Matter Of The Investigation Into Voice Over Internet Protocol (Voip) Services, Docket No. 03M-220T, Order Closing Docket ¶ 3 ( Colorado PUC Dec. 17, 2003) (Chairman Gregory E. Sopkin Specially Concurring)

Markets

Barriers to Entry

Providers of Internet-based voice communications may face very few barriers to entry into the local and long-distance telecommunications markets.
-- Order instituting investigation on the Commission's own motion to determine the extent to which the public utility telephone service known as Voice over Internet Protocol should be exempted from regulatory requirements, CA PUC February 11, 2004 http://www.cpuc.ca.gov/published/agenda_decision/33960.htm

Adoption

Penetration of VoIP: Penetration by VoIP providers into the voice telephony market is growing rapidly. Our Telecommunications Division (TD) has projected the penetration of VoIP over the next five years. Based on conservative estimates, by 2008 TD projects that VoIP will account for 40 percent to 43 percent of total intrastate telecommunications revenues in California. These projections assume no change in the number of residential and business access lines, and assume conversion rates from conventional voice service to VoIP service of 10 percent for cable/residential; 5 percent for ILEC/residential; and 10 percent for ILEC/business. A copy of TD's projections is attached.
Currently, both SBC and Verizon are offering VoIP service to customers. As noted, Time Warner filed an application for operating authority with the Commission in order to offer VoIP on a local, intrastate basis to customers in California. Other providers in California include Vonage, 8X8, and Level 3 Communications.
-- Order instituting investigation on the Commission's own motion to determine the extent to which the public utility telephone service known as Voice over Internet Protocol should be exempted from regulatory requirements, CA PUC February 11, 2004 http://www.cpuc.ca.gov/published/agenda_decision/33960.htm

Nascent Deployment

While the technology is developing, the IURC does not believe sufficient customers use the technology today to effectively
compete with wireline voice telephony. A major hurdle for VOIP providers is that the phone for VOIP is dependent on the power source in the home, as opposed to traditional wireline telephony that does not require a power source in the home. "For that reason, most observers see VOIP for now as an attractive second home line, instead of a replacement for the Bell local service."6 Furthermore, since the calls go through the Internet a customer still needs some type of Internet connection and the system works best over broadband.
-- TELEPHONE REPORT TO THE REGULATORY FLEXIBILITY COMMITTEE OF THE INDIANA GENERAL ASSEMBLY Sept 29, 2003 Page 12 PDF

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