Voice over the Net: Telecommunications Regulatory Outlook

1. Voice over the Net: Telecommunications Regulatory Outlook Trey Hanbury Attorney Advisor Federal Communications Commission International Bureau

2. Some International Regulatory Forums • International Telecommunications Union (ITU) • ITU World Telecommunications Policy Forum on Internet Protocol Telephony • European Community • Asia Pacific Economic Cooperative • World Trade Organization • Inter-American Telecommunication Commission (CITEL)

3. Emerging International Regulatory Issues • Developed World • Technological Neutrality • “ENUM” • Developing World • Costs and Benefits of IP Telephony • Accounting Rates and “ICAIS” • Backward Compatibility, Billing and Bypass • Defining Voice over Internet Protocol

4. Technological Neutrality • The EC sought to urge nations to consider the principle of technological neutrality when developing government policies toward new services, such as IP Telephony. • According to the EC, the goal of the “technological neutrality” principle is “not to impose, nor discriminate in favor of, the use of a particular type of technology, but to ensure that the same service is regulated in an equivalent manner, irrespective of the means by which it is delivered.”

5. Technological Neutrality (2) • The apparent EC Regulatory Goals: • Consumer Protection • Universal Service • Call Interception • Emergency Calling • Privacy Protection • Accurate Billing • Number Portability • Basic Message: Engineering Now Will Be Cheaper than Engineering Later • Fundamental ITU Question: Regulate Up or Regulate Down?

6. ENUM • ENUM uses the Internet domain name system (DNS) to resolve the E.164 number into the service specific routing information needed to complete a communication, such as an e-mail or an Internet telephony call.

7. ENUM • ENUM could enable the termination of calls from non-IP networks to IP based networks • Some tout ENUM as a potential PSTN-IP "convergence" protocol. • Two basic administrative models:

8. ENUM Activities • IP-Telecom Interworking Workshop on Numbering, Naming, Addressing and Routing (25-27 January 2000) • ITU-T Study Group 2 Meetings • 7-17 March 2000 • 19-26 October 2000 (Working Party 1/2) • 23 January - 2 February 2001 • ITU ENUM Workshop (17 January 2001) • ITU-Commissioned Study on Root Server Issue from Nominum (?)

9. Economic Costs and Benefits of IP Networks • World Telecommunications Policy Forum • Syria, Lebanon, India, Tanzania, Oman, Bahrain and other developing nations proposed to prevent the ITU from even discussing the economic benefits of IP networks.

10. Why All the Fuss? • Declining International Settlement Rates • Benchmark Implementation and Enforcement (Benchmarks Order, Aug. 7, 1997); (Benchmarks Order on Reconsideration, June 11, 1999) • New Internet Transit Expenses • Developing Countries View Issues Together and Perceive a Net Outflow of Vital Hard Currency

11. Most Minutes Comply with Acct. Rate-Reduction Policy Source: FCC, IB (March 14, 2001)

12. Non-compliance in Nations with Teledensity of <1 93.7% Source: FCC, IB (March 14, 2001)

13. Developing World Strategy 1 • First, apply circuit-switched accounting rate regime to Internet services. • An accounting rate (AR) is the bilaterally agreed rate for traffic termination between two carriers. • Depending on the imbalance of traffic, carrier A pays carrier B for the amount of traffic terminated by carrier B in excess of the amount of B’s traffic terminated by A. • The excess traffic volume is multiplied by an amount — usually half the AR —called the settlement rate.

14. Sample Initiatives to Apply AR Regime to IP Telephony • “Backward compatibility” initiatives seek to track and measure internet traffic to allow AR regime to apply • Defining “IP Telephony” allows regulators to classify the offering -- a first step toward licensing, fees, taxation or prohibition.

15. Developing World Strategy 2 • Second, promote International Charging Arrangements for Internet Services (ICAIS). • ICAIS would apply to all IP traffic, not just IP Telephony. • Remember: under an AR regime, a carrier either pays or receives payment only for excess traffic measured from the hypothetical mid-point of the line. • Under the Internet model, by contrast, a non-peer carrier pays for the entire international transoceanic line. • In one view, U.S. consumers and businesses “free ride” on developing countries because U.S. consumers “hit” foreign websites over the line that the foreign ISP purchased.

16. Sample ICAIS Proposal • “Where measurement tools are available and acceptable, charging arrangements should be based on traffic flow patterns for each type of service, taking into account which side has generated the traffic.” • “In the absence of efficient measurement tools, charging arrangements for international links should be based on the ratio of inbound to outbound traffic flow.” APEC TEL ICAIS Task Force, quoted in Continued Consideration of the ICAIS and Other Internet Related Issues PLEN/D/04

17. Some ICAIS Flaws • Aside from IP Telephony, most data traffic is not proportional • Complex, Interactive Traffic Patterns • Rapidly Changing Infrastructure and Costs • As Use Outside of U.S. Increases, Internet Connections Become Less U.S.-Centric

18. Responses to the Money Concerns • First, are settlement-rate revenues actually declining? • Second, new IP networks reduce the costs of providing universal access and universal service. • Third, because the Internet can generate new revenues that ripple throughout the economy, generating revenues from sources other than the Internet might prove more beneficial to a developing world’s economy.

19. Developing World Message to United States Industry • Government Advocacy No Substitute for Concrete Examples from Industry • Might Consider: • Providing more information and education about capabilities and limitations of IP networks • Helping developing world manage transition to IP networks • Showing developing world how to make effective use of existing circuit-switched resources • ITU Development Sector (ITU-D) Perspective

20. Thanks! Trey Hanbury Attorney Advisor International Bureau Federal Communications Commission 445 12th Street, S.W. Washington, D.C. 20554 Tel: (202) 418-0766 Fax: (202) 418-0398 Email: ghanbury@fcc.gov