Subject: [NEXTEL-1] Regulating Internet Phones May Backfire

From: [email-masked]
Date: Sat, 10 Jan 2004 15:04:17 -0500

FCC Chief:
Regulating Internet Phones May Backfire

Fri Jan 9 2004

By Ben Berkowitz

LAS VEGAS

Rapidly expanding voice communications over the Internet should be protected
from excessive government regulation and from being pigeonholed as
traditional phone service, the top U.S. telecommunications regulator said on
Friday.

Harm from misregulation of Internet phone service could take "decades to
fix," said Federal Communications Commission Chairman Michael Powell,
speaking at the Consumer Electronics Show here. "You (can) create a very
hostile regulatory environment for voice-over-IP providers in the United
States," Powell said.

Powell's comments were welcomed by the largest provider of Internet-based
phone service, Vonage Holdings Corp., http://www.vonage.com which has
92,000 customers and is expecting 250,000 customers by the end of the year.

"One thing you don't want to do is accelerate the movement of technology,
jobs and infrastructure away from the United States, and outside the reach
of the government if they ever want to reach into it," Vonage Chief
Executive Jeffrey Citron said in an interview with Reuters.

Companies like privately held Vonage have seen rapid growth in recent months
as people embrace lower-cost communications online with quality comparable
to traditional phone service. The technology has recently attracted the
attention of large telecommunications providers including AT&T Corp., which
also intend to provide Internet phone service.

In other comments, Powell said his commission needs to do more work this
year on promoting and expanding high-speed communications over the Internet,
which he said is crucial to the economy's future.

"I think it is the most dramatic and meaningful stimulus to our economic
productivity and growth," he said. "I think it is the most promising
development for job creation."

Powell, however, was most vocal about the technology known as voice over
Internet protocol, or VoIP.

He added "there is nothing to stop" the companies from moving to other
countries and setting up computer systems to serve U.S. customers.

A major danger, he said, is people saying "'Oh VoIP, it's just telephony. It
looks like a duck; it quacks like a duck; regulate it like a duck."'

GRAPPLING WITH REGULATIONS

Last year, the state of Minnesota tried to impose telephone regulations on
Vonage, a leader in the VoIP business that lets a user hook up a regular
telephone to a special adapter and in some cases even keep their traditional
phone number.

But a federal judge ruled in October that Vonage was an information service
rather than a telecommunications service, and that state regulation of it
would run counter to congressional intent to keep the Internet free of
regulation.

"We should be starting on the cleanest slate possible," Powell said. "I
don't think you should ask a Vonage ... to hire an 80-person lobbying staff
and legal staff."

Indeed, Vonage's Citron said the Minnesota case was very costly to the
Edison, New Jersey-based company, even though it prevailed in the case,
which he called a "travesty."

"It's very expensive to fight the government," he said.

http://www.reuters.com/financeNewsArticle.jhtml?type=governmentFilingsNews&storyID=4103669

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