FCC Position Could Give Edge to Cable Providers

Federal Communications Commission Chairman Michael Powell wants federal oversight of the growing VoIP industry, an arrangement that, analysts say, may make the cable companies big winners over the Regional Bell Operating Companies.

Federal Communications Commission Chairman Michael Powell’s plans to request federal oversight of the growing VoIP industry, which he says will make more sense than putting it under state control, could give cable operators an advantage in providing VoIP services, according to an industry analyst.

According to Jon Arnold, VoIP program leader for Frost & Sullivan, Palo Alto, Calif. “The cable companies can bundle voice for nearly no additional cost, it takes up very little bandwidth.”

Regional Bell Operating Companies can offer a bundle of their own with DSL and digital voice, but for video, they have to partner with a satellite company because video over DSL doesn’t work that well, Arnold said.

The pure-play VoIP providers don’t have the bundling capability, though Vonage and Boingo might have taken the first step in that earlier this week by bundling wireless and VoIP together, according to Arnold. The wireless component is missing from the cable and RBOC bundles, Arnold points out.

Yet, Arnold cautions, it remains to be seen how well the Vonage-Boingo partnership will work in actual practice.

That is only one part of the evolution of VoIP that has yet to be seen, according to Powell.

“It is very likely that treatment of VoIP will have some of the farthest-reaching consequences of anything the commission will consider in the near future,” Powell said in a well-accepted address at Voice on the Net (VON) conference in Boston. The conference included some 2,500 attendees from various areas of the VoIP industry. “The commission is considering the future of electronic and optic communications for many years to come. And we have to get this right.”

To realize the innovation dream that IP communications promises, the FCC must ensure that a willing provider can reach a willing consumer over the broadband connection, Powell added. “Ensuring that consumers can obtain and use the content, applications, and devices they choose is critical to unlocking the vast potential of the Internet.”

“To hold that packets flying across national and indeed international digital networks should be subject to state commission economic regulatory authority is to dumb down the Internet to match the limited vision of government officials,” Powell said.

The state commissions regulate traditional phone services. It’s wrong to not recognize the potential of VoIP, or to see it through the lens of the old telephone network regulatory model, Powell explained.

Court cases have generally found that VoIP is a data service, and therefore is exempt from state telecom tariffs. But the FCC has said it wants to make sure that future court cases don’t stifle VoIP growth, hence the idea of putting the services under FCC jurisdiction.

Powell cited a Yankee Group estimate that there will be 1 million VoIP subscribers by the end of 2004, up from just 131,000 last year, a 650 percent increase.