Voice over Internet Protocol and the Changing Face of Communications

by Terry Costlow

Voice over Internet Protocol (VoIP) is expected to ramp up quickly, possibly garnering more than 10 percent of worldwide telephony revenues in just five years. State and federal governments will not be involved significantly in the transition, but will almost certainly have to get involved with the taxation, law enforcement and other regulatory issues that will accompany the change.

Revenues for VoIP are expected to hit $260 billion by 2009, about 12 percent of the overall telephony market, according to Juniper Research. But during this time, according to the Gartner Group, the Federal Communications Commission (FCC) is expected to apply “only minimal regulation to Internet services.”

Unfortunately, minimal regulation may not be enough. Regulating the Internet poses vexing challenges, so even minimal oversight will require maximum effort. Regulatory priorities include taxing service providers, controlling phone locations and law enforcement. Some say issues related to these priorities will have to be resolved before VoIP really takes off.

“For the early adopters, the issues don’t slow things,” said Larry Blosser, a communications attorney and member of IEEE-USA’s Committee on Communications and Information Policy (CCIP). “But for any number of mainstream consumers with wired and wireless phones, we’ll wait until this shakes out.”

“Phone Tap” Issues Get Complicated

As IP-based services continue to expand, regulators are looking at how traditional “phone tap” regulations will have to be expanded to give law enforcement personnel ways to tap suspected criminals. For one thing, it’s more difficult to determine where Internet-based messages start and where they go than, it is with existing telephone networks. Header information doesn’t necessarily include addressee information, and messages traveling over peer-to-peer connections are — and will continue to be — difficult to tap.

“The problems of extracting information in the Internet age are much more complex than with plain old telephone service,” said Thomas J. Talley, an engineering professor at Texas A&M University in Texarkana and head of CCIP’s VoIP group. The technical issues (related to) wire taps must also be weighed against personal concerns. “As always, these ‘need to know’ issues must be balanced against the right to privacy,” Talley said.

The FCC is currently looking at ways to address these and other law enforcement issues. IEEE-USA volunteers recently testified before the FCC, saying, “It is no longer appropriate to consider a ‘phone tap’ as the simple acquisition of voice information concerning an individual, but instead the existence of IP-based services require that all information flowing to and from an individual, in whatever form, should be sought by warrant or with judicial review and given to the courts as appropriate.”

Taxing Issues

While law enforcement concerns are not trivial, some feel they pale in comparison to the task of making sure VoIP providers and traditional phone service providers receive adequate compensation for their services and their losses.

“I think the political hurdles, such as regulations and compensating those who lose money because of the shift to IP-based services, will be much more difficult to resolve than the technical challenges associated with gathering information by and for law enforcement,” Talley said.

One of the first hurdles is to determine who’s going to be the taxing body. VoIP corporate executives are hoping that the FCC or another federal agency will take control, so they don’t have to work with several different entities. The promise of lower costs might not be met if VoIP service providers have to deal with many groups and levy different taxes in different areas. “That could be a significant factor in the cost equation,” Blosser said.

“VoIP providers would like to work with one issuer, instead of all 50 states and the District of Columbia,” Blosser said. “On the international side, many argue that there should be a single European directive, so the providers don’t have to deal with 25 countries.”

The ease of movement in a global society is another concern. Companies working in states with high tariffs or complex regulations may find it simple to avoid taxes by moving their headquarters or primary processing facility. “If state fees are too high, some companies may decide to offshore the entire operation,” Blosser said.

Terry Costlow has been writing about engineering issues for more than 20 years. He can be reached at todaysengineer@ieee.org.