- The Washington Times - Tuesday, February 24, 2004

Lawmakers said yesterday the nation’s telecommunications laws should not apply to Internet telephone service because the arcane regulations could suppress development of the emerging technology.

The Senate Commerce, Science and Transportation Committee also said the 1996 Telecommunications Act needs to be updated to account for new technologies such as Internet calling.

“If we try to regulate [Internet phone service] then I think we are headed down the wrong path,” said Sen. John E. Sununu, New Hampshire Republican.

Sen. Conrad Burns, Montana Republican, suggested Congress not regulate Internet calling for up to six years.

Just a few hundred thousand U.S. consumers currently use Internet phones, which is unregulated and costs less than regular phone service. But more are expected to subscribe to Web calling as companies like Time Warner Cable and Vonage Holdings Corp. broaden their reach.

State regulators and local telephone companies like the Baby Bells want lawmakers to regulate Internet phone carriers so they pay for network access. But FCC Chairman Michael Powell told lawmakers at the Senate committee hearing it is simply too early to impose new rules on Internet calling.

“There is little compelling evidence that heavy economic regulation of these vibrant services is warranted at this stage,” Mr. Powell said.

He also endorsed the Senate committee’s call for reworking telecommunications laws.

Mr. Sununu said he plans to introduce a bill to protect Internet phone service from regulation.

Internet phone service converts calls to data, then sends calls over high-speed Internet connections. Most Internet phone companies also use at least part of the conventional telephone network to transmit calls.

The FCC voted two weeks ago to exempt from regulation voice communications that flow entirely over the Internet. The agency said it will gather evidence before deciding whether to regulate Internet phone calls that use some part of telephone networks.

State regulators and local phone companies argue that once an Internet phone call crosses the telephone network, the Internet phone company in question should pay access charges.

“Access charges are nothing more than legally required payments for use of another carrier’s network,” Glen Post, chief executive of CenturyTel, a Louisiana local telephone company, told the Senate panel.

Regulators and phone companies also argue that Internet calling companies should contribute to a universal fund that subsidizes phone service in rural areas and for the poor, and ensure that emergency calls work on Internet phone services.

“It is not the intent of state [public utility] commissions to stifle this new technology,” Stan Wise, president of the National Association of Regulatory Utility Commissioners, told senators.

But Mr. Wise argued Internet calling is not a data service, and should be treated like a telephone service subject to the same regulations.

Mr. Sununu said his bill will classify Internet calls as a data service, not a telecommunications service. Internet calling “is an application,” he said. “These are bits and bytes of data.”

A thriving Internet phone industry, free of regulation, could provide enough competition to local calling companies to cause consumer prices for all calling services to fall, senators said.

Internet calling “holds the promise of unleashing many new competitors for voice service that was once the province of a regulated monopoly,” said Sen. John McCain, Arizona Republican and chairman of the Senate Commerce, Science and Transportation Committee.

The market for Web phone service is expected to rise to $15.1 billion by 2007 from $3.3 billion in 2003, according to technology research firm IDC.

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