Legal issues confronting internet telephony
Recent developments have brought the issue of voice over Internet protocol (VoIP) or Internet-based telephony services to the fore. A recent article in Asiaweek highlighted the popularity of dialpad.com, a U.S.-based website that offers free long-distance telephone calls anywhere in the U.S. DialPad’s users need not download any special software to use their service – although users must have a computer equipped with a microphone and a set of speakers and an Internet connection. Last week, this newspaper featured a report about IPStar, a VoIP device, that connects directly to the phone line and allows users to make international phone calls at a fraction of the price charged by the telcos. What’s more, VoIP communication between owners of the IPStar device are free of charge (excepting your usual ISP charges).
Why are VoIP calls much cheaper than ordinary voice calls? VoIP allows the transmission of voice by converting it into data which is then divided into small packets that are sent using the Internet protocol, IP. During transmission, these data packets share available resources on a single leased line with other packets containing say e-mail or a web browsing session. Hence, VoIP uses network resources much more efficiently and allows multiple users to share a single leased line that would ordinarily be dedicated for one telephone call. Efficiency translates into lower costs which are then passed on to the consumers.
VoIP can theoretically allow users in different parts of the world to carry what amounts to an international telephone conversation even though they’re each making a local telephone call (from, say, their home to their respective ISPs). In other words, the “international call” effectively bypasses the international gateway facilities of and the fees collected by their respective telcos.
For this reason, the telcos see VoIP as a threat. Fortunately for them, the law is on their side. In a recent roundtable discussion at the U.P. Law Center, the Director for the Common Carrier Authorization Department (CCAD) of the National Telecommunications Commission (NTC), Engr. Edgardo Cabarrios, disclosed NTC’s position on VoIP. Essentially, it boils down to this – VoIP will be allowed only if undertaken by the telcos. In other words, ISPs are currently prohibited from offering VoIP services – unless of course, they secure a legislative franchise (which is, in fact, a law) and the appropriate permits from the NTC.
The NTC’s position has sufficient legal basis. The Public Telecommunications Policy Act of 1995 allows value added service (VAS) providers, which include the ISPs, to offer enhanced services not ordinarily offered by the telcos. Since voice is ordinarily offered by the telcos, then ISPs may not engage in the same. Should the ISPs insist on offering voice services, it will no longer be allowed to enjoy the benefits of being a VAS provider under the law -- essentially, the right to operate without a legislative franchise. Understandably, the telcos would not look kindly upon any ISP which offers or attempts to offer VoIP services.
Pursuant to various executive issuances, the telcos were mandated to support the government’s efforts at securing universal telcommunications access. As a result, the telcos were obliged to provide local exchange or fixed line services to unserved and underserved areas in urban and rural areas. In return, they were permitted to operate, among others, lucrative international gateway facilities, the revenues of which would subsidize the local exchange operations – a cross subsidy. Obviously, these telcos are concerned about the potential revenue losses VoIP can wreak upon this delicately-balanced subsidy.
On the other hand, the resistance to VoIP is detrimental to the consumer who should be allowed to enjoy the benefits of these emerging technologies. Besides, it is debatable whether VoIP poses a serious threat to the telcos at this time. It should be pointed out that VoIP is not what would be considered “ready for prime time.” The sound quality is vastly inferior to telephone calls and has been described as equivalent to making a call from a tin can. In addition, network traffic can cause the sound transmission to deteriorate further. Inferior quality means serious business users would likely prefer to use their telephones for long-distance calls over VoIP instruments.
As for those who opt to bear with the quality of VoIP calls, it can be assumed that they wouldn’t have used the phone to call long-distance anyway. In other words, VoIP is not likely to eat into the existing market for long-distance telephone calls. In sum, there would hardly be any opportunity or actual income loss for the telcos.
On the contrary, the net effect would be to increase the total amount of long-distance voice traffic. So, in the final analysis, the telcos would do well to support VoIP either on their own or with partnerships with companies specializing in this emerging technology. Otherwise, they are missing out on a potentially lucrative market currently served exclusively by foreign VoIP players.
From the consumer’s standpoint, the telco’s acceptance of VoIP will mean the freedom to choose between a high-quality telephone call or a lower-quality VoIP call. Either way, the telcos stand to earn revenue while the consumers enjoy savings from these emerging technologies – truly a win-win solution.