[IP] Canadian Agency to Regulate VoIP
Begin forwarded message:
From: Michael Geist <mgeist@xxxxxxxxx>
Date: May 16, 2005 7:45:57 AM EDT
To: dave@xxxxxxxxxx
Subject: Canadian Agency to Regulate VoIP
Dave,
I don't recall seeing a posting on last week's Canadian decision to
regulate VoIP. Much to the chagrin of the major telcos, the
Canadian Radio-television and Telecommunications Commission adopted a
strong regulatory approach. While it exempted P2P VoIP providers such
as Skype, the traditional providers face a VoIP framework that looks
a lot like the current local regulatory framework. The Commission
reasoned that for consumers, local VoIP service looks a lot like (and
is marketed like) traditional local phone service. Accordingly, the
Commission set a regulatory framework that addresses everything from
reseller registration to phone directory listings to privacy protection.
The CRTC decision is at http://www.crtc.gc.ca/eng/NEWS/RELEASES/2005/
r050512.htm
My weekly column (posted below) takes a closer look at the decision.
It argues that the Commission relies to heavily on its analogy that
equates VoIP to local phone service, suggesting that unlike
traditional local phone service, VoIP dominance is not dependent upon
local phone service control. Rather, the real danger lies with
insufficient competition in the provision of high-speed Internet
access, which serves as the pre-requisite to effective VoIP services.
Freely available hyperlinked version at
http://www.michaelgeist.ca/resc/html_bkup/may162005.html
Toronto Star reg. version at
<http://geistcrtcvoipdecision.notlong.com>
MG
Michael Geist
May 16, 2005
CRTC PICKS WRONG ANALOGY IN NET TELEPHONY RULING
When the Internet burst onto the public stage in the mid-1990s, legal
scholars initially relied on analogies to identify an appropriate
legal framework. Likening the Internet to the "Law of the Sea" or
the "Law of Outer Space", their hope was that an existing body of law
would provide a ready-made solution to the Internet's inevitable
legal challenges. The approach failed, however, as the complexity of
the Internet, as well as the genuinely novel issues it raised,
rendered each successive proposal unsatisfactory.
Last week marked the return of the Internet analogy as the Canadian
Radio-television and Telecommunications Commission (CRTC) issued its
much-anticipated Voice-over-Internet Protocol or VoIP decision. In
its search for an appropriate regulatory framework, the CRTC was
guided by a single analogy - its belief that the provision of local
VoIP service is most like traditional local phone service and that
similar rules should therefore apply. Unfortunately, much like the
earlier Internet analogies, this one is not a perfect fit.
In a few short years, VoIP has taken the telecommunications world by
storm with at least 1,000 Internet service providers already offering
it to their customers. The ability to use a high-speed Internet
connection to complete voice telephone calls offers the promise of
lower prices, increased features, greater competition, and a viable
substitute for traditional local phone service.
The CRTC is clearly anxious to foster local telephony competition and
it views VoIP as perhaps the best opportunity yet to break the
monopoly over local telephone service currently enjoyed by Bell
Canada and Telus, Canada's incumbent telecommunications providers.
In order to achieve a robust competitive environment, the CRTC's
approach rests on three pillars. First, Internet based VoIP
providers, such as the enormously popular Skype, should be exempted
from the Canadian regulatory framework since these services are not
interchangeable with local telephone service.
Second, the CRTC is committed to ensuring that VoIP services that
offer local phone alternatives can serve as functional equivalents to
traditional local phone service. The Commission argues that a
necessary condition is that VoIP services include many of the same
basic protections that typify traditional phone service. It has
therefore mandated that VoIP providers feature 911 emergency service
and offer privacy protections equivalent to those found with
traditional local service. In fact, the CRTC even provides for the
inclusion of VoIP phone numbers in local phone directories.
The Commission correctly identifies many of the features needed for a
level playing field, but this pillar also demonstrates some of the
limitations of relying on the traditional local phone service
analogy. For example, the decision grants consumers the right to
select an alternate VoIP long distance provider, much like local
service. This makes little sense, however, since consumers choose
VoIP providers primarily on the basis of their long distance
services, rendering it unlikely that consumers will opt for different
local and long distance VoIP providers.
While the long distance requirement is relatively harmless, it is the
CRTC's third pillar that is extremely problematic. Given the
incumbents' dominance in the traditional local market and their
potential ability to gain significant VoIP market share by
underpricing the competition, the CRTC believes that fostering a
competitive VoIP market requires similar controls. Last week's
decision therefore subjects the incumbents to price regulation,
though it leaves other competitors, including the cable companies,
untouched.
This represents a serious misreading of the VoIP market. Unlike
traditional local phone service, VoIP dominance is not dependent upon
local phone service control. Rather, the real danger lies with
insufficient competition in the provision of high-speed Internet
access, which serves as the pre-requisite to effective VoIP services.
Although Canada is a world leader in high-speed Internet access, the
market is not particularly competitive. Most consumers are forced to
choose between two strikingly similar options -- DSL service from
their telephone provider or cable broadband from their cable
television provider.
By regulating only one of the two choices, the CRTC has opened the
door to cable dominance of the VoIP market while neglecting two
preferable policy choices. First, the Commission could have
established price regulation for both phone and cable, thereby
creating a level playing field as between the two dominant modes of
VoIP delivery and as against third party providers. Alternatively,
it could have dispensed with price regulation altogether, secure in
the knowledge that with open access will come widespread competition.
The damage caused by neglecting access is not limited to price,
however. The CRTC declined to establish a prohibition on high-speed
Internet access providers that engage in packet preferencing by
either blocking or impairing competing VoIP service as requested by
third-party VoIP providers. The CRTC concluded that there was no
evidence that packet preferencing represents a real risk.
In recent months, it has become apparent that the opposite is true.
The Federal Communications Commission, the CRTC's U.S. equivalent,
has ordered at least one ISP to cease blocking a third party VoIP
service. Moreover, Clearwire, a wireless broadband provider that has
partnered with Bell Canada, has reserved the right to restrict access
or terminate customers that use third party VoIP services.
The CRTC set the right goals in its VoIP decision, but unfortunately
stuck too closely to a single analogy. The danger is that last week's
decision will itself be analogized to other failed policy initiatives
that start with the best of intentions but ultimately misread the
market.
--
**********************************************************************
Professor Michael A. Geist
Canada Research Chair in Internet and E-commerce Law
University of Ottawa Law School, Common Law Section
57 Louis Pasteur St., Ottawa, Ontario, K1N 6N5
Tel: 613-562-5800, x3319 Fax: 613-562-5124
mgeist@xxxxxxxxx http://www.michaelgeist.ca
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