Federal Communications Commission Chairman Michael K. Powell warned against regulation of telephone calls that travel over the Internet yesterday, saying government interference could stifle the development of a still evolving technology.
"No regulator, either federal or state, should tread into this area without an absolutely compelling justification for doing so," said Powell, at an FCC forum on the issue.
Powell's statement was directed largely at state regulators who have been attempting to assert their authority over the Internet telephone technology.
During the last year, several companies have sprung up that allow users to place calls over the Internet for a fraction of the regular cost. The Internet calls are cheaper in part because users do not pay state or federal regulatory fees. In some areas those fees add up to 20 percent of a monthly phone bill and raise billions of dollars for state and federal coffers.
Yesterday's forum marked the first public effort by the agency to grapple with an issue that is already threatening the future of a 100-year-old regulatory regime. It was convened, in part, as a response to efforts by state officials in Minnesota and California to regulate Internet telephone calls.
Like Powell, Commissioner Kathleen Q. Abernathy expressed concern about the actions of the state officials. "This commission must play a leadership role," said Abernathy.
But California Public Utility Commissioner Carl Wood argued at the forum that regulators have an obligation to oversee telephone services, whether they travel over traditional lines or the Internet.
"The advent of [Internet phone calls] does not in and of itself exempt it from telecommunications regulation," said Wood. He added that the National Association of Regulatory Utility Commissioners voted earlier this month in favor of regulation of such services.
The technology has been around for almost a decade, although until now, it has remained relatively obscure.
Major telecommunications companies including AT&T Corp., Qwest Communications International Inc. and SBC Communications Inc. already provide Internet phone services to businesses. In the last month they have announced plans to roll out similiar service for residential users.
The telephone companies are attracted to the Internet in part because they view it as a way to slip free of the regulatory regime that covers their standard networks. But moving calls over to the Internet is also cheaper and more efficient. Major cable companies such as Comcast Corp. are planning to introduce their own Internet telephone services in the next year and a half.
While Powell urged regulators to refrain from regulating calls over the Internet, he did acknowledge that there are several issues the FCC must still resolve.
Law enforcement agencies, including the FBI, have expressed concerns about their ability to listen in on conversations conducted over the Internet. In addition, Internet telephone companies are also struggling to make their systems compatible with the emergency 911 system. Finally, there is also concern that the growth of Internet telephone service could reduce revenue for the Universal Service Fund, a $6 billion annual program, paid for by fees on most phone bills. The fund subsidizes the cost of telephone service in poor and rural areas.
Powell expressed optimism that the issues could be resolved without imposing heavy regulatory burdens on the technology.
