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When looking at VOIP, the most interesting aspects of regulation are not what are currently being discussed and regulated, but rather the future possibilities of the industry and the killer apps that have yet to be introduced. How are governments going to adapt when these innovations are causing sea changes and shifting the balance of power in the telecom industry? While VOIP companies like Vonage and Skype are changing the way the telecommunication industry is regulated, they haven’t shocked the system enough, as evidenced by the U.S. governments’ feet dragging approach to regulation and to a lesser extent by the EU’s allowance of each countries’ NRA to handle key policy decisions.

One interesting scenario concerning the future of VOIP occurs when we look at VOIP in the context of some topics we touched on in earlier classes, specifically the architecture of the internet. By looking at how network architecture can spur VOIP proliferation and force governments to make decisions they haven’t been forced to make yet, we can get a better idea of the strengths and weaknesses of the U.S. approach and compare them to those of the EU approach. Is the current form of VOIP another killer app like email? Or is it just another telnet, waiting for a new and improved version of VOIP, its email counterpart, to revolutionize the way people communicate?

WIRELESS EVERYWHERE

A completely wireless city created either by local governments, like in Toronto, or created by a network of hotspots and privately owned broadband access points, like the Fon model, has the ability to put the current regulation on its ear in both the US and Europe. With public access to free or relatively cheap broadband wireless in a large number of locations, the power of companies like Skype increases exponentially and they are put in direct competition with the major telecommunications companies. Government distribution of telephone numbers will be of little importance when a large majority of the population is using VOIP software that does not insist on having a basic telephone number, simply a unique username. Will the VOIP companies continue to use the telephone number system or will the old telecommunications industry to forced to adapt to the new username system or face extinction? With wireless access for all, the biggest change comes from the elimination of ‘the last mile’, or at least a shift of ‘the last mile’ from the telecom’s to the broadband providers. The major telecoms are not likely to go quietly when they see their only grip on the industry being taken away, how will governments react when the telecom lobbyists tell them that the sky is falling?

THE US REACTION

The U.S.’s choice to differentiate based on ‘telecommunications’ and ‘information’ services will need to be changed if companies from the ‘information’ services can compete head to head with those from ‘telecommunications’ services with absolutely no contact with the old circuit switched networks. As the case states, it is much easier to regulate using standards from previous industries and it is a concern that once VOIP has completely entered into (and conquered) the regular telephony domain, that governments will simply force VOIP to comply with the old telephony regulations, stunting growth and innovation in the industry. While I think that this is what the U.S. will probably do, I believe that an approach similar to that laid out at the end of the case is most effective for the ever changing environment of VOIP. I believe governments should be decisive and make decisions quickly to give the free market a known field to play on, while at the same time putting time limits on the regulations and reviewing the direction of the regulations every few years. With that said, I always prefer a ‘change the business model’ approach to regulation and government involvement. The risk of constant regulatory involvement is that it will stunt growth and innovation more than the governments already ambiguous involvement.

THE EU REACTION

The EU should have a much easier time with the scenario of free national wireless broadband access than the US because of its decision to regulate based on functions rather than the technology that is used. The EU will have a much easier time classifying a company like Skype as a PATS provider if it was being used as one throughout the EU, and in turn force Skype to provide all the same functions that a circuit switched telecommunications company has to provide. However, things get tricky when looking at the functions of the NRA’s and their jurisdiction and authority. Similar to the online gambling case, how can Skype be held to provide PATS services in Spain when it says that it is based in the U.S. or another country in Europe that does not consider it a PATS provider? The location and nation free quality of the internet and its applications makes regulation agreements between countries extremely important, no more so than in Europe.

ASTERISK AND OTHER INNOVATIONS

The creation of a wireless broadband network is not the only innovation that could be coupled with VOIP to create a new killer app, open source applications like Asterisk, that allows almost anyone to create their own VOIP service, could become the new standard and allow rapid development of VOIP applications. This model has already been popularized in the server market, where Linux has spurred innovation and the growth of the server market itself.

SUMMARY

Currently, finding the right methods for regulation of the VOIP industry is tricky at best, and it is only going to get more complex as more rapid innovation and convergences happen in the VOIP industry. Governments should act now to regulate the VOIP industry to provide a stable ground for future innovation and, if for no other reason, to get practice regulating an industry that is destined for large scale changes.

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