VoIP Fuels OSS, but Will Regulators Crash the Party? (cont'd)

Syndesis, which currently provides solutions to several incumbent carriers in North America, shares this perspective with many others in the OSS business. "I think the ILEC claims are all smoke and mirrors and they aren't really investing - it's more to show the regulators that they are trying this technology," says John Konczal, vice president of business development for Telution, an OSS solutions provider and integrator that has done pioneering work in VoIP deployment with market leaders such as Z-Tel. "You have to imagine the cost savings of moving to a VoIP network for a large ILEC would just make sense," Konczal adds. Given the numbers BT has stated publicly - and the expectations thus set for its investors - it would seem Konczal is right.

Destroying UTOPIA
In most cases, ILECs are not only failing to invest in a devoted transition to VoIP, but they are preventing others from doing so as well. For example, it was Qwest that was largely responsible for seeing legislation passed in Utah that has severely hampered the much publicized UTOPIA initiative. UTOPIA is a municipally funded project to connect Utah's most populous cities with a high-speed, metro-optical network that would deliver a range of services including triple play, business communications, education and public safety applications. The idea behind the project is both to drive economic development and improve quality of life for people in Utah.

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Part of what's driven UTOPIA at all is the fact that Qwest has not itself invested in high-capacity networking in Utah. What Qwest has invested in, alternatively, is lobbying the Utah legislature to rule that municipalities are not permitted to own and operate telecom networks. The end result of this course of action was a less extreme ruling that undercut the public, tax-based funding available to UTOPIA and in turn forced Salt Lake City to exit the project.

This same type of attitude is being brought to Capitol Hill, where ILECs are actively lobbying to create barriers for CLECs and cable MSOs as they invest in delivering VoIP and other broadband services. Beyond the typical lifeline arguments that involve issues such as network power, CALEA compliance, and universal service fund contributions, more spurious regulations are within the realm of possibility. For example, ILECs may be pushing for rules that would require cable companies to reimburse customers for any loss of service availability - even if the customer is never actually affected. ILECs themselves are not subject to such rules, which would potentially put their cable competitors in an arbitrarily disadvantageous position.

Further, ILECs have already secured the right not to un-bundle any new fiber they deploy. With the current structure for wholesale rates set to expire June 15 - thanks to the White House's apparent indifference - it will only become more difficult for those actively investing in VoIP capabilities to access the last mile connections they need to deliver service to customers. "In order for there to be a robust VoIP market, there has to be access to broadband capable loops," says Z-Tel's Curtis. The next bellwether to mind is an upcoming Notice of Proposed Rulemaking (NPRM) that will set the direction - for better or worse - for the first and most critical wave of VoIP regulation.

The U.S. Senate Speaks on VoIP
While few rules have yet been made, there is both good news and bad news. The good news is that the handful of Senators who have commented thus far on VoIP's regulatory treatment have been in favor of letting it grow. The FCC has created a VoIP forum through which it plans to gather information and opinions to prepare for a NPRM. Several senators have written letters to FCC Chairman Michael Powell to express their initial, apparently positive, opinions on VoIP regulatory treatment.

For example, Sen. George Allen of Virginia notes that the United States is being outpaced by Asia, and even Canada, in broadband penetration and hopes that VoIP will be "free of unnecessary or unreasonable regulatory costs or burdens." He also notes that the development of VoIP and related broadband services are "crucial to local economies and job growth." Sen. John McCain of Arizona argues that "existing regulatory uncertainty…threatens to quickly create an unhealthy environment for continued investment and development of competition in [VoIP]."

Sen. John Sununu of New Hampshire argues that "regulatory burdens…would stem the digital migration" and that "if states approach VoIP in the same manner they regulate the current local phone system, the external benefits of the technology…would be lost…and might undermine the ability of this new technology to develop and succeed." Sununu's heart is in the right place, but it's important to note that VoIP will succeed regardless of U.S. regulations because of global investment - but the United States could be left out of the game.

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