[Politech] Michael Geist on Canada's struggle with VoIP regulation

From: Declan McCullagh (declan@private)
Date: Tue Sep 21 2004 - 06:11:46 PDT

-------- Original Message --------
Subject: 	A Tale of Two Sectors (and one disruptive technology)
Date: 	Mon, 20 Sep 2004 16:28:58 -0400
From: 	Michael Geist <mgeist@private>
To: 	Declan McCullagh <declan@private>


Of possible interest to Politech -- my regular Toronto Star Law Bytes
column examines this week's Canadian hearings into VoIP regulation. The
column contrasts the approach of the content industries to peer-to-peer
with that of the telecommunications sector noting that one perceives P2P
as the worst of times, while the other sees no other alternative than to
treat it as the best of times. The columns calls on Canada's regulators
to craft a VoIP policy that maximizes consumer choice and marketplace
competition while preserving the social goals that serve as the bedrock
of Canadian telecommunications policy.

Column at


No need for Dickensian approach to voice-via-Web

Michael Geist
Toronto Star
"It was the best of times, it was the worst of times." Although Dickens
wrote his oft-quoted novel,/ A Tale Of Two Cities/, in the 19th century,
his words resonate with prescient timeliness today. Consider the story
of a technology that allows customers to by-pass traditional
distribution channels with unlimited, low cost communication.
While many recognized the enormous power and potential of the Internet
when it first burst onto the public's radar screen in the mid-1990s, it
has been the emergence of peer-to-peer technologies that have proven
particularly disruptive.

Aided by high-speed broadband networks, peer-to-peer applications enable
individual Internet users to connect to each other instantly, free to
exchange all forms of data without regard for location.

If your business involves the sale or transfer of data, peer-to-peer
leaves you with two options - you can either fight the technology or you
can seize the opportunity by adopting many of the same technologies and
competing on the basis of price, service, convenience, and reliability.

Therefore, depending on your perspective, peer-to-peer is either the
best of times or the worst of times. Some content-based industries view
this as the worst of times. They have pursued a "fight the technology"
strategy, turning to the courts and lobbying campaigns.

This particular tale, however, does not concern those industries.
Rather, it provides a contrast by focusing on another industry that
faces many of the same challenges.
Voice over Internet Protocol - VoIP for short - refers to the
convergence of the Internet and traditional telephony through the
digitization of voice signals that are carried over the Internet. For
the telecommunications industry, VoIP, particularly peer-to-peer based
VoIP, is proving to be transformative as it creates new competitors,
lowers costs to consumers, and embraces new business models and services.

With the rapid proliferation of Skype, the peer-to-peer based VoIP
software from the creator of Kazaa, telecommunications providers could
be forgiven if they were tempted by the "fight the technology" strategy.
For over a year, Skype users have enjoyed the ability to talk from
computer-to-computer with fellow users anywhere in the world at no cost.
Moreover, the freely available Skype allows users to place
computer-to-telephone calls for a nominal fee that takes the distance
out of long-distance telephone calls.

VoIP is not limited to Skype and other peer-to-peer communications
providers. Services such as Vonage and Primus' TalkBroadband are quickly
finding loyal followers as users gravitate to services that require only
a broadband connection to enjoy cheaper long distance costs with
innovative extras such as portable area codes. These services appear to
be the tip of the iceberg as ISPs and telecommunications providers of
all sizes gear up to provide their own consumer VoIP offerings in the
coming months.

While most industry observers seem convinced that VoIP is the wave of
the future, the regulatory framework surrounding the emerging technology
remains uncertain. This week the Canadian Radio-television and
Telecommunications Commission (CRTC) will hold three days of hearings on
VoIP regulation.

The telecommunications community will not use the opportunity to launch
marketing campaigns claiming inferior and unreliable VoIP service, sue
providers and their customers for "stealing" talk time, or lobby the
CRTC to regulate the upstart services out of existence. Instead, most
will urge Canada's telecommunications regulator to provide regulatory
certainty by keeping VoIP regulation to a minimum and allowing the
marketplace to evolve with an even playing field.

Earlier this year, the CRTC issued a preliminary opinion that signaled
that it is inclined to adopt a regulatory model for VoIP. While it might
exempt the peer-to-peer services such as Skype, other services that
connect to the Public Switched Telephone Network would face CRTC
regulation consistent with traditional voice telephony regulation.

The CRTC argued that VoIP fits within its mandate under the
Telecommunications Act and that the social goals of telecommunications
policy, including 911 emergency service, financial contributions to
foster local connectivity in rural areas, and privacy protection, must
be maintained.

While the CRTC is right that its telecommunications policy goals must be
preserved, it would do well instead to seize this opportunity by working
with Industry Minister David Emerson to reconsider how Canadians can
achieve the same aims in a converged network environment that does not
distinguish between bits of data that may be Web pages, e-mail, MP3
files, or "voice" calls.
The evolution of the marketplace should also weigh heavily in the CRTC's
analysis. Unlike the movie and music industries, which claim legal
protections such as the broadcast flag and the WIPO Internet treaties
are needed before their members can offer innovative new services, many
in the telecommunications industry argue that Canadians would be better
served by regulatory intervention only after its need is demonstrated.

This leaves the CRTC with a significant challenge. Although light
regulation may help promote technological innovation, a hands-off
approach is not without its own risks. Of particular concern is the
potential for Internet service providers and incumbent
telecommunications providers to use their customer connections and
near-monopoly status to unfair advantage. The CRTC must ensure that its
VoIP policy does not directly or indirectly favour the dominant players
and thereby leave smaller upstarts unable to compete effectively in the
Canadian marketplace.

In/ A Tale Of Two Cities/, Dickens follows his best of times, worst of
times opening sentence with the line that "it was the age of wisdom, it
was the age of foolishness." The headline-grabbing lawsuits and policy
reform proposals of recent years have provided plenty of foolishness.
Participants at this week's CRTC hearings will look to the commission to
demonstrate wisdom by crafting a VoIP policy that maximizes consumer
choice and marketplace competition while preserving the social goals
that serve as the bedrock of Canadian telecommunications policy.


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@private              http://www.michaelgeist.ca
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