Don't Call 911

Question: When is a telephone no longer a telephone?

Answer: When telecommunication companies say they're not using copper wires to connect people, but instead are using technology that sends and receives digitized data via a mix of computers, the Internet, optical cables, wireless and old-fashioned copper.

Why does this matter? Because telecom firms are pushing the Federal Communications Commission to let them sell telephone services based on new technology that would be free from federal regulation -- such as 20th century rules that required phone companies to offer universal service to remote areas, 911 access for the public and police, and handicap access -- all of which were built into the nation's copper-wire phone system.

On Feb. 12, the FCC will take up the first of three cases involving different Voice-over-Internet-Protocol, or VoIP, technologies. VoIP is seen by telecom firms as new and inexpensive way to offer phone service. But the technologies -- and there are three varieties, hence three proceedings -- doesn't always support the public interest safeguards and access options as copper-wire phones do.

"It's just another way to make money. It's another service they can offer," said Kenneth DeGraff, a policy analyst at Consumers Union, publisher of Consumer Reports. "But it is a shift away from the telephone system of the last 100 years. And it's an open question whether the public interest protections of the old system will be in the new one."

For instance, in one case before the FCC, a new VoIP company, Vonnage, has trouble connecting to the 911 emergency system. The 911 system doesn't just let people call police or fire dispatchers; it also allows public safety employees to identify the caller's address -- so responses can be quicker. Another case, involving, seeks FCC approval to waive access fees charged by phone companies -- because its technology is based on computer-to-computer communication.

This kind of question is not only about where profits are generated in the private sector, DeGraff said. That's because from a public interest viewpoint, fees collected from long-distance access charges -- which most people pay -- subsidize the underlying network that ensures reliable phone service across the country. If certain firms or new technologies are exempt from paying those fees, that precedent could have an impact on maintaining the underlying network -- which keeps phones running even during power outages, when other electric appliances, including computers, do not work.

Then there's the contentious issue of who owns, uses and pays for the phone lines -- even if computers are talking to computers via local Internet nodes -- not telephone switches.

"It's time for our society to have a clear-eyed debate on what the Internet is and what it should pay for," said Consumer Federation of America Research Director Marc Cooper. "The net requires an infrastructure to deliver. What we are seeing is a bunch of people trying to get a free ride on that infrastructure."

Cooper also said that it's not accurate to say that VoIP is 100 percent an Internet service. But telecom firms like to describe it that way, he said, because they know FCC Chairman Michael Powell has often said that anything related to Internet should not be regulated.

"By labeling their new service as Internet telephony, you can't touch it -- regulate it," he said. "This is fundamentally challenging established public policy. The net is now 20 years old. It is not something so new that it escapes regulation."

But that is the scenario that may be unfolding at the FCC. The chairman has often said regulation can stifle innovation. In recent months, Powell has been boosting the promise of VOIP and suggesting 21st century technology shouldn't have to face 20th century rules.

"The purpose of the universal service program is... to get consumers ubiquity and affordability of services," Powell said late last year at a telecom forum at the University of California San Diego. "If that goal is achieved, you don't need any money. You don't need a government program just because it's cool to have one."

Powell said he was "intrigued" by companies such as Vonnage, which already offer unlimited local and long distance service for $35 a month, saying, "That is a better price proposition than a universal service program ever produced in 100 years."

At the same time Powell was speaking, a handful of the nation's top telecom companies, such as Time Warner, were announcing plans to offer VoIP service in 2004. The three cases at the FCC are requests by firms, including AT&T, which want to clarify the rules and requirements before they launch their new products and services, DeGraff said.

Like 2003's media ownership fight, consumer advocates fear the FCC under Powell will follow the industry's cues and define the emerging landscape outside a regulatory framework. Thus, it isn't surprising that the big telecom firms are describing VOIP technology as an Internet activity, said the Consumer Federation's Cooper.

"This is regulatory arbitrage," he said. "If they can convince Powell it is an Internet application, then the FCC doesn't have to regulate it. When they dress up the front end as an 'Internet protocol,' they are not subject to consumer protections."

Cooper said VoIP could become a Trojan horse that could eventually unravel a reliable public utility infrastructure that took a century to build and perfect.

"This is a regulatory ruse," he said. "This is strangling the (copper wire) public switch network. They want to attract all the customers into a broadband network, while also avoiding any obligation to invest in or maintain the pre-existing 'public switch' telephone network."

Cooper said recent telecom deals, such as plans by Time Warner to work with Sprint and MCI, intend to use fiber optic networks built during the Internet boom. "The key questions are, what are they actually doing?" he said, "Are they really using the net? The Time Warner deal may never touch it. And, two, are we being deceived? If they are not using it, then there is no reason to let them off the regulatory hook. If they are using the net, then, what are they doing to contribute to the underlying public network, which is the backbone of the net."

Steven Rosenfeld is a senior editor for

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