P A U L, W E I S S, R I F K I N D, W H A R T O N & G A R R I S O N
TELECOM POLICY FORUM: A CHANCE TO PUSH IP TELEPHONY, DATA SERVICES
LAURA B. SHERMAN
PUBLISHED IN TELECOMMUNICATIONS REPORTS INTERNATIONAL JANUARY 2001 PAUL, WEISS, RIFKIND, WHARTON & GARRISON
The upcoming World Telecommunication Policy Forum (WTPF-01) will present an opportunity for all companies in the Internet value chain—equipment manufacturers, content providers, and network and service suppliers—to head off unneeded and unwanted regulation of the Internet.
The International Telecommunication Union (ITU) is hosting the forum in early March for executives and regulators from the developed countries to explain the positive aspects of IP (Internet protocol) telephony and data services to their counterparts from the developed world.
WTPF-01 is the third in a series of ITU forums on emerging policy and regulatory matters arising from the changing telecom environment. These forums do not result in legally binding obligations or commitments. Rather, they build understanding and set a direction for governments and regulators.
The first policy forum, on global mobile satellite services, led to the establishment of an ITU registry and marking process for global mobile satellite terminals. A memorandum of understanding designed to facilitate the mutual recognition and cross- border transport of terminals also emerged.
The second forum dealt with trade in telecom services. Participants reviewed the World Trade Organization’s negotiations on basic telecommunications services and the marketplace changes that resulted from the agreement.
The ITU Council last year set the agenda for the upcoming forum’s discussion of IP telephony. Subjects to be covered include (1) the implications of IP telephony for developing countries’ policies and regulatory frameworks; (2) the financial effect of IP telephony on incumbent operators (many of which are still monopolies) in developing countries; (3) actions that will help developing countries and their telecom operators to adapt their networks for IP telephony; and (4) ways to meet the human-resource needs presented by new telecom technologies.
A Challenge and Threat
IP telephony presents both a challenge and a threat to developing countries and incumbent operators. IP-based networks increasingly are being used as alternatives to circuit-switched telephone networks and, to some extent, are becoming the technology of choice as new infrastructure is deployed.
Operators in developing countries fear that these new networks are “stealing” revenue from their most lucrative services—international and long distance telephony— and thus are undermining their ability to build out advanced networks and provide universal service.
This article is reprinted with permission of Telecommunications Reports International, 1333 H Street, Ste. 100, Washington, DC 20005, (202) 312-6060 (www.tr.com). www.paulweiss. com PAUL, WEISS, RIFKIND, WHARTON & GARRISON 2 The immediate reaction of many regulators is to prohibit IP telephony or to regulate it as voice telephony. Either action dampens the development of IP networks.
Restrictive regulation harms global operators because of the inherent international scope of the Internet; regulatory restrictions in one country affect the network in other countries and the ability of companies to build global systems.
It also harms the country imposing the regulation by dampening the construction of IP-based networks that will carry data, text, and video traffic. Countries that choose to ban the use of IP technology for carrying voice communications may be blocking the technological migration path of the incumbents and new market entrants.
WTPF-01 consists of two parts. In keeping with the event’s educational focus, the first day (March 6) is dubbed Information Day. Companies and regulators from countries where IP telephony is well developed will have an opportunity to share their knowledge and experience.
Discussions will focus on network development, traffic patterns, transitioning to IP-capable networks, and the scope of Internet services, with particular emphasis on those that would benefit lesser developed countries.
There will be case studies from China, Colombia, Peru, Thailand, Canada, Egypt and Hungary—countries that have made the transition successfully or are doing so.
Participants at the actual forum, which runs March 7-9, will review and adopt a report from the Secretary General of the ITU. (This article is based on the Dec. 15, 2000, draft report, which is available at http://www.itu.int/wtpf. A working group was expected to finalize the report in mid-January.)
The draft report states frankly that “few countries can ignore IP telephony” because of its dramatic growth and potential benefits to consumers. It points to significant opportunities for social and economic development related to the Internet:
· Using IP-based networks for electronic commerce helps companies widen their customer base and reduce transaction costs;
· Health care professionals can keep up to date by using IP-based networks to retrieve information; and
· Governments, schools, and universities can expand the range of services available.
Short-Term Revenue Losses
The draft report recognizes that incumbent operators may see short-term revenue losses if there is a shift from the public-switched network to lower-priced IP telephony.
But it finds the scope of revenue losses difficult to quantify, because revenues depend on how easy it is for subscribers to use the services, the opportunities for arbitrage, and the quality of the IP-telephony services offered. www.paulweiss. com PAUL, WEISS, RIFKIND, WHARTON & GARRISON 3 At the same time, the draft report emphasizes that growth in IP-based networks provides significant economic opportunities to incumbent operators. Reaching the “last mile” to customers always will be necessary. Meanwhile, new Internet services will spur higher local and long distance growth rates, as the volume of local calls and the demand for second lines increase.
WTPF-01 also will address government policy objectives for IP telephony, which should form the basis for regulatory approaches. To spur discussion, the draft report lists a number of policy objectives:
Providing universal service;
Making telecom services affordable;
Rebalancing tariffs;
Ensuring a level playing field for new entrants;
Promoting new technologies and services;
Stimulating investment in networks and services;
Addressing the effect on revenue streams of incumbent operators;
Addressing issues surrounding technology transfers and human-resource development; and
Ensuring economic growth overall, and in particular in the communications sector.
Questions about Regulation
The draft report reviews the current regulatory situation, noting that most ITU member states have not formally addressed the question of how to regulate IP telephony.
To help those countries determine what regulatory scheme, if any, to adopt and how to avoid regulating IP telephony as a telecommunications service, the draft report describes the regulatory distinctions that have been made in countries that clearly allow IP telephony:
w Type of service (voice v. data);
w Mode of transmission;
w Facilities-based operators v. resellers; and
www.paulweiss. com PAUL, WEISS, RIFKIND, WHARTON & GARRISON 4 Finally, the draft report asks the fundamental question of whether “calls on one technological platform (e.g., IP, frame relay, or ATM [asynchronous transfer mode]- based) should be treated differently from calls on another when it comes to universal service obligations.”
The ‘Digital Divide’
Any discussion at the ITU ultimately focuses on how to narrow the “digital divide”—the gap between those countries and peoples with access to the Internet and those without access.
Regulators and incumbent operators on the “without” side need to be educated on the benefits of IP telephony and other data services, the impossibility of regulating IP telephony without harming the provision of other IP-based data services, paths for transitioning their networks and training their employees to provide these new services, and the potential sources of revenue that IP-based networks will offer.
If companies from the “with” side do not help with this education and training, their own goals for providing global Internet-based networks and digital services (or for providing the related equipment) will be thwarted by unnecessary regulatory hurdles. Participation in WTPF-01 and in the ongoing training and assistance programs it will foster is thus essential.
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Laura B. Sherman is communications counsel in the Washington, D.C., office of Paul, Weiss, Rifkind, Wharton & Garrison.
www.paulweiss. com