Senate Commerce Committee Voice Over IP Hearing
February 24, 2004

Oral Testimony of Kevin Werbach
(as prepared for delivery)

Mr. Chairman, and Members of the Commerce Committee, thank you for the opportunity to testify on the implications of voice over Internet protocol technology.

I am the founder of the Supernova Group, an independent technology analysis and consulting firm. Earlier in my career, I had the honor of serving as Counsel for New Technology Policy at the Federal Communications Commission. I participated in the FCC’s efforts, starting nearly a decade ago, to understand a phenomenon we called “Internet telephony.”

I’m here to tell you that VOIP presents tremendous opportunities for the US economy and the American people. As my written statement explains in more detail, we are witnessing the most significant change in telecommunications since Alexander Graham Bell called out for Mr. Watson.

Historically, telephony and other services like broadcasting were tied to specific infrastructure and regulatory regimes. The service was the network.

In the converged digital world, however, there is one network of networks, the Internet, bound together with common technical protocols. Instead of data as a service delivered through a voice-oriented telephone network, voice is becoming a class of applications on top of data networks. To a data network, a voice call is nothing more than an instant message with different latency and reliability characteristics.

[Hold up Grandstream device]

Consider this device. It may look like a phone, but it’s actually a data terminal for voice over broadband service. It has an Ethernet port on the back, rather than an RJ-11 phone jack. Should regulatory obligations depend on the shape of a jack?

[Hold up Motorola ATA]

How about this? It doesn’t look like a phone at all. But it’s essentially the same device as the previous one, just without a keypad, microphone, or speakers. This is the Motorola box Vonage gave me as part of its VOIP service.

[Hold up laptop]

Now, I don’t think anyone here would call this a phone. But if I load a piece of software called a softphone client onto this laptop, and plug in a simple headset, it becomes a voice communications end-point.

If I then use the laptop to call my friends, who is the service provider that would be subject to regulation? The software vendor? The laptop manufacturer? My broadband provider? What if I’m online through a WiFi wireless hotspot in a Starbucks, and the softphone client is running on my handheld personal digital assistant?

And it doesn’t end there. I can buy a $50 Webcam, and use it to engage in multi-point voice and video-conferencing with other computer users around the world. Or I can subscribe to the online services associated with Sony’s PlayStation and Microsoft’s Xbox video game consoles, and chat live with other players. Both applications use voice over IP. Even the push-to-talk services cellular operators are deploying generally employ VOIP.

As these examples show, VOIP is much more than services that may look similar to traditional circuit-switched voice telephony. Trying to separate out unregulated from regulated VOIP applications will prove to be an impossible exercise.

Engineers use the concept of layering to describe how data networks operate. The underlying physical transmission is a separate layer from higher-level functions, just as cars are separate from the highways they drive on.

A layered approach to communications regulation would distinguish among content, applications, addressing, and physical transmission. Open and non-discriminatory connectivity between those layers ensures innovation and competitive deployment of new applications.

In considering the policy concerns we’ve been asked to address, we must step back and examine the point of existing regulatory obligations and taxes. And then we must adapt our policy approaches to reflect the changes sweeping the industry.

The current systems of universal service funding and inter-carrier compensation must be reformed if universal service is to endure. Such reforms will only succeed if all parties have a reason to come to the table. It would be a sad irony if our attempts to impose universal service obligations on VOIP limited deployment of technologies that can help bring affordable advanced communications capabilities to all Americans.

For social policy obligations such as law enforcement access, consumer protection, and emergency services, voluntary industry efforts now underway should be given an opportunity to succeed, before regulators and Congress should consider the need for targeted action.

With VOIP, we are seeing the Internet realize its destiny. We can embrace that future, or we can try to pull the Internet back into yesterday’s regulatory system.

Make no mistake. Broad-brush regulation of VOIP is tantamount to regulation of Internet applications. From the network’s perspective, a stream of voice bits is no different from an eBay auction or a Google search.

If the US is to remain the leader in the information-driven global economy of the 21st century, we must continue our enlightened policies to favor innovation and competitive markets, while remaining committed to our essential social goals.