Voice Communication over the Internet

Background

The increasingly popular Voice over Internet Protocol (VoIP) technology allows consumers to make phone calls over a broadband Internet connection. Some VoIP services enable users to call other people anywhere in the world without charge as long as the recipients are also using the same service. In addition, more traditional telecommunications and cable operators offer “interconnected” VoIP service. For a fee, this service allows users to call or be called by anyone with a telephone number, including local, long-distance, mobile, and international numbers.

The advent of VoIP brings many potential benefits to consumers, including lower prices and a multitude of features, such as the ability to check and manage messages from any phone or computer. These may motivate consumers to switch to VoIP service.

Regulators treat VoIP service and wireline service quite differently. In most states, phone companies providing conventional service must meet certain commitments (e.g., providing a certain level of customer service, complying with 911 regulations, and contributing to funds that subsidize rural phone service and Internet access for libraries and schools). Some states further regulate “minimum standards” for telephone service quality; they have established criteria for measuring customer experiences, including service-related incidents, repairs and service staff quality, business offices, and network performance. Regulations in these states ensure that residential customers have access to reliable, high-quality telephone service with appropriate consumer protections.

In contrast, VoIP consumers have more limited protections. The Federal Communications Commission (FCC) has ruled that interconnected VoIP providers must provide E911 access, participate in wiretapping as directed by law enforcement, and contribute to the federal universal service fund. But it also has preempted state regulation of VoIP services. However, courts have established that the FCC’s preemption ruling does not apply to “fixed” VoIP, the type provided by incumbent cable and telephone companies, available over a fixed connection to the customer’s home or business. As a result of this ruling, some states have, among other actions, required fixed VoIP providers to contribute to state universal service funds, file annual reports with public service commissions, and develop a customer complaint process. In contrast, other states have enacted laws that exempt all types of VoIP service from state jurisdiction.

Voice Communication over the Internet: Policy

Voice over Internet Protocol (VoIP)

In this policy: FederalState

Policymakers should adopt rules and promote a market structure for telecommunications services to ensure that all consumers—whether they have a traditional wireline, subscribe to a VoIP service, or use another alternative—have ready access to affordable, reliable, and high-quality voice telecommunications service.

 

Among other goals, policymakers should:

  • preserve the dual state-federal system of regulating providers of voice communication service for VoIP services by maintaining states’ authority to adopt service-quality and other consumer protections for VoIP and further strengthen minimum federal requirements for VoIP providers;
  • require VoIP providers to pay into state universal service funds;
  • allow VoIP providers to achieve eligible telecommunications carrier status and receive universal service funding if they meet mandated requirements;
  • require VoIP providers to comply with federal and state truth-in-billing standards so that consumers can easily understand their bills;
  • establish service termination requirements and procedures and prohibit VoIP providers from imposing unfair early termination penalties on subscribers;
  • prohibit VoIP providers from imposing separate monthly line-item charges, surcharges, or other fees on customers’ bills unless such charges have been expressly mandated by federal, state, or local law;
  • require VoIP providers to provide full up-front disclosures regarding the limitations of VoIP service; and
  • ensure that all VoIP service includes Enhanced 911 capability.