Regulatory, reliability issues swirl around VoIP

FRAMINGHAM (09/19/2003) - Practitioners of packet telephony will converge next week to hear about the latest advances in voice over IP, at a time when industry ears are ringing over regulatory, interoperability and implementation issues.

At the Voice on the Net (VON) conference in Boston, attendees will get progress reports on interoperability of multi-vendor VoIP systems using Session Initiation Protocol (SIP); service rollout plans by incumbent carriers; and the deployment experiences of enterprise users. But overhanging what undoubtedly will be much promotional cross-talk are concerns about VoIP security, reliability and regulatory policy that could disconnect users from the potential benefits of the technology.

"We have the politics going on, we have a large international showing. . . . You can feel the buzz in the air," says VON organizer Jeff Pulver, who is also CEO of Internet research firm Pulver.com Inc.

That buzz is fueled by recent state rulings on how to regulate VoIP: Some argue it's a telecom service subject to the same restrictions as the public switched telephone network; others propose it as an unregulated Internet service.

Regulators in Wisconsin this week informed service provider 8x8 that its Packet8 VoIP offering is subject to the same rules as traditional phone company services. This ruling comes on the heels of a similar decision by Minnesota last month regarding VoIP service provider Vonage.

The rulings could have far-reaching ramifications for Internet-based services. Some fear that policy could extend beyond VoIP to e-mail and VPNs, or any service or application delivered over a particular infrastructure, such as the Internet.

"Minnesota recently ruled against Vonage's argument that its VoIP service was an information service, not a telephone service," says UBS Warburg analyst John Hodulik in a research note. "Both of these rulings make VoIP operators subject to the licensing, certification, and other regulatory requirements that apply to more traditional telephone operators."

Regulation for VoIP is just beginning to heat up. Only a few states are regulating the technology, Hodulik says, and the FCC has not indicated which way it is leaning.

"There needs to be some kind of universal thinking about what a voice service is: Is it a service? Is it a technology? Is it an application," says Kevin Mitchell, an analyst at Infonetics Research Inc. "They need to do that soon because further regulatory uncertainty and a mishmash of policies is not going to help the market grow. Any delays will take the momentum out of VoIP."

Security and reliability

One of Tuesday's sessions at VON will provide an update on U.S. regulatory matters.

Another topic to be on the minds of attendees is the issue of VoIP security and reliability. But the issue this year has acquired a new level of urgency in the wake of Merrill Lynch & Co. Inc.'s decision to scrap its "pure" VoIP network supplied by Cisco Systems Inc., in favor of an Avaya Inc. VoIP/TDM hybrid because of concerns about reliability.

Merrill Lynch said it feared an attack on its IP data network would wipe out voice service as well as data. While it still plans to deploy IP telephony, the company is banking on TDM as its safety net and replacing up to 7,600 IP-only handsets with IP/TDM hybrids.

"People were somewhat surprised by Merrill Lynch's decision, but I don't think we're seeing any clear direction yet of whether VoIP will be judged to be more problematic in that regard," says Tom Valovic, an analyst at IDC. "It's too immature a market to come to any conclusions about enterprise VoIP and security just yet."

Pulver says Merrill Lynch's decision was driven by other motives.

"It's pure politics," he says. "It's a good story, but there are 2 million Cisco (IP) phones that have been sold. They can't have all been lemons."

On the technology front, VON will feature a SIP interoperability demonstration and a raft of session border controller products. The SIP interoperability demo, called SIPop! 2003, is designed to help display multi-vendor VoIP systems interworking via SIP.

Session border controllers help smooth the transition between traditional and IP voice services by regulating bandwidth, and maintaining service-level agreements and quality of service as traffic traverses disparate corporate and service provider networks through firewalls and network address translators.

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