Voice over IP (VOIP) Update

In a decision issued in February 2004, the Federal Communications Commission in the U.S. ruled that calls utilizing voice-over-IP technology, sometimes referred to as Internet telephony, made from computer to computer are free of government rules, taxes and requirements that are applied to telephone networks. In a statement accompanying the Commission’s order, Chairman Powell likened the technology to other peer-to-peer applications, such as e-mail and instant messaging and confirmed the agency’s “non-regulation” policy of the Internet. The decision, however, left unanswered the question of whether traditional phone regulations might apply to VoIP calls that interconnect with the traditional telephone system.

The recent US developments in this area have renewed calls from the Canadian industry for Ottawa to get its act together. The CRTC is currently “reviewing the facts.” Additional pressure will come from Roger’s introduction of telephone services based on VOIP which are set to be offered in Toronto in 2005. However, while there are still legal uncertainties surrounding the regulatory status of VOIP technology, that doesn’t seem to be slowing its implementation.

VOIP provides a number of significant benefits for business users. First, it eliminates the need for separate voice and data cabling as VOIP telephone sets plug into and run over network cabling. Such phones can therefore be unplugged from one network jack and plugged into another without the need to reconfigure a central telephone switch. The jack can be located in the same office or at another office, even one in another city (assuming the offices are linked through a wide area network).

The use of VOIP by residential users is expanding quickly. US-based VOIP telephone providers, such as Vonage, have been aggressively marketing local telephone phone service over broadband Internet connections. Vonage even offers 416 area code numbers. As previously mentioned, Canadian cable companies will likely utilize VOIP technology to compete with the telephone companies. Already one Canadian long distance provider, Primus, has begun offering a broadband service.

The big attraction is more features and lower rates. For example, Vonage and Primus both offer unlimited Canadian and US long distance for a flat monthly fee. Snowbirds can take their Toronto phone service to Florida for the winter. Residential VOIP service is also attractive to households that need to exceed the one or two lines which run to their house.

An interesting development has been the trend to run VOIP over wireless networks such as WiFi. A WiFi-capable VOIP handset can therefore be used to roam within the office, the employee’s home (assuming they are using a WiFi network at home) or even public “hotspots”. Telus is planning to set up wireless access points throughout Scotia Plaza and to sell VOIP and wireless Internet services to the tenants of the building.

Another recent development has been the explosive growth of “free” VOIP networks such as Free World Dialup or FWD. FWD can be used to call other FWD users or to place calls to US or UK toll free numbers. Features such as call display, call answer, 3 way calling and others are also available at no charge. FWD can also be used to receive calls from the regular telephone system although callers must dial one of a number of US numbers and then enter the user’s FWD number.

Users can access FWD using special VOIP phones, free software programs (known as SIP softphones) which can emulate a phone on a PC or hardware devices (known as terminal adapters) which can be used to connect a regular analog phone or cordless phone to a local area network (including home DSL routers or cable modems). FWD is a great tool for homes with teenagers who would otherwise tie up the phone. The ultimate setup for a “road warrior” is a SIP softphone program running on a WiFi-capable PDA.

Note: The above appeared as a Bits & Bytes article published by Law Times in 2004.