: A Tale of Two Sectors (and one disruptive technology)

[Dave Farber <dave () farber net>]

___

Dave Farber  +1 412 726 9889



...... Forwarded Message .......
From: Michael Geist <mgeist () pobox com>
To: dave () farber net
Date: Mon, 20 Sep 2004 08:10:46 -0400
Subj: A Tale of Two Sectors (and one disruptive technology)


Dave,

Of possible interest to IP -- my regular Toronto Star Law Bytes column 
examines this week's Canadian hearings into VoIP regulation. The column 
contrasts the approach of the content industries to peer-to-peer with that 
of the telecommunications sector noting that one perceives P2P as the worst 
of times, while the other sees no other alternative than to treat it as the 
best of times. The columns calls on Canada's regulators to craft a VoIP 
policy that maximizes consumer choice and marketplace competition while 
preserving the social goals that serve as the bedrock of Canadian 
telecommunications policy.

Column at
<http://geistcanadavoippolicy.notlong.com>

MG

No need for Dickensian approach to voice-via-Web

Michael Geist
Toronto Star
"It was the best of times, it was the worst of times." Although Dickens 
wrote his oft-quoted novel, A Tale Of Two Cities, in the 19th century, his 
words resonate with prescient timeliness today. Consider the story of a 
technology that allows customers to by-pass traditional distribution 
channels with unlimited, low cost communication.
While many recognized the enormous power and potential of the Internet when 
it first burst onto the public's radar screen in the mid-1990s, it has been 
the emergence of peer-to-peer technologies that have proven particularly 
disruptive.

Aided by high-speed broadband networks, peer-to-peer applications enable 
individual Internet users to connect to each other instantly, free to 
exchange all forms of data without regard for location.

If your business involves the sale or transfer of data, peer-to-peer leaves 
you with two options - you can either fight the technology or you can seize 
the opportunity by adopting many of the same technologies and competing on 
the basis of price, service, convenience, and reliability.

Therefore, depending on your perspective, peer-to-peer is either the best 
of times or the worst of times. Some content-based industries view this as 
the worst of times. They have pursued a "fight the technology" strategy, 
turning to the courts and lobbying campaigns.

This particular tale, however, does not concern those industries. Rather, 
it provides a contrast by focusing on another industry that faces many of 
the same challenges.
Voice over Internet Protocol - VoIP for short - refers to the convergence 
of the Internet and traditional telephony through the digitization of voice 
signals that are carried over the Internet. For the telecommunications 
industry, VoIP, particularly peer-to-peer based VoIP, is proving to be 
transformative as it creates new competitors, lowers costs to consumers, 
and embraces new business models and services.

With the rapid proliferation of Skype, the peer-to-peer based VoIP software 
from the creator of Kazaa, telecommunications providers could be forgiven 
if they were tempted by the "fight the technology" strategy. For over a 
year, Skype users have enjoyed the ability to talk from 
computer-to-computer with fellow users anywhere in the world at no cost. 
Moreover, the freely available Skype allows users to place 
computer-to-telephone calls for a nominal fee that takes the distance out 
of long-distance telephone calls.

VoIP is not limited to Skype and other peer-to-peer communications 
providers. Services such as Vonage and Primus' TalkBroadband are quickly 
finding loyal followers as users gravitate to services that require only a 
broadband connection to enjoy cheaper long distance costs with innovative 
extras such as portable area codes. These services appear to be the tip of 
the iceberg as ISPs and telecommunications providers of all sizes gear up 
to provide their own consumer VoIP offerings in the coming months.

While most industry observers seem convinced that VoIP is the wave of the 
future, the regulatory framework surrounding the emerging technology 
remains uncertain. This week the Canadian Radio-television and 
Telecommunications Commission (CRTC) will hold three days of hearings on 
VoIP regulation.

The telecommunications community will not use the opportunity to launch 
marketing campaigns claiming inferior and unreliable VoIP service, sue 
providers and their customers for "stealing" talk time, or lobby the CRTC 
to regulate the upstart services out of existence. Instead, most will urge 
Canada's telecommunications regulator to provide regulatory certainty by 
keeping VoIP regulation to a minimum and allowing the marketplace to evolve 
with an even playing field.

Earlier this year, the CRTC issued a preliminary opinion that signaled that 
it is inclined to adopt a regulatory model for VoIP. While it might exempt 
the peer-to-peer services such as Skype, other services that connect to the 
Public Switched Telephone Network would face CRTC regulation consistent 
with traditional voice telephony regulation.

The CRTC argued that VoIP fits within its mandate under the 
Telecommunications Act and that the social goals of telecommunications 
policy, including 911 emergency service, financial contributions to foster 
local connectivity in rural areas, and privacy protection, must be 
maintained.

While the CRTC is right that its telecommunications policy goals must be 
preserved, it would do well instead to seize this opportunity by working 
with Industry Minister David Emerson to reconsider how Canadians can 
achieve the same aims in a converged network environment that does not 
distinguish between bits of data that may be Web pages, e-mail, MP3 files, 
or "voice" calls.
The evolution of the marketplace should also weigh heavily in the CRTC's 
analysis. Unlike the movie and music industries, which claim legal 
protections such as the broadcast flag and the WIPO Internet treaties are 
needed before their members can offer innovative new services, many in the 
telecommunications industry argue that Canadians would be better served by 
regulatory intervention only after its need is demonstrated.

This leaves the CRTC with a significant challenge. Although light 
regulation may help promote technological innovation, a hands-off approach 
is not without its own risks. Of particular concern is the potential for 
Internet service providers and incumbent telecommunications providers to 
use their customer connections and near-monopoly status to unfair 
advantage. The CRTC must ensure that its VoIP policy does not directly or 
indirectly favour the dominant players and thereby leave smaller upstarts 
unable to compete effectively in the Canadian marketplace.

In A Tale Of Two Cities, Dickens follows his best of times, worst of times 
opening sentence with the line that "it was the age of wisdom, it was the 
age of foolishness." The headline-grabbing lawsuits and policy reform 
proposals of recent years have provided plenty of foolishness. Participants 
at this week's CRTC hearings will look to the commission to demonstrate 
wisdom by crafting a VoIP policy that maximizes consumer choice and 
marketplace competition while preserving the social goals that serve as the 
bedrock of Canadian telecommunications policy.
 --
**********************************************************************
Professor Michael A. Geist
Canada Research Chair in Internet and E-commerce Law
University of Ottawa Law School, Common Law Section
57 Louis Pasteur St., Ottawa, Ontario, K1N 6N5
Tel: 613-562-5800, x3319     Fax: 613-562-5124
mgeist () pobox com              http://www.michaelgeist.ca

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