Court Backs FCC on VoIP Regulation

Ted Hearn (3.21.07)
http://www.multichannel.com/article/CA6426491.html

The court backs FCC in keeping telecommunications laws from applying to VoIP providers.

A three-judge panel of the U.S. Court of Appeals for the Eighth Circuit Wednesday upheld Federal Communications Commission rules that banned states from applying their telecommunications laws to a class of voice-over-Internet-protocol providers, such as Vonage Holdings.

The court concluded that the FCC acted reasonably in pre-empting state regulation and that the agency could assert its jurisdiction without first having to determine whether VoIP is an information service or a telecommunications service as those terms are defined in federal law.

The FCC’s rules were adopted in late 2004 under former FCC chairman Michael Powell, who wanted to shield nascent VoIP providers from complex and inconsistent state regulation. Minnesota’s effort to regulate Vonage triggered Powell’s moves at the FCC.

There is still a question about whether IP video should be treated as a traditional cable service subject to local franchising authority or whether it’s not a service subject to Title VI in the same way that voice-over-IP isn’t traditional telecommunications subject to all of the [common-carrier] regulations,” Martin told a telecommunications forum.

“I think the decision [that] will come out of that [Vonage] case will be critical in trying to craft whether or not the commission’s authority to deal with all of these IP services will continue to be affirmed,” he added.

More reading:

Judges Back FCC Over Attempts To Regulate Internet Phones (Provides a nice history of the ruling)

What the Verizon Verdict Means for Vonage

Olga Kharif (3.9.07)
http://www.businessweek.com/technology/content/mar2007/tc20070309_887320.htm?chan=technology_technology+index+page_today%27s+top+stories
887320.htm?chan=technology_technology+index+page_today%27s+top+stories

More on Vonage patent lawsuit, the larger implications for Vonage.

After a weeklong hearing in the U.S. District Court for the Eastern District of Virginia, a jury ruled that Vonage Holdings must pay Verizon Communications $58 million in damages and a 5.5% licensing fee per subscriber per month. Vonage's costs per line would increase by about $1.6 per subscriber, or almost 20%.

The company's stock fell 3.86%, to $4.85, an all-time low, the day the verdict was announced.

With its financial position corroded, Vonage, long rumored to be shopping around for a buyer, could finally become cheap enough for an acquisition by a cable company, or even a telco like Verizon, whose VoiceWing Web-calling service has so far failed to take off. Indeed, Verizon's 19-page complaint notes: "Vonage's expanded marketing and advertising of its infringing services threaten to shift more customers and goodwill to its business at Verizon's expense"

This decision carries huge implications for the $4.4 billion U.S. VoIP-services industry as a whole. "The message this sends to the VoIP industry is, if you build a patent portfolio, it helps you negotiate in these situations," Rabena. The number of VoIP-related lawsuits mounted by telcos and other entrenched players could rise. According to the U.S. Patent & Trademark Office, there are 2,273 patents related to VoIP, many of them belonging to telecom old-timers like Verizon, AT&T, Motorola, Broadcom, and Cisco.

And that spells more trouble ahead for small Web-calling service providers looking to retain their foothold on the market. In his closing arguments on Mar. 7, Vonage's lawyer said, "this case is about choice." Thanks to the Verizon victory and other potential legal action in the future, the choices for Vonage will be far fewer.

Vonage to pay $58 million in Verizon patent case

Marguerite Reardon
http://news.com.com/Vonage+to+pay+58+million+in+Verizon+patent+case/2100-1036_3-6165747
.html?tag=html.alert


Internet phone provider Vonage has been ordered to pay $58 million to Verizon Communications for infringing on three of the company's patents.

Vonage, which provides a service that turns broadband connections into phone lines, was found by a Virginia jury to have infringed patents that cover the technology used to connect these VoIP calls to the regular phone network, as well as some features for implementing call-waiting and voice-mail services.

The monetary damages and the ongoing royalties awarded Verizon could have a significant impact on Vonage, if it doesn't come up with a solution that doesn't infringe the patents. The Internet phone service provider has yet to turn a profit.

But the biggest risk for Vonage is that the company could also be forced to shut down its service. In addition to the damages, Verizon is asking the court for an injunction. On March 23, U.S. Judge Claude Hilton will hear arguments to decide whether Vonage's service should stop offering service until an acceptable licensing agreement can be worked out. Vonage said in a press release that it doesn't expect any interruption in service.

"Even though the damages could have been worse, the royalty fees and ongoing legal battle, will add more expenses," Moran said. "And that could impact the future profitability of the company."

VoIP strives to co-exist with alarm systems

Joan Engebretson (3.5.07)

Leading alarm installing companies - ADT and Brinks Security Systems - have started making arrangements with VoIP providers to solve incompatibility issues.

Current alarm systems do not work with VoIP services, forcing customers to choose one or the other. This is more evidence that companies and legislation are working to meet the demand for diverse broadband services.

About 25 million alarm systems have been installed nationwide, according to Gordon Hope, general manager of Alarmnet, a unit of security manufacturer Honeywell. Comcast, which uses VoIP for the Digital Voice service that the company offers over its cable network infrastructure, estimates that 25% of Digital Voice customers have alarm systems. Potential incompatibilities between VoIP and alarm systems are fourfold.

Issues that need addressing are: the results of a power outage, home wiring often needs updating, customer service conflicts, and network stability.

To date, ADT’s and Brinks’s acceptance of VoIP seems to be the exception, rather than the rule within the alarm industry. The NBFAA it still seeking a legislative solution, and John Chwat, NBFAA director of government relations, expects to get several provisions written into any telecom bill proposed this year. Some of these provisions—including a requirement that VoIP providers contact customers’ alarm companies if VOIP is installed--simply codify what many providers already are already doing. But another requirement—to provide 24-hour battery backup—could add substantially to the cost of VoIP service. Today, even VoIP providers that offer battery backup typically only provide it for a few hours.

FCC Clarifies VoIP-PSTN Interconnection Rules

Tom Tovar (3.7.07)
http://www.convergedigest.com/Bandwidth/newnetworksarticle.asp?ID=20786

The FCC has passed a petition that will allow CLECs to connect with ILECs.

Opens up choice and potential for broadband voice communications.

FCC granted a petition from Time Warner petition that clarifies rules of how voice traffic can be exchanged between broadband providers and the PSTN. By granting the petition, the FCC affirmed that competitive local exchange carriers (CLECs) are entitled to interconnect with incumbent local exchange carriers (ILECs) pursuant to section 251 of the Telecommunications Act for the purpose of exchanging traffic on behalf of VoIP-based service providers.

FCC Chairman Kevin Martin stated: "Our decision will enhance consumers' choice for phone service by making clear that cable and other VoIP providers must be able to use local phone numbers and be allowed to put calls through to other phone networks."

Other noteworthy aspects of the ruling:

• It doesn't apply directly to VoIP providers, therefore not giving them their own interconnection rights, but CLECs can provide them wholesale interconnection.
  

• CLECs must provide number portability to VoIP providers.
  

For further reading:
http://www.telecomlawblog.com/fcc-daily-fcc-order-clarifies-interconnection-rights-of-
carriers-serving-voip-providers.html

Report: VOIM Sounds Better Than PSTN

Mark Sullivan (2.23.07)
http://www.lightreading.com/document.asp?doc_id=118017


A recent study has found that voice over IM services such as Skype, Yahoo, and Google provide higher quality more realistic quality sound than TDM-based phone services.

More support for IP telephony, and that traditional phone carriers will have to start making adjustments as interest grows in what VOIM can offer.

The codecs used in TDM-based voice systems cover an 8kHz band directly in the middle of the voice frequency range, explains Global IP Sound AB CEO Gary Hermansen.

By contrast, Hermansen says, new IP codecs cover a 16kHz swath of the frequency range, which better conveys the highs, lows and texture of a caller's voice. Hermansen says VOIM codecs can also compensate for packet loss, and cancel out echo and background noise.

The end result is that VOIM makes the human voice sound more, well, human than traditional telephony ever did.

"Carriers will ultimately need to reconcile traditional telephony with VOIM as they face increasing pressure from their customers to receive the same types of flexible services" that VOIM enables, report writer John Longo writes.

Future of Net phone firm Vonage hangs in balance

Leslie Cauley (2.20.07)
http://www.usatoday.com/printedition/money/20070220/vonage.art.htm

Verizon is taking Vonage to court for patent infringement on 48 counts.

This could stifle growing VoIP companies and have an impact on service and innovation in the future.

Vonage claims Verizon's patents are too broad for any company to work around and still remain in business. Brooke Schulz, a Vonage spokeswoman, said Monday that Verizon's claims are baseless. "This is about Verizon trying to stifle competition," she said. "We have not infringed on their patents, period."

By the end of 2006, there were 8.6 million VoIP users in the USA, estimates JupiterResearch. By 2010, the number is expected to reach 22.5 million. Many of those customers are coming from traditional local phone providers such as Verizon and AT&T.

William Bosch, a Vonage lawyer offered a prediction: "We think there is an extremely good likelihood this jury is going to find that (the Verizon patents) are invalid, that they never should have been granted in the first place."

Jeffrey Citron, Vonage's chairman and chief strategist, has been subpoenaed to appear as a witness — for Verizon. That has put him, potentially, in the awkward position of testifying against his own company. Vonage is fighting the subpoena, Schulz said.

Charter Boasts of Big VOIP Gains

Alan Breznick (2.9.07)
http://www.lightreading.com/document.asp?doc_id=116905&site=cdn&WT.svl=news1_5

Charter Communications Inc. racked up its strongest growth yet in VOIP subscribers during the fourth quarter, even though its IP phone focus has increased its operating and capital expenses.

Demand for VoIP is on the rise.

Like Comcast, Charter expects to run up even higher capital expenditures this year as it continues its nationwide VOIP rollout.

Charter said today it signed up 106,200 VOIP subscribers in the last three months, as opposed to 31,300 customers in the year-earlier period. With the increase, the MSO closed out 2006 with nearly 446,000 IP phone customers.

However, unlike Comcast and others Charter is not seeing consistently stronger subscriber gains for its other cable TV products. The good news there, according to Charter, is that about 75 percent of its annual capital costs were "success-based," meaning the costs were directly associated with adding new customers.

Charter said it expects capex to go up again this year, rising about $100 million to $1.2 billion.

Charter did not disclose specific earnings information, but it will do so on Feb. 28.