TELECOM Digest OnLine - Sorted: Re: Help Setting Up a VoIP Regulatory Framework

Re: Help Setting Up a VoIP Regulatory Framework

Raqueeb Hassan (
Fri, 22 Jun 2007 04:29:35 -0700

> It's not because of technology: TDM telephony can be even cheaper, in
> terms of bandwidth, than VoIP; it doesn't waste space on headers, and
> while the switches tend to be a bit more costly, that's in the noise,
> on a per-minute basis. No, it's because VoIP is not taxed the same
> way. It's a different business model. Regular phone calls are still
> governed by the principles of the 1850s International Telegraph Union,
> which worked pretty well into the 1980s. But now that fiber optic
> undersea cables are more common and their price has fallen, the fixed
> cost of terminating a phone call exceeds the international transit
> cost. And so any form of evasion becomes attractive.

Thank you very much for the pointers. You are right. It's a different
business model. What is it they say? "Let the market work". VoIP,
being a newer technology was not taxed, and even FCC (in US) worked
really hard to evade 50 state regulations to let VoIP grow to hold its
promise. Now, when VoIP has already taken its flight, small surcharges
like USF won't hurt. That's perfectly fine when calls mostly generate
from USA.

But, we can't compare Country "A" with USA. Being a poor country, "A"
needs to earn some revenue what the service providers and illegal
stake holders did so far. The model of revenue sharing might help this
poor country to encash some of fortune for sometime. Though the (VoIP,
especially call termination) was branded illegal, but most phone
companies were doing it. We can't blame them, market needed it badly
and flaws in regulatory policies provided these technologically
superior foreign phone companies a huge advantage, which are not even
listed in local stock exchange, let alone offering IPOs. One of their
parent companies recently deenlisted themselves from NASDAQ. Don't get
me wrong, I don't have anything against them, but the profits to be
shared. When you enjoyed huge tax holidays and allocation of spectrum
for almost free; you are entitled to contribute a little extra for the
social development of that population.

> You're going way wrong here, because what you're doing is replicating
> a monopoly, so as to tax it. But if you tax VoIP (where "tax" may be
> a fee to the telephone company, not the general fund, but enforced by
> government power), then what's the point? Current VoIP is a tax
> evasion scheme, and a valuable one at that, because the tax is so
> harmful. So your scheme will result in avoidance too. The Internet
> is famous for routing around blockages, which sometimes are merely
> administrative schemes and fees, not real circuit failures.

I agree to your point. So far it was illegal, now all of a sudden you
can't expect things to be free and open, when the policy makers are
really skeptical about it. The technology was abused so far, you have
to give it a time. Now, you may not brand it as a monopoly, because
the service providers will have the liberty to choose their wholesale
VoIP carriers, ITSP, pricings i.e., only thing, they have to share 5%
of their earning from call termination. DPI is not good, I hate that
too; but how would you know about their earnings? Gentlemen agreement?

> The proper price for terminating a call into a country should be the
> cost of carrying it from the point of termination to the destination,
> perhaps subject to the same percentage tax as all calls (i.e., not
> technologically discriminatory, and not high enough to encourage mass
> evasion -- think VAT, not luxury tax). Operators could then focus on
> minimizing costs and maximizing quality, not evading taxes or setting
> up costly toll booths.

As you said, yes, I did also propose some percentage of tax on VoIP
calls (i.e., 5-6%). Charging more will obviously end up users to pay
more. That's should be avoided. On the other hand, when you don't have
much technology to asses total call generation for VAT and QoS for the
services they offer, you can't regulate them. Regulation needs more
knowledge, and that costs money. I have seen plenty of documentations
by ITU, World Bank, USAID on regulatory framework and case studies,
how to tailor those down to country "A"s model?

> The Internet is NOT technology. It's a business model. The PSTN is a
> business model which is losing out to the Internet. The technology is
> a side show, and should be allowed to evolve, not be locked in by some
> master plan that forever locks in what was thought of as state of the
> art in 2000 or so.

> (I am the Telecom Policy columnist for TMCnet, so you can see some of
> my essays on related topics there.)

I agree. The technology should be allowed to evolve to gain its
momentum. All I wanted a short term plan for this transitory period.
Plans are subject to review every or every other year. The PSTNs are
dying and KPN, BT, Deutsche Telecom are moving to VoIP enabled NGN
solutions. VoIP won't be taxed forever!

Country "A" may not be able to afford your telecom policy guidelines,
but I assume you will be welcomed open arm to setup a regulatory
framework for countries like "A". Ramifications of knowledge sharing
are even greater for developing countries. And Newsweek once said,
Nations that learn faster will prosper. But it will take something
else -- wisdom -- to endure.

Thanks once again.

Raqueeb Hassan

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