VoIP is the first of the apps enabled by IP to threaten traditional telecommunications business models because they depended on voice revenues (and mostly still do). Policy and regulatory issues and responses have evolved with the maturity of the VoIP market.
Table 5.1: VoIP Regulatory Issues
Source: Adapted from Table 1, VoIP enemy or Ally?, GSR 2009, P Biggs
The key policy issue is how to regulate VoIP compared with the telephone services it replaces  or displaces. Some countries view VoIP as a voice service while others view it as data: a ‘value-added’ or ‘information’ service. For example, Bolivia, Czech Republic, Egypt, Jordan and the United States view VoIP as data, while Dominica views it as voice. In the European Union, VoIP can be classified as either an Electronic Communication Service or as a Publicly Available Telephone Service.
Despite its limitations, users increasingly view VoIP as ‘functionally equivalent’ to conventional telephone service. The quality of VoIP has improved and users can now obtain a PSTN telephone number and receive calls originated on the PSTN. Technical and consumer protection aspects are discussed in regulatory implications of VoIP.
Most countries licence different types of VoIP service. Policy makers then have to decide what aspects of conventional telephony regulation should apply to each class of VoIP service because the differences between VoIP and conventional voice service will have implications for universal service arrangements, telephone number management, public safety, and national security. For example, VoIP services are generally unable to provide access to emergency service if there is a power cut or to give reliable location information in the case of an emergency.
Recognizing the difficulties of translating existing regulatory frameworks into the IP world, the European Commission advocated a ‘light regulatory touch’ when it first examined VoIP regulation in 2004. The United States initially took a similar approach, but VoIP is becoming more regulated over time in the United States; especially in the context of security concerns (whether and how VoIP traffic can be monitored) and access to emergency call services. With a ‘light touch’, regulation is confined to specific matters such as access to telephone numbers, number portability, access to emergency services, universal service, and national security.
The number of countries attempting to ban VoIP is continuing to decline:
Figure 5.3: Status of VoIP Regulation Across ITU
Source: Figure 2, GSR 2009 Discussion Paper, Voice over Internet Protocol (VoIP): Enemy or Ally November 2009
But it is very difficult to stop unlicensed VoIP services which can traverse the telephone network without detection. Even where regulators permit only limited or no VoIP services, incumbent operators will still face VoIP competition.
Box 5.1: VoIP Licencing and Bangladesh
The licensing of VoIP in Bangladesh was delayed while attempts were made to establish a common platform to route all VoIP calls for national security reasons and to monitor VoIP revenues. Then when the current licenses were issued in 2009, they were set high to minimize the number of competitors.
At that time, it was thought that up to 200 illegal VoIP providers were operating in Bangladesh; mainly connecting international calls from pre-paid card users, using VSAT links. The use of VSAT for voice services is not permitted. VoIP-based call termination business captured over 40 per cent of the market of incoming and outgoing international calls.
Bangladesh now requires all calls including inter-operator VoIP calls to be routed through Interconnection Exchanges or International Gateways. Intra-operator VoIP calls and other domestic data traffic must be routed through National Internet Exchanges.
The regulator, the BTRC, is still catching illegal VoIP operators. In the first eight months of 2011, the Rapid Action Battalion seized Voice over Internet Protocol (VoIP) equipment from eight unauthorised VoIP business centres — seven in the capital and one in the port city of Chittagong. And the BTRC has a running banner on its site saying: ‘Urgent Notice on Illegal VOIP: If you receive any overseas call which has a CLI display of any Bangladeshi mobile or PSTN number, please send us that number (contact details provided)’. Changing the calling number from international to local before presenting it for termination on a fixed or mobile service reduces the interconnection payable (and if it terminated as data on, say, a PC no number substitution is necessary and no fee is paid).
Sources: International Long Distance Telecommunications Services Policy, Bangladesh Ministry of Posts and Telecommunications, May 2010, TeleGeography, 6 Aug 2009 and VoIP and relevant Issues: Bangladesh’s Context
The ability of mobile broadband users to access Skype using iPhones led certain European operators to block Skype access over their networks to prevent loss of revenues. Regulators are now beginning to stop such practices on the basis that it is inconsistent with net neutrality .
VoIP class licences have different rights and obligations attached to each type of licence depending upon how closely the licensed service resembles PSTN voice services. Barbados has four different classes of VoIP services.
In the future voice telephony will migrate completely from circuit switched telephony to VoIP. Once this happens, Internet interconnection and pricing models may replace the current arrangements. Until that happens, VoIP network operators will need to interconnect with incumbent network operators’ PSTNs.
VoIP providers require access to the PSTN to terminate calls to recipients who do not subscribe to the VoIP provider’s service. Interconnection typically occurs between a VoIP operator’s gateway and the PSTN operator’s point of interconnect closest to the call originator or recipient. For calls terminating on fixed networks, VoIP operators should pay PSTN operators for call switching and routing in much the same way that other carriers (such as mobile and long distance operators) do. This may be hard to enforce (Box 5.1).
Call originations from fixed networks may require a different pricing and access mechanism. For many VoIP services, the caller originates the call over a broadband access link or a wireless network. Carriers have no visibility of such VoIP calls originated on their access networks; they are just part of data traffic. However, no originating interconnection fee should arise because the customer is paying for the access link and any traffic carried over it.
Wireless networks will have a substantial impact on VoIP service development, particularly in developing countries. As wireless and VoIP traffic increase, differences in the terms and conditions under which wireline, wireless and VoIP operators interconnect networks will create opportunities for arbitrage and distort markets. Differences in call termination rates and interconnection arrangements can cause operators to adjust traffic flows to obtain the lowest possible rate, and to minimize regulatory fees.
 In Australia, the government-owned national broadband network (NBN) will replace approximately 93% of the copper PSTN with a fibre-to-the-premise network. The Network Terminating Device supports 2 voice (and 4 data) ports which will support voice. An ATA adaptor will be provided so that existing telephones can be used. But at the time of writing (November 2011), the responsibility for providing battery back-up (needed to satisfy standard telephone service standards for emergency calling) was unresolved.