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September 22, 2004

My Testimony at the CRTC

TESTIMONY OF JEFF PULVER
BEFORE THE
CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION
Regarding the Regulatory Framework for
Voice Communications Services Using Internet Protocol
PN 2004-2

September 22, 2004

Thank you for allowing us the opportunity to testify today. My colleagues and I have been sitting here listening to the commenters before us, and, frankly, we are concerned that many of the entrepreneurs, innovators and Internet enthusiasts driving the communications revolution are not sufficiently represented in this proceeding. You have heard well-stated testimony from the largest, most established players in Canadian communications -- the ILECs, the CLECs, the cablecos, the wireless carriers -- but you have heard very little from the smaller start-ups, be they Canadian or foreign-based, that have been driving, and hopefully will continue to drive communications innovation. The truth is that many entrepreneurs simply do not have the time, staff and resources to participate in this proceeding or similar proceedings underway around the world. Frankly, many of these entrepreneurs and innovators might not have conceived their visions just yet, and only will do so if the CRTC and other oversight authorities establish an environment that fosters innovation and entrepreneurship. For this reason, I am grateful to the CRTC for allowing us the opportunity to speak today, not just for Free World Dialup and the other pulver.com enterprises, but also for the IP communications entrepreneurs, innovators and Internet enthusiasts around the world.

I became engaged in the nascent VoIP industry in 1995, combining my passion for community and technology and connecting my Ham Radio to the Internet to communicate with people around the world. This led me to launch Free World Dialup, the world’s first Internet-based communications network. Since then, I started the VON Coalition in 1996, to combat efforts to regulate Internet communications. I started the company that became Vonage back in 1998. And I have incubated numerous other IP communications-related enterprises over the past decade. I also run the VON Conference, the leading and longest running tradeshow for the VoIP Industry, and publish VON Magazine. I like to think that pulver.com has provided essential thought-leadership and incubator services for the emerging industry.

Free World Dialup has evolved into the world’s largest open communications network. It is based on open source and open standards. I like to think that FWD is the living greenhouse for IP communications and innovation. Since its inception, FWD has grown to more than 300,000 registered members in 187 countries, including 15,000 members in Canada, which quite possibly makes FWD the leading VoIP offering in Canada. As it’s name implies, FWD empowers its members to communicate with each other around the world for free. Free World Dialup was, in fact, the subject of the US Federal Communications Commission’s first order, and perhaps the world’s first positive regulatory statement, on IP communications. In the pulver Order, the FCC recognized Free World Dialup as an “interstate, information service” and exempted it from traditional telecommunications regulation. I am here today because I want to ensure that the entire world may avail itself of the capabilities of Free World Dialup, as well the many other evolving flavors of IP-based communications.

When I look to the future, end-to-end IP networks have the power to disrupt traditional telecommunications and to empower consumers and enterprise users of future communications services. Over the next decade, as traffic moves from legacy networks to wireless and broadband, what will be needed is fair and unfettered access to the Internet and, frankly, not much more. The advent of Open Source communications is helping to level the playing field and to put high quality communication software into the hands of communication enthusiasts.

As much as there are email and web servers on the Net today, look for communications servers to become part of the Internet experience. The deployment of such servers will empower a new generation of communicators -– people who can “talk” on the Internet without any formal billing relationship or need for a voice service provider.

The Internet is a user’s network, not a service provider’s network. It has a rich history as a result of the universities, enterprises and entrepreneurs that represent the end points that utilize the technology and not because of the service providers that transport the bitstreams. IP communications is “disruptive” communications in the most positive sense and, if allowed to evolve, will dramatically enhance the ways in which we communicate. Applications and services, be they video, music, or even voice, are now clearly severable from the telecommunications transport on which they ride. Today we are talking about VoIP, but tomorrow it is really EoIP – or Everything over IP. Services and applications can be deployed from anywhere to anywhere. Like email, “voice” will be enabled from a variety of everyday consumer devices, managed in a variety of architectures. Anyone can deploy new applications and services and no one is beholden to the “one-size-fits all” service provider model of the legacy telecommunications network. IP-based communications are capable of empowering users to control their own communications experience. I implore the service providers of today as well as the regulators to look at IP communications as more than a mere replacement or substitute for traditional telephony. And we must establish a regulatory structure that nurtures innovation and does not constrain the future with the legacy vision and rules of the past.

We, the IP-based communications pioneers, need room to innovate and experiment in a regulation-free zone for the Internet. There should be a broad hands-off approach to IP-based communications, particularly peer-to-peer IP-based communications that do not connect to the Public Switched Telephone Network. If there is regulation, it should be smart, targeted, and narrowly tailored to achieve a very precise goal that is not otherwise achievable with market solutions.

It is for these reasons that we are concerned about the approach that the CRTC might take in imposing unnecessary and debilitating regulations on the nascent, emerging IP communications industry.

It is evident that IP-based communications obliterate traditional geographic distinctions. An IP-based communications service provider could deliver services to residents in Ottawa, from a computer based in St. John’s, Newfoundland, or even from a computer in St. Johns, Virgin Islands. And, to the extent that Canada embraces IP-based communications with a favorable regulatory environment, it is far more likely that the serving computer is based in St. John’s, Newfoundland.

In fact, there is, at least technologically, nothing stopping any of the large incumbents from empowering all expat Canadians who have broadband Internet access anywhere in the world with the ability to maintain a local Canadian number where they can be reached by leveraging the global broadband Internet. Canada has a rather sizeable expat community. I think such a revolutionary offering could profoundly enhance Canadian ex pats’ bond and sense of community with their families, friends and colleagues back home in Canada.

The real trick for regulators is to establish the proper regulatory structure that will empower consumers to control their own communications experience. Regulators and other authorities should ensure that consumers genuinely have the freedom to access content; the freedom to use applications; the freedom to attach personal devices; and the freedom to obtain service plan information. Giving more than lip service to these consumer freedoms and ensuring no one may encroach on these freedoms will serve to maximize consumer choice, foster competition, and promote investment in infrastructure and Internet applications.

The issues before us today while they appear to be national issues in Canada are really global issues, which need to be addressed on a worldwide basis.

For this reason, pulver.com and many other members of the IP-based communications community are committed to promoting the public good by establishing international, industry-based solutions to the host of social issues confronting IP-based communications. To this end, pulver.com has established the Global IP Alliance, an international consortium of IP-based communications providers committed to realizing the promise of interconnecting IP-based communications. The Global IP Alliance will adopt and implement common principles designed to promote the social good.

I am pleased to report that at the Voice on the Net Canada Conference that pulver.com hosted in Toronto a few months ago, we brought members of the industry together with public safety experts to hammer out an emergency response solution -- an emergency response solution that should, because of the power of IP technology, dramatically surpass the capabilities of the PSTN solution. We intend to continue these efforts at our next VON Conference, set for Boston, MA, the third week of October. And, we’ll back in Toronto next April. Perhaps many of you will join us as we attempt to work out the other social, technological, and business issues that confront the emerging industry.

The countries that embrace the new technology and foster the growth of IP communications will simultaneously become havens for IP communications entrepreneurs and allow their residents to avail themselves of the benefits of IP communications. The countries that choose to impose unnecessary burdens on IP communications will find that they have become pariahs to the would-be entrepreneurs who will take their business, money and ideas to more inviting locations. Additionally, the residents of those backward looking governments will become disenfranchised wallflowers at the communications revolution.

We imagine a very limited role for government, and one primarily focused on consumer protection and consumer empowerment. Regulations, or at least the proper application of antitrust principles, should ensure that consumers can control their own communications experience and avail themselves of all that the Internet and IP technology afford. Under some circumstance, this logically might compel minimal antitrust or regulatory oversight over bottleneck transmission facilities. Regardless of how many potential applications exist on the Internet, there will be only a limited supply of transmission facilities available to the consumer. A controller of such a bottleneck, be it a wireline local exchange carrier, a cable company or a wireless carrier, must not be allowed to parlay its dominance over a bottleneck facility to choke a consumer’s access to the Internet or the application of his/her choice. With emerging last-mile access technologies, such as wimax and broadband over powerlines, these oversight obligations might become increasingly less necessary, but for some time to come, there will still be an opportunity for unfair market control and gamesmanship that could stifle innovation and competition.

Having said that, I think it is important that we not prejudice a company based on its DNA. The CRTC should allow incumbent telecom carriers the same latitude to offer IP-based broadband services largely free of onerous regulations. Frankly, these are the companies with the deep pockets to invest in new infrastructure and to seed innovation. The default presumption should be that regulation need not apply. If a potential monopolist demonstrates that it cannot play fair, then it should be slapped silly.

While there might need to be a limited oversight role for government to push the industry to support law enforcement objectives where market forces might otherwise not compel industry to develop its own market-based solutions, the other social goods are more readily achieved through the pure play of the competitive market. For instance, we do not believe that the CRTC needs to address quality of service for IP-based communications services.

Today, we can only glimpse a hint of the IP-based communications future. Personal and enterprise instant messaging and “presence” continue to grow and empower users. Social networking is helping to supplement business and social mixers. Open source communications is disrupting the vendor marketplace. With push-to-talk, we are rediscovering the walkie-talkie of our youth. At least mine… Wi-Fi VoIP is disrupting mobile communications. We do not yet know the full potential and promise of IP-based communications. Our children will be dreaming that up if we give them the tools and latitude to innovate and evolve the ways we communicate.

What we know at this point is that VoIP has emerged as the “killer app” and, arguably, the first great driver of broadband. It’s important to note that VoIP is still in its infancy. Apparently, only 15,000 Canadians today can be counted to subscribing to VoIP over broadband services, and many of these simply to complement and not to replace their standard POTS line. Compare that statistic with the growing number of consumers who have abandoned their wireline services for wireless alternatives, not to mention the degree to which email has cut into traditional wireline telecom revenue. On top of that, lawmakers and regulators do not consider wireless, with its millions of customers, a substitute for traditional wireline service. Based on this fact alone, it is frankly absurd to impose regulations on an industry that has barely made a dent in legacy telecom revenue streams, and will, in fact, drive new broadband revenue to builders of telecommunications networks and infrastructure. I’m forced to wonder what would have happened had the CB radio first emerged today. Would the LECs, the wireless industry and regulators attempt to stifle or control the disruptive technology simply because it had the potential to cut into traditional revenue streams by offering consumers the option for a different communications experience? Putting CBs aside, where would mobile communications be today if cellular rollout was disallowed, simply because the cellular industry did not yet have an emergency response solution?

Open IP-based communications have already enabled early adopters, carriers and enterprises to interconnect directly as peers. End users have access to numerous alternative solutions. Customers can utilize multiple providers as well as enterprise or end user systems. End users can attach a variety of hardware and software including their own “switching” from varying locations -- blurring demarcation points.

This scenario exists because, to date, IP-based communications pioneers have had the courage to test the waters, to experiment with Internet and other IP-based communications under the belief that voice is simply an application and will not be pulled into the morass of telecom regulation. Acoustic regulation is absurd! It makes no sense to think that acoustic applications are somehow qualitatively different from any other bitstream that appeals to any of the other senses except the ear, simply because of the existence of archaic voice regulations that make no sense in an IP-enabled world. Confirmation of this logic will go a long way in giving the innovators in IP-based communications the comfort to continue developing the technologies and services enabled by IP technology.

The conclusions and rules that will result from this proceeding will greatly affect the future of all IP-based communications, including the speed of deployment, consumer and enterprise adoption and ubiquity of IP-based communications. The CRTC has the opportunity to get a regulatory structure in place that will shape the future of communications, allow new technologies and services to evolve, enable both traditional telecommunications and emerging communications entities to cooperate and compete, establish the right incentives to ensure investment in and deployment of networks, infrastructure and equipment, and empower consumers to control their own communications experience. The CRTC should adhere to two core principles: (1) do not impose regulation unless absolutely necessary; and (2) ensure that no entity can leverage its market power to stifle choice and innovation.

The CRTC should certainly herein confirm that peer-to-peer, Internet communications products that do not touch the PSTN, such as pulver.com’s Free World Dialup, are not telecommunications and may proceed unfettered by unnecessary government intrusion.

We do not know the future’s requirements. IP-based communications can change the way we work and live. It has the potential to redefine communications as we know it today. In order to realize this potential, it is essential for the CRTC to lead the way and ensure that governmental bodies around the world do no harm and ensure the growth and viability of IP-based communications.

Thank you for your time and consideration. We would be happy to answer your questions.

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Posted by jeff on September 22, 2004 05:52 PM | Permalink

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Comments

Jeff,

great as usual - congratulations. And you are not only supporting the pioneers and innovators, you are also supporting the incumbents ;-)

I like especially this part (of course among others):

"Having said that, I think it is important that we not prejudice a company based on its DNA. The CRTC should allow incumbent telecom carriers the same latitude to offer IP-based broadband services largely free of onerous regulations. Frankly, these are the companies with the deep pockets to invest in new infrastructure and to seed innovation. The default presumption should be that regulation need not apply. If a potential monopolist demonstrates that it cannot play fair, then it should be slapped silly."

This is completely along the lines what Telekom Austria is trying to tell the European Commission how providers with Significant Market Power (SMP) should be treated in this new market.

What you are really doing is to give the regulators a ticking-off to do their job as basically intended by law:

"In Europe e.g. the aims of the “New” Regulatory Framework and the derived national Telecommunication Laws are:
-fostering of competition in the telecommunication arena,
-to ensure the adequate supply of the population and the economy,
-with reasonably priced, high quality and innovative communication services;

reached by different measures of regulation,

-but these measures should be to a large extent technology neutral,
-and innovative technologies and services as well as new emerging markets should only be regulated (ex-post) to avoid distortion of competition and to reach the above aims."

(and NOT by protecting service providers or technologies
especially NOT specific service providers or specific technologies.)

Some if them already got the message and are acting or trying to act accordingly (see US, UK, Austria, Singapore, ...), others may need some more tutorials. BTW, my experience is that regulators dealing for some time also with ENUM-issues seem to be more advanced regading VoIP and Internet-issues in general ;-)

regards

Richard

Posted by: Richard Stastny at September 23, 2004 05:30 AM

Hi Jeff -

I was following parts of your testimony (as much as it was possible) as it was happening, though the connection seemed to be flimsy at times. Now that the written text is in front of me, I can say nothing but kudos for your standing in support of the innovative spirit of the smaller players, of the universities and research labs, and the pioneers who brought forth the Internet and VoIP. As part of your original FWD and now of FWD II, I can tell you that the interests of VoIP in Canada are best served by "light regulation" that is premised upon public service goals such as emergency service (E-911), law enforcement (CALEA) and universal service funding.

If the CRTC is wise, it will pursue a similar policy to that adopted by the FCC. It was in an unregulated, innovation friendly ad-hoc environment that innovations such as the Ethernet (Bob Metcalfe), the precursors to the Internet (Arpanet, DARPA) and the WWW (a hypertext Lynx-like browser at CERN) flourished. Canada will benefit from more VoIP regulation only once it is proven to be necessary (i.e. if and only if a few players exert their powers to stifle competition and/or innovation).

Posted by: Ronald Gruia at September 23, 2004 01:28 AM

Jeff;

You did exactly what I expected you would do - and hoped you would do. "Reactive" notwithstanding, it's a message I believe the CRTC needed to hear, and you did a great job of speaking on behalf of the innovators and startups who could not be there. I'm with you on the "slapped silly" line of thinking, even though it's not what they probably wanted to hear. Great job Jeff!

Posted by: Jon Arnold at September 22, 2004 11:01 PM

Hi,

I enjoyed your speech today. I almost spat out my coffee when you answered the "do you know how we work?" question -- It was priceless.

It is unfortunate that the CRTC seems to be taking a limited look at VoIP. While the commission seemed to think that many of your points were outside the scope of the hearings, I think it points out how narrow their viewpoint is.

Thanks for coming to Canada and giving your perspective. I only hope the CRTC sees things your way.

Sean

Posted by: Sean at September 22, 2004 07:29 PM