Regulatory Issues Associated with Provision of Voice Services Using Internet Protocol in Australia

Ewan Brown

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Regulatory Issues Associated with Provision of Voice Services Using Internet Protocol in Australia - SETEL Comment

VoIP services are likely to be welcomed by Australian small businesses as a means of providing flexibility to business operations. If switched or analogue telephony voice services were able, in a digitised format, to provide a similar range of innovative uses then those services would also be welcomed. The technology is largely irrelevant to the user – the function and effectiveness are the important elements. SETEL welcomes new technology that offers greater flexibility for innovative and new services, reduces the impact of ‘last mile’ restrictions and promises potential cost savings. Therefore we should favour minimal regulatory intervention in order to maximise the roll-out of competitive services. However, as VoIP services rely significantly on telephony access services (ISP services in particular) and the typical small business user is unlikely to be capable of discerning the difference between a telephony and non-telephony VoIP service, SETEL believes that there needs to be a maintenance of at least the standards applicable to ISP services. Accordingly SETEL submits that VoIP services should be regulated under a class licence or similar structure and that numbering for such services needs to be controlled by the relevant Government authority. At present there appears to be a trade-off between price and quality in relation to substituting a telephony service with a VoIP service. For a typical small business this requires additional knowledge of the purposes to which a VoIP service will be put, the technical aspects and the additional hardware/software components required. More important is the awareness by the business operator of the limitations of currently available VoIP services and the likely danger of total reliance on a VoIP service for all business communications activities. Accordingly SETEL advocates a separate number range for VoIP services preferably with differentiation between the types of service being offered. We remain concerned that a large proportion of VoIP services will be offered by providers not within the telecommunications industry. It is likely that many of these providers will be from the ISP and computer industries and the majority will rely upon channel partners or retail outlets to distribute their products. Small business users are therefore unlikely to get quality information on which to base an acquisition or usage decision.

We have noted that ISPs do not consider themselves part of the telecommunications industry and thus not subject to its rules and regulations. A similar situation will apply in relation to VoIP services. Yet end users must be given protection despite the probability of innovation being affected. Another area of concern is that the current deliberations are significantly influenced by outmoded concepts, such as the Standard Telephone Service, which have not been updated sufficiently to keep pace with developments in technology and expectations of usage by groups of consumers including small businesses. The dilemma is whether to apply old standards to an environment promising flexibility and innovation and possible solutions to the current impediments to the successful application of new technologies for the benefit of the public at large. VoIP services offer a significant increase in functionality of communications services. This functionality should not be inhibited by regulation unless the protection of the interests of the end user is a paramount issue. An easily identifiable number range for VoIP services, together with some extension of existing regulations, may well be sufficient to enable sustainable introduction of the new services. SETEL’s preference is for VoIP services to continue to be regulated in a manner similar to telephony services whilst being cognisant of the end user benefits that are and will become available through the implementation of this technology. ISP Connection VoIP services, in the main, are likely to be provided in the short to medium term over fixed lines, including cable, using current technologies such as ADSL. As with most new mass market applications the take-up needs to be substantial before the majority of customers, particularly low- end users, can benefit. Accessibility to ADSL services remains a problem for a large number of residential and small business customers despite claims by carriers about suitable exchange characteristics and ready availability of services. A near-monopoly on the ‘last mile’ remains in place thus inhibiting competition and thus the introduction of new services/applications and the likelihood of real price competition. SETEL wishes to see tangible Government policy and program advancements to ensure that effective competitive supply of broadband (wireline ADSL and cable) services is fostered throughout Australia. Accordingly we will be promoting the following concepts: •National Infrastructure Duct Program – Governments to promote (and subsidise if necessary) a national program for the installation of infrastructure ducting in all metropolitan, outer metropolitan, regional

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and rural communities (including country towns in excess of a population of 50 persons) to enable regional communities to take greater control over communications services of relevance and benefit to their communities. •National Infrastructure Cable Program – Governments to promote (and subsidise if necessary) a national program for the installation of infrastructure cable in all metropolitan, outer metropolitan, regional and rural communities (including country towns in excess of a population of 50 persons) to enable regional communities to take greater control over communications services of relevance and benefit to their communities. •National Register of ADSL-enabled Exchanges – The Commonwealth Government to maintain a register of all telephone exchanges in Australia that have been made ready for the provision of ADSL services to users in that region. •Area Maps to signify reach of ADSL service from exchange - The Commonwealth Government to maintain a register of spatial and area- specific information relating to telephone exchanges in Australia that have been made ready for the provision of ADSL services to users in that region to indicate the ready availability of ADSL services in that region or area. •Publicly available register (at suitable level of detail) of existence of RIMS/Pair Gain features- the Commonwealth Government to maintain a current register of the location of all network facilities such as RIMS & Pair Gains that affect the provision of ADSL services to users supplied by exchanges denoted as ADSL-enabled. General comments relating to specific areas raised in ACA paper 1. SETEL does not see a current need for VoIP be a declared service, but standards need to be set and become enforceable. 2. KIS principle should be considered for the introduction of VoIP regulations, from the small business perspective, in order to encourage innovation but certain criteria must be met regarding numbering, pricing, etc. 3. Small businesses stand to gain many benefits from VoIP, but there are many traps for unaware users. Education and awareness raising will be the key to a successful transition from telephony services and adoption of VoIP. Awareness raising and mentoring maybe the keys e.g. education delivered by neutral (non VoIP providing parties). An example of raising awareness is that small businesses should not surrender a fixed line service in favour of VoIP – a fixed line is essential for backup.

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4. Small businesses may misled by false advertising of the net benefits of VoIP. Exaggerated information on the costs and savings from VoIP are already appearing in the media. The costs of setting up VoIP for a small business may not be mentioned in promotional material, although it may run into $’000s especially if existing equipment requires even moderate adaptation. 5. Interoperability and compatibility will be a major issue for those small businesses wishing to take advantage of the benefits of new developments in the VoIP market. 6. Current numbering based on geography does play a major role for customers of many small businesses e.g. local trades people such as plumbers. 7. Given the difficulties encountered by many consumers with their mobile phone and Internet bills, combined with the failure of providers to adequately advise customers of the costs, VoIP providers should be encouraged to avoid similar misunderstandings in the VoIP market and to introduce standard terminology. 8. Will the question of ownership of data and intellectual property arise in relation to transmission of data/content by VoIP services, as it occurred in e-commerce? Where does the VoIP service provider’s line of responsibility and ownership of data end? This can be an important consideration for small businesses involved in service industries and for those providing access to their own data to add functionality to VoIP services. SETEL comments on questions raised in the ACA paper on specific issues as they relate to small businesses Section 4: VoIP Services From a small business perspective, issues arising from VoIP supplied by Process B that are unsatisfactory include: •an undefined level of quality of service and reliability; and •a lack of clear contractual arrangements with the VoIP provider. Without such contractual arrangements small business consumers will be disadvantaged when systems fail or do not meet expected reliability standards. A likely but unacceptable outcome of Process B is similar to the current situation re: the Internet, with ISPs, telcos and modem suppliers passing blame and seeking to avoid responsibility in the case of service failures with the small business user left to expend excessive time and resources to rectify the problem.

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VoIP service providers need to be made aware that reliability (including quality of service) is of more importance than price for most small businesses. A minimum standard level of service could be devised regardless of who the provider is (under both Process A & Process B). (Especially since VoIP service providers may be able to offer the same services over a wide area.) 4.2: Issues for ACA where an infrastructure provider is unaware of the uses of that link The reason for the existence of infrastructure in the first place is for the provision of services and the provider of the infrastructure must maintain an awareness of the existence of a particular service likely to be provided over the infrastructure so as to be able to meet its contractual obligations with the service provider. This situation is similar to that applying to telephony services so the current provisions are likely to be adequate. 4.4: Should regulation be influenced by the market segment e.g. corporate vs residential There is scope for different levels of standards of service to apply for different classes of user provided there is a common set of standards for certain service characteristics and there are discernable QoS differences for which a price premium (over a benchmark level) is charged. In the case of home-based businesses there must be a justifiable improvement in QoS and service components (over a residential service) before a business grade service can be charged for. 4.5 What issues should be considered for specific market sectors – how should these sectors be identified? Because small businesses have fewer resources, as they generally lack access to IT staff/ resources, and have an increased vulnerability when problems do occur, then higher standards for the delivery of VoIP to small businesses should be considered. Telephony has had a growing role in the management of small businesses and a higher priority should be attached to small business needs to ensure they have a dependable service. This should apply to the delivery of service, fault repairs and payment of compensation when the service fails. The level of compensation must be increased to be commensurate with the increased and important role of telephony in business, and be on a par with the scale of losses incurred due to outages. SETEL has regularly made this point in relation to CSG issues since small businesses pay a premium for what are effectively residential services without gaining a higher level of service.

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Identification of business sectors ought to follow official guidelines rather than arbitrary rules. An example is the recent introduction of an arbitrary definition of a small business in the ACIF Customer Contracts Code to meet the commercial requirements of a single provider. The ACA may consider that it appropriate for small businesses located within specified areas to act together or network to gain contracts for better VoIP services. 4.15: QoS Issues relating to Numbering. If the opportunity arises and the administrative complexity is not too great, there is scope for seeking to differentiate VoIP services by quality level. End users need some process by which they may easily identify the shortcomings of a VoIP service if lower quality standards are applicable. A benefit of the new applications is the range of likely new services, some of which may not need high quality. However the user must know what the limitations are, or, be able to identify the type of service. 4.16: What weight to be given to consumer understanding in deciding VoIP numbering Assume minimal customer understanding – need to keep to the lowest common denominator. The cost and effectiveness of education programs must be weighed against the extent and complexity of number ranges likely to be introduced. Small businesses prefer to be ‘informed Luddites’ – given a sufficient amount of information to be able to discern a difference in a type of VoIP service without having to be able to understand all the technical components. The numbering ranges should reflect usage or service definitions and not reflect technical aspects. Providers should be encouraged to avoid the use of unique marketing terminology. 4.19: Importance of VoIP numbering for move to personalisation of telco services VoIP numbering should not be held up by the move to personalisation. SETEL’s view is that VoIP services can offer sufficient functionality so as to provide increased levels of personalisation without reaching the state of achieving a unique personal number/service. 4.8: Ease of market entry SETEL supports, within reason, any numbering system or process that encourages ease of market entry and hence competition. Familiarity with existing numbers would assist some small businesses and their clients

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but, in balance, a new set of numbers may provide far greater awareness of the existence of a new type of service, its potential and its limitations. Section 5: Numbering From a small business point of view, it needs to be taken into consideration that a limit on the range and quantity of numbers for telecommunications has probably been reached, since businesses now have contact numbers for home, business office, fax, and mobile. However a separately identifiable series of numbers for VoIP services, perhaps using a prefix or suffix to existing number ranges, may provide clarity and differentiation of service types. The adoption of an existing familiar system, e.g. based on geography, may ease barriers to entry and not have a detrimental affect on innovation. For certain types of small business geographic identification of both calling and called parties can affect the decision to transact business. A proportion of small businesses avoid trading outside their immediate geographic area. Nomadic services can also be accommodated within a geographic framework on the basis that distance is no longer to be a component of charging. This is similar to mobile numbering. It may be useful to allocate a separate number range to nomadic services to accommodate the need to seek to preserve some element of geographic identification. Current numbering systems based on geography do play a major role for the customers of many small businesses e.g. customers seeking local tradespeople such as a plumber. Section 6: Customer Equipment Standards need to be defined and enforceable to prevent cowboys entering the market with non-conforming and incompatible equipment. Many small businesses fall prey to such providers usually because of the initial cheaper prices. 6.6: Industry processes required to ensure end users can change VoIP service providers VoIP equipment and perhaps VoIP services will be increasingly supplied by non-telco companies. Standards must apply to protect consumers where suppliers are either outside or within the scope of the TIO etc. There should be no impediment (arising from the installation of VoIP software and hardware) for a small business to change VoIP providers, allowing for normal contractual obligations. Flexibility is important to users, particularly in an emerging and developing market, and tied

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services should be avoided as far as possible. (Lessons from failures of e- commerce should be learnt – prevent retailers providing cheap inappropriate “off the shelf” VoIP solutions.) If standards are to be set in relation to customer equipment then end users need to be made aware of these standards. 6.9: Is action required by regulators to take action about the interaction of security software? Given current incompatibilities between some Operating systems, firewalls and security software (e.g. Nortons and Windows XP) end users such as small businesses may find themselves unable to use security software that they have paid for, and with potentially a less than ideal level of security. VoIP will possibly require a greater awareness of and level of security. (Having to depend on Microsoft Windows to provide adequate patches is not ideal especially given the time delay sometimes for Microsoft to respond to a new security breach.) SETEL continues to focus on the problems of expecting small businesses to become ‘experts’ in the installation and use of new communications technologies. This scenario fits into that category whereby the user has the responsibility to fix a problem that is better handled at network or provider level. Section 7: Quality of Service (QoS). QoS of VoIP is a major issue at present and there is too little marketplace understanding of the benefits and shortcomings of services currently on offer. This infant market has yet to develop. 7.1: What level of QoS can be expected over VoIP? The development of minimum standards should be a responsibility of the regulator. The economic losses from inadequate standards and the consequent need for remedial action should be a consideration in determining whether standards should be developed and set from the outset. Reliability issues should be no less than those applicable to telephony services and the expected added functionality of VoIP services suggests that additional standards may become necessary. The problems associated with the Internet, and virtual free access to services, are examples of adopting a laissez faire attitude to regulation. Intervention by non-conforming individuals in developing intrusive practices (viruses, worms, phishing, adware) is severely restricting the utility of the Internet. Regulatory intervention is rarely sufficient in these cases but the provision of sufficient standards may provide adequate features (bandwidth, programmability, etc) to address emerging problems.

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7.2: What are consumer’s expectations for VoIP? Given the current level of hype, consumers may expect too much of VoIP services without being able to experience the ‘promised’ benefits for some time. This situation can be exacerbated by hype sourced from VoIP service providers seeking to establish a market presence in competition with existing telecommunications service providers. 7.6: What QoS issues if any should be left to consumers or market control? Consumers may not be armed with the best and most up-to-date information to know what level of QoS they need in relation to a particular VoIP service. The ‘product’ is not sufficiently developed or well known to enable most consumers to know what level of QoS is available to them, nor are there any requirements on VoIP providers to supply such information (unless they voluntarily conform to the PTC Code). Therefore QoS levels and standards should be developed and monitored by the ACA, not industry and not consumers. If small businesses do not have a separate contract which includes a minimum QoS clause they may be reliant on the VoIP providers and the physical configuration of the service. Where QoS falls below a prescribed level, a small business should be entitled to a rebate of charges. An option is that a sliding scale of charges could apply where control of QoS levels is beyond the VoIP provider. Some leniency should be built in for transitional periods but consumers must be made aware that higher standards will become applicable once services become established. Section 10: Customer Obligations Complaint handling for VoIP services should be subject to the same provisions as those applicable to telephony services. In most cases end users will see no difference between the services. VoIP could be offered as an interim or temporary service under a CSG regime. The application of the full CSG provisions to VoIP services may be seen as a major market impediment to new entrants. Where a VoIP service replaces a telephony service the fault rectification and attendance provisions should apply to residential and small business services. Provisioning of a VoIP service may not be an automatic inclusion in a CSG regime but may become a component in certain circumstances, such as where immediacy of connection is an issue.

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10.6: To what extent will VoIP services and providers be able to comply with CSO requirements? Given the application of adequate standards the provision of VoIP services may address the inadequacies of the Standard Telephone Service definition in providing contemporary communications services to both residential and small business users. It needs to be clarified as to how the CSO will apply when a 3rd party is involved with the supply of the service or equipment. Also how will the small business person know who to go to when a problem or fault occurs, or where the source of the problem lies; or what redress is due from any of the parties involved. Small businesses will need to be made aware of their rights and to be encouraged to take up VoIP. It will need to be made clear to small business consumers of VoIP exactly what their entitlements are, especially with the layers of providers and steps in the delivery of VoIP. To whom should a small business consumer turn to for help in the first instance? Will this be a lengthy process given small businesses are very time poor. The CSO question raises the following: •What are the lines of responsibility and accountability and who is responsible for specifying them? •What happens with a malfunction of equipment supplied by an IT company not covered by the provisions of the Telecommunications Acts? •What performance levels are to be decided for various VoIP services and for whom? •What levels of compensation, if any, are proposed for small business for not meeting any obligations imposed?

•Will the increased and important role of telecommunications be considered and/or the element and impact of “immediacy” of VoIP on business transactions? •When considering residential consumers will the significant proportion of home-based businesses operating in the residential sector taken into account? Section 11: Call charging accuracy In theory the same level of call charging accuracy should apply to VoIP as covered elsewhere but the issue may become less relevant if individual call charges are not levied, if there are no time or distance components and charging is accomplished by quantum of data transmission.

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11.4: Basis for charging Charging based on distance and to a lesser extent time is becoming irrelevant for IP based services. Fixed and flat rates are not linked to the benefits of IP services and are not really suitable. Sliding charges based on certain usage rates maybe more applicable. An unknown but of importance for charging will be the functionality obtained from, or the functions of VoIP used by small businesses. If multimedia functions are used then it would be reasonable to expect higher charges as opposed to use of VoIP for voice calls. Charging could be based on a quantum such as volume or downloads. A sliding scale of charges could be implemented similar to the plans offered for the Internet. For example, a flat rate for light users for certain usage parameters, through to higher rates for unlimited usage (including data downloads). 11.5: Is there a need to inform end users of likely download charges? Yes. It would be ideal to avoid the anxieties arising from very high bills that have been experienced by some Internet and mobile phone users. This could be achieved by clarifying or highlighting potential hidden costs such as download charges. Terms and conditions if possible should be standardised and publicised. Section 12: Preselection Preselection may be an unnecessary component of a VoIP service if expected charging levels are as cost-effective as promoted. It is likely that industry practices such as bundling will render the need for preselection to be considered but its exclusion from the VoIP ‘basket’ may, in balance, be better for end users. Section 14: Number portability Small business consumers must be able to switch VoIP service providers and keep their VoIP numbers (for the same reasons as for mobile phones). The need for portability of VoIP numbers may become less relevant than for telephony numbers but again the industry practice of bundling of services will provide an influence. Ideally VoIP should offer flexibility and functionality so as not to need to rely heavily on portability. A determinant will be the level to which users seek to replicate telephony services with VoIP services rather than seek to use VoIP services for additional, new and innovative applications. From a business perspective, the practice of advertising numbers will be a factor.

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