March 08, 2005, 8:09 AM — The top executive of VOIP (Voice over IP) provider Vonage Holdings Corp. is satisfied with regulators' response to a carrier that blocked Vonage's service but sees a broader danger ahead with technology for detecting the data service that customers are using.
In an interview Monday at the Spring VON (Voice on the Net) trade show in San Jose, California, Vonage Chief Executive Officer (CEO) Jeffrey Citron also said traditional carriers can't afford to compete all-out with Vonage and other VOIP upstarts despite having greater resources.
Late last year, Vonage determined that Madison River Communications LLC, a broadband provider based in North Carolina, was blocking the use of Vonage's service by some Madison River customers. Following an investigation by the U.S. Federal Communications Commission (FCC), Madison River last week agreed to pay the FCC US$15,000 and not to block VOIP services on its network.
Vonage, in Edison, New Jersey, has been an early leader in rolling out VOIP technology, which this week is bringing together about 240 exhibitors and 6,000 attendees at Spring VON. VOIP breaks up voice calls into data packets and sends them over IP networks, which usually allows for less expensive phone service and can enable advanced services such as unified messaging. Calls made on a VOIP service may travel over the broadband data network of a consumer's phone company or cable provider while bypassing that provider's own voice calling service.
Vonage was pleased with the FCC's action and how quickly it came, Citron said.
"How often do you see the FCC in the position to be able to act in a few weeks?" Citron said. It showed clearly that blocking VOIP service violates FCC rules, he said. Vonage never filed a complaint against Madison River because it didn't have to push the FCC to take action, Citron said. Vonage is investigating possible blocking by one or two smaller service providers and will bring its evidence to the FCC if its suspicions are confirmed, he added.
However, there are larger issues at stake in the matter, Citron contends.
"I think it's a technical issue that extrapolates itself into a First Amendment issue," Citron said. Service providers that own infrastructure and deliver content or services over it now have the capability to look into the packets going to and from a customer's connection and determine what kind of service they are using and even the content of those packets, he said. It is technically possible for network operators to read e-mail, block e-mail messages based on content and limit access to Web sites, Citron said.
In addition to anti-competitive moves against VOIP companies and other content and service providers, the problem raises censorship issues, he said.
"What happens when the media property that owns distribution is owned by a religious group?" Citron asked. Laws should be brought up to date to prevent abuse, he said.
Jeff Pulver, CEO of Pulver.com Inc., which provides a VOIP service and organizes Spring VON, said he can imagine a future U.S. Supreme Court case to address such an issue. However, he downplayed deliberate port-blocking by network operators.
It's common for VOIP users to hit a virtual brick wall when they try to make calls from a hotel or a Wi-Fi hot spot, but in most cases there's no conspiracy, he said.
"Most actual cases of port blocking have been human error," Pulver said. Engineers often block the virtual network "ports" commonly used for VOIP without knowing what they're doing -- and there are ways around it, such as assigning calls to a different port, Pulver said.
Vonage's Citron said he isn't sweating as big traditional carriers such as AT&T Corp., SBC Communications Inc. and Verizon Communications Inc. move on to the turf where Vonage has taken the early lead with more than 500,000 subscribers. Vonage is adding more than 15,000 lines per week, more than any other provider, and he sees that trend continuing. Meanwhile, big competitors such as Verizon have more to gain today by concentrating on its lucrative traditional phone service, he said. They are not aggressively pushing VOIP yet, he said.
"It doesn't make sense for them to go out and push voice over IP products today. As a matter of fact, if they did, they would destroy their own company," Citron said. And their customers won't jump to VOIP en masse immediately: The most aggressive estimates see only about 20 million VOIP users by 2008, he said.
"If Verizon can wait five years ... before it does anything aggressively in VOIP, and if it loses 10 percent of its customer base, it will have generated nearly 100 billion in cash just by waiting," Citron said. By that time, Vonage will be in a commanding position, he said.
Spring VON continues through Thursday.
