European Commission Consultation document on Voice over IP

STELLUNGNAHME European Commission Consultation document on Voice over IP This paper provides the eco comment on the European Commission consultation document. eco is the association of German internet enterprises. It currently represents approximately 300 members inter alia ISP (Internet Service Provider), ASP (Application Service Provider), Carrier, supplier of Hard- and Software and telecommunication companies. The approximately 110 major providers that form the backbone of the German internet are all members of eco. eco also runs the largest national data exchange, De-CIX (Deutscher Commercial Internet Exchange). The total annual revenue of its members is approximately about 40 billion Euro. eco s member companies have more than 200.000 employees. eco currently represents all VoIP providers operating in the German market. In addition many of our members are planning a market entry. eco welcomes the opportunity to contribute to the European Commission consultation on Voice over IP. We appreciate the priority being given to this subject at European level, as well as by regulators at national level. A consistent approach to VoIP will provide clarification on the application of the EU regulatory framework for new entrants and established operators and help to foster the deployment of VoIP enabled services in Europe. As mentioned in the purpose of the consultation document three broad sets of issues can be distinguished. The European Commissions consultation document is concerned with the application of the EU regulatory framework for electronic communications to VoIP, whereas the issue on fair competition will be addressed by the ongoing work of the European Regulators Group on remedies and the impact on relevant markets identified will be considered in the Commissions Recommendation on relevant markets foreseen for the end of 2005. eco is convinced that there is an interdependency between the mentioned issues that has huge impact on the deployment of VoIP enabled services in Europe. eco therefore recommends that these issues should be considered coherently and in a sufficient timeframe. The consultation document solely mentions VoIP in the context of voice services. From our understanding the innovative potential of Voice over IP technologies should not be restricted to voice services. In fact the application of VoIP technology is the basis for various innovative business cases and enhances the economic value chain for information and communication services. Furthermore, services like videoconferencing, streaming, voicemail and new convergent applications Berlin, 31.8.2004 Seite 1 von 9 20040831-VoIP-Comments

(e.g. collaboration services) will be provided on the basis of VoIP in the future. The European Commission consultation document should further emphasise the entire innovative potential of VoIP technology. In the light of above, eco would like to offer the following comments we deem relevant for the deployment of VoIP enabled services in Europe. Regulatory approach The classification and application of the EU regulatory framework for electronic communications to VoIP services is a critical issue for regulators. Nevertheless there should be a clear distinction between publicly available Electronic Communication Services (ECS) and Public Available Telephone Services (PATS). For providers of VoIP services it is necessary to obtain legal certainty and a clarification about their rights and obligations at the time of market entry. Through this, VoIP providers gain the ability to evaluate the investment required to fulfil their obligations at the time of market entry. It is desirable to have an accurate disjunction between ECS and PATS. Hence the offered VoIP service is categorized as PATS the providers have to fulfil the associated obligations. In our view compliance with PATS obligations should only be limited by technical feasibility. The border where a VoIP provider can not be obliged to fulfil an obligation should be the general technical impossibility to cover an obligation. In particular limitations regarding emergency services and the integrity and availability of the network should not prevent VoIP providers to acquire PATS status for their services. Therefore eco refuses the proposal in the consultation document that publicly available electronic communications services gradually over time may decide to take on the rights and obligations of being a provider of public available telephone services. From our point of view it is not desirable that VoIP providers have the choice between ECS and PATS classification or the decision to move gradually from one status to another. A clear distinction can and should be drawn depending on the products offered. Also the Universal Service Directive does not foresee a gradual move from one status to another. Providing an option will increase the danger that incumbents with significant market power would deprive from their regulatory obligations. At the same time it would be prevented that Berlin, 31.8.2004 Seite 2 von 9 20040831-VoIP-Comments

VoIP providers and traditional PSTN market players are treated disproportionately. Irrespective of this, the regulatory framework must avoid undue burdens, support innovative services and easy access with low entrance barriers for new market entrants. eco therefore recommends that the European Commissions consultation document should not only consider the requirements with regard to new entrants. It has to be taken into account that incumbents with significant market power will try to leverage their market power from PSTN to VoIP. Therefore it is necessary to classify VoIP into the current voice markets and to oblige the incumbents with the obligations currently applied for PSTN voice services. Otherwise contrary to expectations a strong tendency towards re-monopolisation will appear soon. Bitstream access Current VoIP technology relies upon high quality data networks with low latency and near-zero packet loss. Service differentiation requires control and enforceability of a defined QoS for the underlying transport (IP) service. Considering the above and taking into account the current real-world implementation of broadband services, the availability of a wholesale bitstream access product is clearly identifiable as a requirement for VoIP services. Bitstream access is important for the rollout of broadband services and applications. There is strong interdependency between VoIP enabled services and broadband services. The deployment of VoIP enabled services will promote fast internet access to consumers and accelerate the objectives of eeurope. At the same time availability of fast internet access will expedite the deployment of VoIP services. In order to stimulate a competitive broadband market under the new regulatory framework for electronic communication networks and services and to open the retail DSL services market - mostly controlled by the incumbents - to competitors it is essential to enforce the provision of bitstream access. An appropriate wholesale bitstream access product offers new entrants the possibility to differentiate their services by altering technical characteristics of the xdsl product and enables them to offer their own, value added services to consumers. Berlin, 31.8.2004 Seite 3 von 9 20040831-VoIP-Comments

Although bitstream access is covered in ECs Recommendation on relevant markets and in the German telecommunications act (TKG), an appropriate wholesale bitstream access product is at present not available for the competitors. The German incumbent s offer simply consists of a resale product that does not substitute bitstream access because it does not allow competitors to differentiate their services from those of the incumbent. The product today offers no service guarantee, QoS or uptime availability and is therefore only partially suitable for VoIP services. The German Regulatory Authority RegTP just started to undertake the market analysis. eco would therefore like to stress the importance of the availability of an appropriate bitstream access product for German competitors in a sufficient timeframe. For the deployment of VoIP services, it is necessary that incumbent s wholesale bitstream access product as well as the DSL resale product have defined SLA and QoS that facilitate VoIP services. With the consideration of VoIP services unbundling of voice and broadband DSL services constitutes a very important point. In all European Member States (with the notable future exception of Belgium) the existence of incumbent s broadband DSL access is bound to the existence of a voice telephony subscription with the incumbent. Customers will loose their DSL broadband access line if the underlying telephony is cancelled or transferred to another service provider. For this reason customers willing to use VoIP services over the broadband connection are in addition forced to pay their traditional phone service. Therefore customers are discouraged from using VoIP services as a substitute to the standard telephone line. This inhibits the development of VoIP services designed to be an alternative to PSTN or ISDN, which in turn prolongs the incumbent grip on its near monopoly market share in voice subscriptions with all its negative aftereffects. eco therefore recommends that the unbundling obligation has to be applied to the requirement to offer bitstream access to achieve the unbundling broadband internet access and voice subscription of the incumbent. Such a wholesale offer will induce the incumbent operator to offer unbundled retail services as well. Berlin, 31.8.2004 Seite 4 von 9 20040831-VoIP-Comments

Numbering Numbering has a huge impact on the deployment of VoIP enabled services, historically all access to telecommunication networks and services was switched and identified by numbers. Even so this is no longer a strict requirement, common practice and interfacing with legacy networks typically relies on numbers and number availability. eco therefore recommends that VoIP providers have access to all available number ranges. In particular, the facility to offer geographic numbers is of vital importance for the decision of prospective customers. Additional to geographical numbers, separate VoIP number ranges should be available, especially for ECS services. As a reaction to the separation of the telephone service from the infrastructure, we suggest, that the allocation of numbers and the specific national conditions to the rights of use of numbers should be eased. As stated in Article 10 of the Framework Directive Member States must avoid discriminating between providers as regards the numbering used. Therefore access to numbers and in particular to geographic numbers should not be restricted to VoIP services with physical access to a subscriber line. Considering the allocation of numbers eco recommends that physical and logical access to a subscriber line should be treated equivalent. Furthermore, to ensure that geographic numbers are only used in the appropriate region will be difficult with regard to the possibility of nomadic usage of VoIP services. Considering that the nomadic usage is one innovative feature of VoIP services and that the distinction between geographic and non geographic numbers is already beginning to vanish the occasional nomadic usage of even the geographic number should be permitted. In this context eco recommends an adaptation of the rules for using the numbers. Number portability The right to port numbers is another basic requirement to foster competition and stimulate the emergence of new services. In Germany, the introduction of effective number portability from the traditional PSTN to VoIP services is hampered by the bundling of legacy telephone connection with broadband internet access. As explained before, the number is dedicated to the legacy telephone line. Due to this, number portability to VoIP services is not ensured and therefore the customers are discouraged Berlin, 31.8.2004 Seite 5 von 9 20040831-VoIP-Comments

from switching to VoIP. Incumbents must be obliged by the regulators to offer their telecommunications services in a fully unbundled way. eco strongly recommends that this obligation is applied for the unbundled allocation of the legacy telephone line and broadband internet access. Moreover, it has to be born in mind that incumbents will try to prevent an effective number portability from the traditional PSTN to VoIP services by any means. Consumer Protection Public policy requirements set out in the Directives and in the case of national measures that implement EU legislation may affect VoIP services. In particular, integrity and availability of the networks and inline powering obligations have to be addressed and reviewed. eco broadly concurs with the European Commissions approach to encourage VoIP providers to provide comprehensive information about their VoIP service and in particular how it differs from traditional telephone service. In order to build trust in VoIP services, this information should be included in the standard terms and conditions and already provided to the customer in the provisioning process. Reliability of IP networks and technical feasibility is an issue that has to be addressed. As matter of principle, we support the idea that that every ISP should guarantee reliability of infrastructure to a certain degree. For PATS classified services primarily, the provider of the VoIP service should be required to ensure the availability independently of whether he has control of the underlying infrastructure or not. While this probably means that the VoIP provider needs to conclude an agreement with the provider of the underlying infrastructure, this clearly falls into the domain of the VoIP provider and not the customer. To elaborate our point of view we would like to point out that as a rule, the providers of the underlying infrastructure provide electronic communication services only. Since VoIP services can be provided independent of internet access, the broadband access provider will have no actual knowledge that his customer uses VoIP services, therefore the obligation to ensure the availability of PATS causes undue burdens for the broadband access provider. The provider of VoIP services has both knowledge of the PATS service and the ability to conclude an agreement with the provider of the underlying infrastructure to ensure the reliability Berlin, 31.8.2004 Seite 6 von 9 20040831-VoIP-Comments

of the service. However, it has to be borne in mind that the conclusion of an agreement to ensure the availability of services could be denied by the incumbents. In Germany we have - historic - inline powering obligations for public available telephone services to ensure the availability of emergency services. Nevertheless inline powering obligations should not be applied to VoIP services because it is technical not feasible to ensure inline powering for DSL access. We suggest that providers inform their customers about the impact of power failure on their service and how it differs from traditional telephone service. Emergency services eco concurs with the European Commissions assessment that access to emergency services is extremely important for citizens and that it is desirable that access to emergency services is available from as wide a range of services as possible. EC and NRAs should address and discuss these issues together with the industry. It has to be considered that an adaptation of PSTN emergency functionalities to VoIP without any reservation will be difficult to implement. eco therefore recommends an evaluation of the technical possibilities and feasibility by EC and NRAs in cooperation with the industry. In this context, the costs for technical solutions should be evaluated. Furthermore, an adaptation of existing emergency technologies used by PSTN to VoIP services might not even be necessary. The opportunity to develop and implement new solutions for emergency services for VoIP should be elaborated. A common platform of government, industry and emergency authorities should be provided to promote the development of technical solutions. Incentives and funding to improve access to emergency services should be provided. eco opposes the Commissions proposed principles concerning the routing of emergency calls. At the current stage of VoIP market development, these principles present undue burdens to the providers of VoIP services and the network operators. Furthermore, these provisions are in excess of the obligations required by the legislature when the directives were adopted. From our point of view, such obligations should be restricted by the technical feasibility. Especially when VoIP services are provided independent of internet access, it is impossible for a VoIP provider to abide these obligations as well for the network operator that has no actual knowledge that his customer uses VoIP services. Berlin, 31.8.2004 Seite 7 von 9 20040831-VoIP-Comments

eco would therefore recommend that any of these obligations should be postponed until technical solutions have been examined. Lawful intercept and data retention In the context of VoIP lawful interception rules and planned mandatory data retention are issues that have to be addressed and discussed. Lawful interception rules and planned mandatory data retention requirements hamper VoIP services and might not be translatable at all with current technology. New market entrants have to take into account the expense factor of these measures. Established VoIP operators have to schedule a significant budget for equipment investments in order to comply with their obligations. Nevertheless, a level playing field has to be created between VoIP providers and PSTN operators. Lawful intercept eco concurs with the EC s harmonized approach in order to determine standardized measures and technical solutions. Due to the single market, this approach could lead to cost savings for ISPs. Nevertheless it must be possible for ISPs to implement their own interception solution because even standardization may not be appropriate for individual network architectures. Furthermore, it is required to grant exemptions for small and medium sized businesses depending on size of VoIP customer base. In Germany, providers have to ensure compliance with their regulatory obligations. The service providers will have to provide evidence before market entry that they are able to implement lawful intercept orders. Without compliance market entry for new services is not permitted. Data retention Up to now in Germany we do not have a mandatory data retention regime implemented. The Federal Council of Germany has refused attempts to implement a mandatory data retention regime for traffic data. If mandatory data retention is required, the evaluation of the economic potential of VoIP services as well as for ECS in general will change. There is a significant disproportion between the investment required for mandatory data retention and supplying VoIP and ECS services. Berlin, 31.8.2004 Seite 8 von 9 20040831-VoIP-Comments

Due to this disproportion, market entry and divulgence of VoIP services will be hampered if mandatory data retention is adopted. eco therefore expressly declares its disapproval of mandatory data retention and any attempts of the EU to mandate a mandatory data retention without total cost reimbursement. Extra-territorial VoIP providers Considering lawful interception and mandatory data retention in Europe, eco is convinced that those requirements determine competitive disadvantages in comparison with non EU providers. It has to be borne in mind that VoIP services can easily be provided on a worldwide base and a presence in the EU is not necessary. As can already be seen in the early stages today, we expect commercial VoIP providers with significant size to enter the European market from abroad. With regard to non EU providers which are not burdened with EU regulatory obligations, the expense to ensure compliance with regulatory obligations is disproportionate. eco therefore recommends that the present and intended obligations should be reviewed to prevent undue burdens to European providers and promote their competitive ability in an international environment. Berlin, 31.8.2004 Seite 9 von 9 20040831-VoIP-Comments