**Before the**

**FEDERAL COMMUNICATIONS COMMISSION**

**Washington, D.C. 20554**

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FCC Voice Over IP Forum )

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**STATEMENT OF JEFFREY CITRON, CEO**

**VONAGE HOLDINGS CORP.**

> In crafting the Telecommunications Act of 1996, Congress paid careful
> attention to the benefits Americans derived from the Internet, its
> open architecture, and its ubiquity. Recognizing that powerful new
> Internet applications were taking advantage of this unique and open
> network to drive innovation, productivity, and commerce, Congress was
> careful to create and codify a regulatory safe-harbor for the Internet
> and Internet applications. This environment not only helped drive
> economic growth by encouraging the development of new applications,
> but these new applications also drove rapid and profound interest in
> connecting to the Internet. In this fashion, the Internet has become
> exponentially more valuable; this value is a product of both the
> number of users connected to the network as well as the continued
> availability of powerful new applications that take advantage of the
> network's ubiquity.

VoIP is yet another Internet application and, as such, the mere specter
of common carrier regulation opens up a Pandora's box that has the
potential to not only devalue and slow the growth of VoIP, but also
detrimentally impact future innovation of new Internet communications
applications. By advocating that common carrier regulations apply to
Internet applications, the proponents unwittingly threaten to commence a
cycle that could lead to the decline or perhaps the destruction of the
delicate ecosystem of the Internet itself. Should the cycle begin with
VoIP regulation, it will undoubtedly spread to other applications,
perhaps e-mail, instant messaging, Internet conferencing, Internet video
and "radio" programming. No doubt endless other Internet applications
would also soon fall prey to similar regulation. As the cycle of
regulating applications progresses, the Internet, a once fertile ground
for American innovation, would undoubtedly become increasingly barren of
creativity or investment. As regulation reduces the availability of
innovative Internet applications the value of the Internet to
subscribers will decrease; ultimately they will unplug themselves -- not
only threatening the ubiquity of the Internet itself, but also any
undermining demand for the growth or deployment of future wireline and
wireless broadband networks.

While others today will focus on the promise of VoIP, I believe in many
regards that is already self-evident. Instead, I will focus on four
critical issues of communications policy that should be addressed by
this Commission with respect to VoIP. Although the issues of CALEA,
emergency services, Universal Service and Access Charges are important
matters for consideration -- their favorable resolution does not require
this Commission to take the position that VoIP services be regulated as
traditional telecommunications carriers. Indeed such a result would not
only lead to a fundamental devaluation of the Internet and Internet
applications but would, as a more practical matter, likely lead VoIP
providers to offer their services from offshore locations at the expense
of American jobs, tax revenues and outside of the control of domestic
legal authority.

**CALEA**

Proponents of regulation assert that, in order to properly effectuate
CALEA, certain providers of voice over IP services must be regulated as
telecommunications carriers under the Telecommunications Act. While
Vonage's VoIP offering is clearly an information service under the
Telecommunications Act, CALEA and the Act are completely different
statutes and entities not subject to Title II carrier regulation may, in
some circumstances, be otherwise subject to CALEA's obligations.
Notwithstanding, it is important to understand that even under such a
framework, the vast majority of voice-enabled Internet communications
will forever remain outside the scope of CALEA. Internet communications
such as Instant Messenger, ICQ, Skype, Webex, Net Meeting and voice
enabled e-mail all remain exempt from coverage under the current
statute. As a result, it is a disservice for parties to suggest that
this Commission can solve important matters of national security simply
by characterizing some VoIP providers as telecommunications carriers
under CALEA or the Act itself. If CALEA's information service provider
exemption somehow limits law enforcement's ability to perform vital
functions, it is critical to confront this issue head-on, and in a
thoughtful and technologically neutral fashion, rather than to sweep
CALEA's potential infirmities under the rug and address national
security issues in a piecemeal manner, one service provider or one
technology at a time.

Data services such as Vonage store and transmit information to the
proper authorities when they receive a subpoena. Vonage has been served
subpoenas from various law enforcement agencies. In all instances,
Vonage has complied with its obligations under the law to provide
information to law enforcement representatives. In no instance was
Vonage unable to provide requested information. Although Vonage has
never received a request from law enforcement for a customer's data
stream (ie: a "call"), the company has the ability to route or store
this data flow. There exists no immediate technical obstacle to
providing this data.

> Although Vonage is capable of intercepting call flows at the request
> of law enforcement, the rapid development of new Internet applications
> call for the FCC's thoughtful consideration of whether CALEA's limited
> scope materially impacts legitimate law enforcement activity. If so,
> it is incumbent upon the Commission to work with Congress and for
> Congress to craft legislation broad enough to address these larger
> issues. While the deployment of new technology will always raise new
> concerns, innovations in data networking and VoIP will offer the means
> by which authorized law enforcement is able to transparently and
> instantaneously receive call data, billing information, or tap or
> intercept real-time data flows without service provider intervention,
> delay or overhead. Such real time intercept capabilities need not be
> limited to one technology or one service provider but with proper
> guidance by this Commission could ultimately become available
> irrespective of the communications device being utilized.

**EMERGENCY SERVICES**

> Proponents of VoIP regulations assert that to provide adequate access
> to emergency services, VoIP providers must be regulated as
> telecommunications carriers. Unfortunately regulations themselves will
> not solve unique technical issues associated with provisioning
> emergency services over data networks. Admirably, however, this
> industry has made significant progress in resolving these technical
> issues and deploying emergency services in the absence of direct
> regulation.
>
> Just last week, the National Emergency Number Association adopted a
> joint resolution with the VoIP industry and Vonage directly, to work
> together toward technical solutions for the delivery of VoIP 911 calls
> to emergency service personnel. This was done in the absence of any
> government intervention or policy directive. In reality, competitive
> necessity requires not only that VoIP providers offer emergency
> dialing capabilities, but also ensures that they will compete based,
> in part, upon the functionality and reliability of these capabilities.
> Early on Vonage undertook to deploy one of the first VoIP emergency
> service solutions. Vonage's "Dialing 911" essentially provides
> functionality that speed dials the user's local public safety
> answering point ("PSAP"). This solution is the first phase in a series
> of improvements that will ultimately permit VoIP providers to transmit
> ANI and ALI information to the PSAPs in a manner similar to the
> fashion in which wireless carriers offer emergency services. Although
> unique technical issues confront providers and PSAPs seeking to
> facilitate the delivery of emergency services in a packet based
> environment, industry is working cooperatively with emergency service
> organizations to overcome technical and operational hurdles. In
> addition to working with NENA, Vonage is also working directly with
> PSAPs in Minnesota, Texas, Washington and Vermont.
>
> In light of the voluntary cooperation between industry and emergency
> services to expeditiously formulate a framework for next generation
> deployment, it is unnecessary and unwise to impose legacy regulations
> designed for legacy network architectures. Since technology is
> evolving, the existing 911 infrastructure must also evolve in order to
> be able to communicate with new technologies. The Commission should
> formulate a policy which enables the systems and capabilities of
> emergency services to move forward into the 21^st^ century, not
> relegate them to the 20^th^ Century. Imagine a world where you can
> access emergency services from any device including a PDA, Blackberry,
> instant messenger or similar device. In this data world, medical
> records and precise location information would be delivered to
> personnel in the field seamlessly and wirelessly. Because this is a
> data world, *any* information can be transmitted to those on the scene
> -- in real-time. Furthermore, by expanding the universe of devices
> that can connect to emergency services, the Commission will facilitate
> the advancement of a robust funding mechanism that will support the
> upgrade and deployment of enhanced next generation emergency service
> capabilities. Although the industry is moving in this direction on its
> own, the Commission can provide valuable input and facilitate the
> universal deployment of this infrastructure.

**UNIVERSAL SERVICE**

> Proponents of VoIP regulation argue that in order to preserve the USF
> fund, all forms of VoIP must somehow be characterized as
> telecommunications carriers. This is untrue, not only because, for
> example, Vonage pays virtually equivalent amounts to USF as an
> indirect contributor as it would if it were required to contribute
> directly -- but also because the Commission has broad statutory
> flexibility to modify the current contribution metrics without
> engaging in any perversion of the statutory dichotomy between
> information and telecommunications services. While Universal Service
> has, to some degree, historically been used to promote the deployment
> of narrowband telecommunications capabilities to rural and underserved
> areas, the advent of new broadband technologies and Internet
> applications including VoIP require not only that the base of
> contributions remain sufficient -- but also that the funds be
> appropriately shifted from the maintenance of legacy infrastructure
> and to facilitate the deployment of broadband networks and
> applications.
>
> At present, Vonage contributes to USF as an end-user of
> telecommunications services. Based on figures current as of September
> 2003, Vonage paid into USF an amount equal to approximately \$1.00 per
> the equivalent of a subscriber line. Although Vonage does not
> contribute directly into USF on the basis of its interstate subscriber
> revenue, the company estimates that based upon call usage patterns it
> would contribute approximate \$1.05 per subscriber line equivalent
> under such a direct funding mechanism. Several other funding
> alternatives are currently under review at the Commission. Under a
> connection based methodology, assuming a surcharge of \$1 per
> connection, Vonage's contribution would remain the same as it is
> today. If Vonage were to pay directly into the fund under some of the
> per-number contribution proposals under consideration, Vonage would
> pay \$1.07 per customer. If Vonage were to pay directly into the fund
> under any of these various mechanism, the amount would not be
> drastically larger than what is paid in today as an end-user of
> telecommunications services.

Vonage's service and other exciting communications applications
increasingly rely upon broadband Internet access and broadband networks.
The universal availability of these powerful applications, as well as
the ubiquity of the Internet itself, remains dependent upon broadband
network deployment to underserved markets and rural areas. The
Commission and Congress should work to ensure that carriers are
sufficiently incentivized to deploy new broadband network architecture
and that USF is not overburdened, but sufficiently capitalized, to
appropriately and efficiently encourage broadband deployment and the
availability of next generation services. To the extent that outflows
from USF, or the contribution metrics for inflows need to be altered to
ensure this goal, the Commission has sufficient discretion to do so
under the current statutory framework.

**ACCESS CHARGES**

Finally, proponents of regulating VoIP argue that to maintain the
current access charge regime, VoIP must be regulated as a
telecommunications service. This is untrue as well -- especially
considering the quagmire of intercarrier compensation issues that
existed prior to the commercial deployment of VoIP. For example, because
of the antiquated access fee regime, it costs more money to call someone
one mile away versus six thousand miles away. The reasons for initiating
access charge reform proceedings are unrelated to the deployment of VoIP
and the Commission must be careful not to derail or forestall the
current efforts to address access reform independent of any VoIP NPRM.

\*\*\*

> In closing, it is important to recognize that the Internet is unlike
> other networks in that it is an open platform for development. This
> open platform and the regulatory safe-harbor created by Congress have
> supercharged innovation, efficiency, economic growth, as well as the
> ubiquity of the Internet itself. While I believe few question the
> promise of Internet communications applications, calls for
> inappropriate regulations threaten not only to slow domestic
> deployment of innovative technologies, but also retard America's
> unmatched leadership in the field.
>
> Rather than discouraging American innovation and driving service
> providers to offshore locations at the loss of American jobs and tax
> revenues, it is incumbent upon this Commission to reject calls to
> regulate the Internet and thereby ignore Congressional intent. In
> exploring VoIP in its upcoming NPRM, this Commission has a tremendous
> opportunity not only to reaffirm this Nation's policies concerning the
> development and deployment of the Internet and Internet applications
> \-- but also to provide a new catalyst for investment in broadband
> infrastructure and Internet communications applications and further
> ensure the delivery of new technology and features to consumers, law
> enforcement and emergency service personnel alike.