VoIP Market Set for Regulation

The regulatory rules applicable to the fast-moving Voice-over Internet Protocol (VoIP) market have finally been clarified, following an announcement by communications regulator Ofcom on 29 March 2007. According to telecoms experts at international law firm Eversheds, VoIP operators could face hefty fines if they do not comply.

In its final statement on the regulation of the VoIP industry, Ofcom has confirmed its intention to proactively monitor and enforce compliance with these rules. These are detailed in the amended General Conditions of Entitlement – the regulatory requirements with which all persons providing electronic communications networks and services must comply – 14 and 18.

Neil Brown, head of telecoms at Eversheds law firm, comments:

“There are two clear areas which will affect VoIP operators, General Condition 14 and 18. Under the new General Condition 14, VoIP operators who offer services to residential or small business customers must provide information on service reliability, for example, whether the VoIP service will work in the event of a power outage, ability to access the emergency services and availability of number portability, that is, where customers can retain their number if they switch service provider. The new rules will require VoIP operators to implement a Code of Practice and also to amend their terms and conditions to reflect these new obligations.

“Under a revised General Condition 18, Ofcom has made it clear that VoIP operators whose services are available to the public, enable their users to make and receive national and international calls and access the emergency services through a normal telephone number, will now be subject to stringent obligations imposed on providers of Publicly Available Telephone Services.”

The new obligations under General Condition 18 came into force on 29 March 2007, and new General Condition 14 comes into force on 29 May 2007. Ofcom has also announced it will open a consultation later this year, looking at whether some VoIP providers should be forced to offer access to emergency numbers.

Neil Brown continues: “With Ofcom estimating that by the end of 2007 there could be as many as 3 million VoIP users in the UK, increased clarification of the rules applicable to VoIP providers should be welcome. However, Ofcom needs to ensure it does not over-regulate what is still essentially an emerging industry. The regulations will need to find the right balance between protecting the consumer and allowing innovation and competition within the VoIP industry to thrive.

“That said, VoIP providers should review Ofcom’s statement and identify the implications of the new rules on their business. With Ofcom keen to show proactivity in enforcing the rules, providers could find themselves facing fines of up to 10% of turnover or even suspension of the authority to provide electronic communications in the UK if they fail to comply.”

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