Internet phone services to be screened

Date: 17/10/1996

By Chris Johnstone

THE new technology of telephony via the Internet is being investigated by European Commission competition officials to determine whether it should be covered by the rules applying to public phone services.

Officials from the Directorate-General for competition (DGlV) are trying to gauge whether Internet phone services have the potential to rival the phone links provided by established companies and should therefore be brought under the same regulatory regime.

This could, for example, mean Internet service providers being asked to foot part of the bill for meeting the public service obligations - such as the provision of

rural telephone services and call-boxes - placed on mainstream phone companies.

Internet telephony uses an ordinary personal computer, some relatively advanced software, a phone card and a microphone to translate voice messages into digital packets which can then be broadcast on the receiver's computer.

Conversation is still laboured on the new service, but it offers international links for the price of a local call and has the potential for fast improvements in quality.

Firms such as Intel, which is offering Internet web sites for phone services, say Internet telephony should remain free of regulation. “We look upon it as an enabling service on the Internet. It should definitely not be regulated as voice-telephony,” said Monique Mèche, Intel's EU regulatory affairs manager, adding that the US approach to Internet telephony had already established that it should not be hampered by rules.

US-based Intel is the world's biggest microchip producer and also manufactures personal computers, networking and communications equipment.

Even ahead of a DGIV decision, pressure is growing for the burden of public service costs to be widened to cover more than just voice-telephony firms. Belgian Post and Telecommunications Minister Elio di Rupo has already called for Union rules to be changed so that all companies profiting from market-opening moves bear part of the burden.

In Europe, Internet telephony is still restricted mostly to Internet gurus, but it has attracted a wider following in the US.

British Telecom said it was still working out its approach to Internet telephony. But a spokesman said that in the short term, the service would appear to threaten lucrative international phone business, although in the longer term, it might offer opportunities for established phone companies.

They could act as service providers and offer the infrastructure improvements on which faster and more sophisticated Internet phone links would have to be based.

Pekka Vennamo, president and chief executive of PT Finland Ltd, sees a time in the near future when the pressure of Internet telephony will force international tariffs down to the same levels as local calls. Telecom companies will then have to focus on higher growth sectors such as mobile phones and value-added services.