Google Voice, the free VoIP service launched in March of 2009, has reportedly been blocking some calls placed to rural areas.   Google Voice, a free service repeating a familiar Skype offer but working on wired and wireless phones rather than Skype’s original computer-to-computer model,  offers users the opportunity to have a single telephone number for contact with several home, office or wireless phone numbers  (see DATALINE Google's Newest Service Launch: Google Voice).  This service, like many VoIP services, offers features such as outbound and inbound calling, voice call screening, listen in, call blocking, sending and receiving SMS, call forwarding, voicemail, voicemail transcripts and more.

Carriers, with AT&T taking the legal lead, complain that Google is a competitor to telecom providers and should be subject to all of the regulatory guidelines applicable to other telecommunications services providers.  AT&T stated in its September  25th letter to the Federal Communications Commission (FCC) that Google is "nothing more than a creatively packaged assortment of services that are quite familiar to the Commission."   At issue is Google's practice of blocking certain calls to evade high local termination charges.  The argument is that Google is "flouting the so-called 'fifth principle of non-discrimination’ [which states that broadband providers cannot discriminate against particular Internet content or applications] for which Google has so fervently advocated."   Google’s  blocking of access to certain providers reveals actions contradictory to Google’s heavily-argued net neutrality stance.

As a result, the FCC is asking Google for more information about its service so it can make a decision as to whether it will require Google to follow the same regulations as telecom carriers.

Analysis:

Google Voice and the debate surrounding it brings up a number of issues that hold the potential to change the dynamics of the telecom industry

• The question of whether Google voice will be required to terminate all calls could have serious implications for Google on one side, and the rest of the industry on the other.  If Google is required to land calls to expensive local exchange providers, Google could be forced to charge for its service, steeply dropping the penetration and impact of Google Voice.  It is unlikely that people will pay for additional phone services when they already have high monthly bills for mobile and landline services.  On the other hand, if Google is allowed to evade local charges, it will be difficult to define which services can follow the no-blocking rule and which do not, potentially leading carriers to come up with clever ways to profit from evading access charges.    For instance, rural ILECs report that some VoIP players are withholding access fee payments, parasitically riding on the ILECs' costly networks and claiming theirs is a data service not subject to access fees.

• The primary purpose of AT&T's letter was not to tackle Google, per se, but to entice a debate about the flawed system of exchanging payments between phone companies. Currently, when a long-distance call is terminated, carriers can pay from next to nothing to as much as 7 cents per minute in rural services areas.   These higher charges help rural carriers cover the high costs of providing services to relatively few customers across large geographic footprints.  AT&T and others would like to see these charges decrease and to have the system simplified.  The Google Voice debate will help to bring the issue to the forefront, just as the FCC looks at net neutrality.

• In line with overhauling the access fees charged by rural carriers is the drive to solve the problem of "traffic pumping," which is a nuisance for AT&T and Google alike.  Google cites on its policy blog that "[certain local phone carriers] partner with adult sex chat lines and "free" conference calling centers to drive high volumes of traffic. This practice has been called 'access stimulation' or 'traffic pumping' (clearly by someone with a sense of humor)."  Carriers can levy high access charges in rural areas.  Companies like Freeconferencecall.com make agreements with rural carriers to place switches in their exchanges to receive and route calls.  So, when an AT&T customer calls one of these numbers, AT&T must pay the high termination cost for a call that is never actually terminated on say, a pig farm in the rural exchange.  Hopefully the FCC will use this as an opportunity to take a serious look into the problem of traffic pumping.

• Finally, a concern of all mobile carriers is the fear that Google Voice and other mobile VoIP applications will cannibalize mobile revenues.   If users can use VoIP via Google Voice, they will have little need for voice packages with high numbers of minutes, and they are less likely to pass their allotted minutes.  Naturally, AT&T and Apple rejected Google Voice as an application on their phones, most likely to protect voice revenues.  The FCC has been looking into the matter.  In an effort to prevent public relations problems and possibly FCC pressure that net neutrality principles be applied to mobile carriers, AT&T announced on October 6th that it will no longer prevent customers with the Apple iPhone from using Internet telephone services to bypass its own voice network.

The Bottom Line:

With a new administration in place and an FCC promoting more connectivity, more application options and net neutrality, mobile VoIP is likely to gain traction.  Hence, the system of access charges will likely be retooled in the future.  Google's long-term goal of becoming a major presence in the mobile world could materialize with Google Voice and Google Wave (a unified communications portal), in addition to the Android operating system.  Android will be included on Verizon and Sprint handsets in the near future and likely will be sporting preloaded Google applications.   To what extent Google will find revenues -- and disrupt carrier revenues -- has yet to be determined, but it is becoming increasingly clear that Google's determination to extend its access model in the wired world into the wireless realm is beginning to gain traction, and to draw some punches back from wireless carriers.