By Andreas M. Antonopoulos, Nemertes Research
February 25, 2005

Recently, privately held Vonage Holdings became the second VoIP provider to notify the FCC of possible tampering of their call traffic by a competitor
last mile provider. Almost six months ago, privately held Nuvio Corporation
sent a letter to the FCC complaining that unnamed providers were blocking
Nuvio calls. Both VoIP services and cable providers are considered
information services and not regulated by the FCC. Furthermore, the FCC has
not ruled to forbid discrimination at the application "layer," so even if
the complaints are well founded, the packet tampering may not be illegal.

As enterprises expand their VoIP deployments, they are increasingly looking
at VOIP as a cost-cutting and productivity solution for remote and virtual
workers. Recent Nemertes benchmarks indicate that 90% of employees work at
remote offices, and the number of virtual workers has increased by 800% in
the past five years. IT executives who are looking to layer IP telephony on
top of consumer-grade Internet networks should therefore take extra
precautions: When extending VoIP deployments outside the company's network
perimeter, IT managers should consider tunneling the VoIP packets through a
VPN. Virtual Private Networks will protect against eavesdropping and can be
used to apply QoS prioritization of voice packets. Given the uncertainty in
the regulatory framework, VPNs will also protect against VoIP-breaking
anti-competitive behavior.

For fledgling VoIP providers, this situation represents an obvious competitive risk. As more and more cable providers and other last mile providers begin offering competitive voice services, they will be tempted to use their control of the last mile as a competitive advantage. Since most providers apply QoS traffic prioritization, it is not inconceivable that competitor's calls will be given a lower priority, leading to reduced quality of service.

The complete Impact Analysis is available to Nemertes clients. For more information, please contact Chris Zimmerman at christine@nemertes.com