Signal Quality

I was noticing something earlier today when reading the USAC’s (Universal Service Administrative Company) interpretation of who must contribute to the USF (Universal Service Fund) according to FCC 06-94. The FCC 06-94 order specifically states that interconnected VoIP providers must pay into the USF, and they go on to define an interconnected VoIP provider as a service that: “(1) Enables real-time, two-way voice communications; (2) Requires a broadband connection from the user’s location; (3) Requires Internet protocol-compatible customer premises equipment (CPE); and (4) Permits users generally to receive calls that originate on the public switched telephone network and to terminate calls to the public switched telephone network.”

Note the use of ‘and’ in that statement to imply that in order to be considered interconnected, you must meet all the four criteria.

The USAC’s interpretation of this regulation, however, is vastly different from everyone else’s interpretation. According to the USAC, “The obligations established by the FCC apply to all VoIP communications made using an interconnected VoIP service, even those that do not involve the PSTN…” which reads as though they think that an interconnected VoIP provider is not necessarily one which connects to the PSTN.

This seems to be a somewhat radical interpretation of what an ‘interconnected’ VoIP provider is, expanding their interpretation to even directly VoIP to VoIP services that never touch the PSTN such as FWD or even MSN to MSN calls.

I note that their site was updated as of the 17th of July, 2007, and that the site archive doesn’t mention this interpretation prior to this date, so I’m wondering if this means they’re going to start to pressure VoIP providers that don’t actually provide connection with the PSTN to pay into the USF.

Always pushing the boundaries, I often wonder how long it will be before we see the USAC and the FCC attempting to charge users who send instant messages back and forth across states ‘interstate communications’ fees, or requiring companies such as AOL, MSN, and Google to pay into the USF for their AIM, MSN, and Gtalk IM services.

You can’t escape the news these days about how Verizon is suing Vonage for patent infringement. Every week, there’s a new legal twist. The latest of these was that Verizon got the court to issue an injunction against Vonage, disallowing Vonage to sign up new customers. Vonage almost immediately got a stay on that injunction, so they’re back to where they were before — waiting for an appeal.

There are a lot of problems with this court case, and it’s very dear to my heart, since I run a VoIP company. How can Vonage be infringing on so many patents? Why is Verizon just now choosing to enforce them? What does this mean for the future of other VoIP companies? What are the patents involved, and why wasn’t Vonage given an option to license the technology instead of Verizon doing everything in its power simply to shut them down?

The answer to all of these questions is simple. The US Patent system is horribly, massively broken.

A brief look at how the patent system used to work:

You create an invention of some kind. You want to protect your rights, so you file for a patent. In the filing process, one of the requirements for you to receive a patent is that the information you provide must give step by step instructions and details to the point that anyone with materials and time and a little expertise could rebuild your invention from the patent. You are then granted an exclusive patent to this invention, and you can sell it or sell the idea to companies that are able to build it in mass quantities. If someone comes along and creates something that’s like your patented invention, you sue them for breach of patent, and either require them to pay you royalties, licensing fees, or simply require them to stop manufacturing the item.

Lawsuits are built into the patent process. In order to maintain your rights to your patent, you are required to ‘actively defend’ your patent. This means that, if you DON’T sue a company that’s making a device like yours, you are almost certain to lose your patent. As you can see, the patent offers you protection, but only protection to the point that you can police it. If you can’t afford the lawsuit, or you aren’t watching the marketplace like a hawk, or the company that’s infringing your patent is in a country that doesn’t care about your US patent, then your patent was, essentially, a huge waste of money.

For the most part, however, patents on objects are relatively easy to police. If an item comes out and is being marketed, it’s likely it will be marketed in the same segment as your item. You’ll see it on the shelves next to your device. You’ll see it in catalogs alongside your own. It’s easy enough to spot and track down so you can fight to save your rights.

The problem came, however, when the US Patent Office decided to allow method or process patents. Now, anyone can create a process in his head, using technology he may or may not have invented, and patent that process. For instance, I could try and patent the process of using a mouse to click on back and forward buttons on a web browser. As long as the process doesn’t currently exist, and the patent office clerk doing the filing is unaware of the technology in question, it’s very likely I will get my patent.

Suddenly, anyone who tries to create a web browser with forward and back buttons owes me money.

Now, if I try to sue Microsoft, for example, for using forward and back buttons on their Internet Explorer web browser, I’m liable to run into the problem of something called prior art. Microsoft is an enormous company, and has the legal power to crush my little claim. They will say that the concept of forward and back buttons has existed since the days before web browsers, and that my patent has no merit.

From this, we learn two lessons.  One, don’t make your patent easy to understand, and two, don’t target the rich companies first.

I should therefore create a process patent that is far more obtuse. Don’t mention forward and back buttons. Don’t mention web browsers. Make the patent more vague.  For instance, I should patent a system whereby navigation through a series of user-displayed screens and/or menus is facilitated by the local caching of content, allowing a user to proceed through pages or to previous pages more rapidly.

There. No mention of web browsers. No mention of forward and back buttons. And instantly, my idea is applicable not only to web browsers, but to any menuing system that has a back button. I added the little bit about local caching so that it will help explain the technology to the point that it looks like I’m giving a more concrete example. This sort of method patent is far more likely to make it through the patent system, and it gives me a distinct advantage.

My first lawsuit will be against the smallest mom and pop company I can find. They’re not liable to have enough money to fight me, and they’ll have to settle out of court.

As soon as I get a single company to settle, I win. This creates what’s called a precedent. Patent disputes with a precedent are far easier for judges to decide upon. They don’t need to really understand the technology (and face it, there are not a slew of technologically-savvy judges in the US legal system). They can simply rely on the added weight of the precedent to help them make their decision. Obviously, I won before, so I should win again.

My first five or six targets will be small shops that can’t afford the legal fees. Target anyone who might go out of business if he fought me, and anyone and everyone who used a menuing system in his software.  Once I gain a few decent precedents, I can start going after the larger companies with ease. It’s almost a given that a judge will side on the side of precedent, and with several precedents, it’s a no-brainer. It then becomes increasingly difficult and increasingly more expensive to fight against the patent holder, even if the patent is vague, has prior art, or the patent holder has ever made anything based on his own patent.

Enter the Verizon/Vonage patent lawsuit.

Verizon, one of the US’ only two remaining phone companies (AT&T, Verizon) is having trouble competing with Vonage. Verizon’s VoIP product is riddled with restrictions on usage, and their rates aren’t terribly competitive. To top it off, few people even know Verizon offers VoIP service. Their chosen service name is VoiceWing, which leaves most to wonder what it has to do with VoIP or Verizon. Vonage, on the other hand, is a well-known brand in the US. Their commercials, while horribly inane, certainly leave you knowing who they are.

Verizon simply can’t compete. The rule for competition in the US is, if you can’t compete, legislate your competition out of business.  Verizon tried this. Regulations from the FCC were passed (after heavy lobbying from AT&T and Verizon) that required Vonage to get all of their customers to sign a notice saying that it was understood that Vonage didn’t offer the same level of Emergency 911 services that a traditional land line offered. Regulations were passed to force Vonage to offer E911 service to all their customers, regardless of feasibility.  Vonage was almost shut down because it was given a ridiculously short time table to innovate, install, and verify new technology to allow E911 access for all its customers, but it made it over that hurdle.

It looked like Verizon would have to compete the traditional way after all, but they still had a trick or two up their sleeves. In order to stop Vonage once and for all, Verizon dragged up 7 rather vaguely-worded patents that might, in some way, apply to things Vonage is doing, and decided to sue Vonage for breach of patent. Yet again Vonage is on the brink of being shut down by a court order unless they can modify their technology to no longer fall under the patents.

The patents that Vonage was declared guilty of violating are vague to the point of being worthless, but they’re so convoluted that, having read them over and over, I still couldn’t tell you exactly what they are for. One of them talks about a method by which a telecommunications service can somehow be linked with a name or telephone number. This could refer to standard DNS, or it could be referring to ENUM, which is a way of linking telephone numbers to telephone or non-telephone services, or it could be referring to something that was a standard long before the patent in question existed, mapping a URI using DNS. Since the patent is both verbose and vague, it could very well be applied to all of these things.

Another of the patents allegedly infringed by Vonage was that of a method by which one uses a wireless phone to connect to talk over the internet.  No, I’m not making this up. While it seems pretty obvious that, given a VoIP network, one might want to use a phone without wires to talk over it, this was apparently a patented ‘idea’ granted in 2002.

And therein lies a problem for any number of VoIP companies. Wi-Fi VoIP-only or VoIP-capable phones have become a big thing lately. It really only makes sense that, given the growing availability of Wi-Fi, and the number of VoIP options, using a Wi-Fi phone to make VoIP calls is going to be huge.  Unfortunately, if Verizon gets its way, no one will be able to do that without either paying them money for ‘coming up with the idea.’ That is, if Verizon allows it at all. With its new found patent madness, it may simply disallow companies to use this technology if it doesn’t want them to be able to compete. IdeaSIP has several users that use Wi-Fi phones on our network. Will I be forced to block them because Verizon says they own the rights to the technology?

How about companies like Yahoo and MSN, which allow phone calls via their IM program? Technically, anyone using their IM on a wireless laptop is violating their patent. Where does the madness end? Will companies stop making Wi-Fi VoIP phones because of patent violation worries?

The allowance of process or method patents has become so rampant, that it’s even affecting new technology standards. There are few standards out there that someone hasn’t patented. Usually, the patent-holder is not the person who created the standard.  This was the case recently with Microsoft and its spate of XML-related patents, patenting everything from XML serialisation to XML conversions.  The XML standard was created as an open standard to encourage interoperability, and that a company would choose to patent changes to XML means that XML loses its standardisation and its very reason for being. More and more companies will have to worry about which parts of XML are and are not patented, and some may opt not to use it at all for fear of patent infringement reprisals.

In the VoIP world, this is happening all the time.  ENUM, a proposed standard for allowing easy interoperability between regular phones and Internet-based phone networks has been patented. That patent might fly in the face of Verizon’s earlier patent that vaguely describes a system that could be ENUM. Calling features get patented — like call return and call waiting.  Someone has a patent out there on using SIP to communicate with customer service people.  All of these patents are vague, process-related patents whose only real purpose appears to be patenting new standards so that, someday down the road, someone can come to collect rewards for technology they didn’t even create.

Innovation and standardisation go out the window (why standardise when someone else can patent your creation and force others to pay for it?), and consumers are left with fewer choices and less competition in the market. And this will continue to be the case until someone takes the brave step of completely overhauling and redoing the patent system — a daunting task, likely to bring lawyers and megacorporations screaming from their corners, ready to crush anyone who suggests an alternative to the current broken system.

I was recently asked to give some comments on what I thought of the above proposed regulation (which is essentially ‘USF for VoIP’). I thought I’d share my comments here publicly.

1. What burdens does the proposed rule place on small businesses?

The burden on a small business is tremendous. Small businesses are currently offering low-cost solutions for consumers by maintaining a low overhead. Many (if not most) don’t even handle the actual voice data that travels to and from the end-users in an attempt to minimize overhead costs and maximize business solvency with very low pricing to the consumer. Adding a 64.9% theorized interstate revenue adjustment to small VoIP companies based on sheer guesswork and estimation, knowing full well that smaller companies can scarcely afford to pay salaries, much less commission FCC-approved studies for traffic flow, is going to put smaller VoIP companies in a position of being unable to compete.

With the global nature of the Internet, many small VoIP companies are taking advantage of the increased userbase that the world offers, allowing origination and termination in any number of countries. This regulation, however, would purport to offer that most voice traffic is US-centric and interstate and therefore subject to paying into the USF — a situation which is highly unlikely, and tantamount to taxation of non-US citizens, as any additional costs will have to be passed on to the userbase as a whole.

2. What significant alternatives should the FCC consider?

The FCC seems wholly unwilling to consider any alternatives until they can work out any issues they have with actual distribution of the collected funds — something that seems beyond the purvey of the FCC. If they have, until now, had problems with distribution, it is unlikely that in future they will be able to better regulate themselves. Such a decision will be external.

A solution the FCC could consider would be using less guesswork and more data in their arrival of a safe harbour number for VoIP providers. Alternatively, and more appropriately, the FCC could simply charge a fee based on every DID in the US local area to pay into the USF — bypassing the need to create traffic studies of any kind or to assume that all voice traffic is US-based.

3. Can wireless providers determine actual interstate and international end-user revenues.

This seems reasonable, considering they know which tower a phone is connected to (needed for authorisation on the network), as well as to which tower the call connects. There should be an easy one to one mapping for the purpose of creating absolute data.

4. Should originating and terminating cell sites be used to determine the jurisdictional nature of a call.

If the attempt is truly to determine which calls are interstate in nature, then yes. If the attempt is simply to collect a phone tax, then it’s somewhat irrelevant.

5. Is 37.1% for a wireless carrier appropriate or should it be raised or eliminated?

I’m of the opinion that, because of the nature of what the USF is used for, the rate should be eliminated.

Think, for a moment, back to what the USF is for. The USF is given to rural areas and areas with poor communications infrastructure in order to pay for communications infrastructure. VoIP companies and Wireless providers usually don’t have penetration into the rural areas, leaving the only ones out there to be the Wireline providers. What’s happening is that the wireline providers are paying the least into the USF, but getting a portion of that money back simply because they refuse to enhance the quality of the network infrastructure in rural areas. Meanwhile, VoIP companies and Wireless providers are, in essence, subsidising the wireline infrastructure in rural areas, thereby subsidising their competitors. The USF is clearly NOT suited for a non-homogeneous wireline telecommunications infrastructure. When you add VoIP and Wireless into the mix, it becomes severely anticompetitive.

6. How should the FCC set safe harbour percentages to better reflect market conditions?

Relying on a more accurate study than the TMS Telecoms study would be a good start. The FCC claims that, because of long-distance service bundling, wireless and VoIP companies are more likely to be doing interstate traffic than wireline providers. It is quite rare, however, to find a wireline provider who doesn’t also offer bundling. If it’s good for the goose, it should be good for the gander. The only way to fairly apply a USF tax is to make it a flat number across the board.

7. How can requirements on interconnected VoIP providers be improved?

Requiring a VoIP provider to pay into the USF for data that clearly never touches the PSTN until it hits an endpoint is a mess. That’s much akin to asking people to pay postage for email. While some would like it (most notably the USPS), it destroys the concept of a data stream for which one already pays. End users pay for bandwidth. VoIP companies pay for bandwidth. These payments may be flat rate or per megabyte charges, but the payments are still made, and somewhere along the line, those payments go into the pockets of companies that provide infrastructure for either telecom or data networks.

Where does it end? Is everyone along the line guilty of somehow subverting the USF system? Should everyone pay into the USF from the provider on down to the end user? How does one say that the provider of what amounts to being an automated phonebook for VoIP users is the one who should be paying into the USF to subsidise the wireline companies in rural areas? It seems to be a rather less based on how the technology works and more simply a line drawn in the sand at random.

8. Should the FCC change or eliminate the safe harbour for VoIP providers?

I believe there are other methods by which a more appropriate USF tax could be collected, but I still disagree that VoIP providers should be responsible for paying into a fund that goes to their direct competitors (wireline providers). If, however, the USF must be collected, and the competitors of VoIP must be governmentally subsidised, then the USF should be a flat safe harbour for all involved. No one method of communication is more or less guilty of providing interstate communication, and to assume otherwise is to penalise providers based on outdated and unproven assumptions.

9. Can VoIP providers identify actual interstate revenue?

Until VoIP providers are able to collect accurate and untampered-with IP data from all customers (difficult in the age of IP spoofing and redirection proxies), and until that data can be accurately mapped to an area (while the Geo-IP database is a handy tool, it is in no way perfect or 100% accurate), then no. There’s simply no way to accurately identify actual interstate revenue, and to create numbers — 23%, 31.7%, 64.9% — is to simply create an arbitrary system based on guesswork.