Tip Top VoIP Service

Local phone giant SBC says its TipTop service, which it is rolling out across its 13-state territory, is just a new option to make life easier for VOIP companies. Yet that’s not how those putative customers see it. Following on the heals of BellSouth’s recent petition to eliminate pro-competitive “Computer III” safeguards, SBC’s move looks suspiciously like a step toward strangling the nascent residential VOIP industry. Even FCC Chairman Michael Powell, who has pushed through a series of rule changes favorable to the local incumbents, finds TipTop alarming. He issued a strongly-worded statement warning SBC that he would fight “any action that might slow the IP-services revolution.”

The details of TipTop are somewhat technical, but the issues ultimately come down to money and power. SBC and its fellow Baby Bells have the power. VOIP providers, such as Vonage, AT&T, and Level 3, must interconnect with these local phone companies to originate and terminate calls on the public switched network. In other words, they must contract with the Bells to allow their customers to make or receive calls involving non-VOIP users, which today are the vast majority of the public.

The Bells want to charge VOIP providers the inflated “access charges” they impose on traditional long-distance companies. Those charges bear no relationship to market prices. If VOIP providers had to pay access charges, their costs would skyrocket. Imposing access charges might wipe out the competitive benefits of using more efficient Internet technology, effectively halting the momentum toward VOIP. Fortunately, the FCC has so far blocked the Bells from taking this step.

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