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The Honorable Ron Wyden

United States Senate

516 Hart Senate Office Building

Washington, DC 20510

Dear Senator Wyden:

Thank you for your letter regarding the Internet Tax Moratorium. I am happy to

share my views on Voice over Internet Protocol ("VoIP") and outline our plans to address

VoIP issues in the coming weeks and months. As I have said often, the deployment of


oadband Internet services to every American is a national imperative. I commend your

leadership and commitment to realizing the public and economic benefits associated with


oadband Internet availability and use for our citizens.

I share your excitement about the potential for VoIP technology to bring those

very benefits to both consumers and businesses. Although still in the early stages of

commercial development and deployment, the proliferation of broadband Internet

connections is turning yesterday's VoIP dreams into today's realities. Entrepreneurs are

tapping into the Internet's potential to provide low-cost voice services to Americans

throughout the country. At the same time, these VoIP providers are introducing

innovations previously unheard of in voice communications, such as the ability to choose

from over 100 area codes and to take your number with you anywhere in the world as

long as you can access the Internet.

In addition, investment in broadband Internet access and VoIP services are

creating small business jobs. U.S. businesses, small and large alike, are increasingly

using these Internet services to increase productivity and contribute to our Nation's

economic growth. In short, the creative forces that have fueled the Internet's growth for

the last decade are doing the very thing government regulators have tried to accomplish

since the 1996 Telecommunications Act-bring competitive, cheaper and more

innovative voice services to the public.

As new digital technologies and Internet applications, such as VOIP, challenge

the established technological, market and regulatory structures of our analog past, the

FCC will continue to stay at the forefront of change. The FCC has been studying VoIP

issues for several years, but things have greatly accelerated over the past year and, thus,

so have the FCC's actions to address the complex issues that arise. The FCC is currently

considering several petitions involving different flavors of VoIP. Last month, the FCC's

Technical Advisory Council held a meeting devoted solely to VoIP issues.

Given the complexity and significance of these issues, the FCC has recently

announced that it will comprehensively tackle the proper regulatory treatment of VoIP

and related issues. On December 1,2003, the FCC will hold a VoIP hearing. The

hearing will have a wide range of witnesses from the industry and government to focus

on a variety of VoIP issues. We will look at how the digital technologies are being used

to provide a variety of voice services in the marketplace. We will also explore emerging

regulatory issues, such as FCC precedent and the classification issues raised in the recent

Minnesota District Court ruling on VoIP services. Finally, we will begin a conversation

on how best to achieve important health, safety and welfare policy objectives, such as

E9 I I, universal service and securing our homeland.

Shortly after the forum, the FCC will initiate a Notice of Public Rule Making

("NPRM") on VoIP services. This NPRM will, in part, inquire about the migration of

voice services to IP-based networks and gather public comment on the appropriate

regulatory environment for VoIP services. Over the course of the next year, after full

public comment and thoughtful consideration of the record, the FCC plans to follow up

the NPRM with a Report and Order on the VoIP issues raised in the proceeding.

As you can see, the FCC will be quite busy with VoIP issues over the course of

the next twelve months. Of course, we wilI keep you, the Committee and all of Congress

apprised of our progress along the way. As the Senate moves to debate the Internet Tax

Moratorium in the coming days, I urge caution in addressing VoIP issues. There is

universal agreement that these Internet services hold great promise for the American

people. Imposing regulatory burdens on these new and emerging Internet services,

before the FCC fully engages the public and develops a comprehensive record, may have

the unintended consequence of stifling its growth and denying the public benefits of that

growth.

I hope this information serves you and the rest of the Senate well as you debate

this important piece of legislation. I thank you for your strong leadership and vision in

this area. If you have any further questions, please do not hesitate to call on me.

Michael K. Powell

Chairman

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