Many businesses are cancelling their traditional land lines in favor of Voice over Internet Protocol ("VoIP"), the new technology used for making phone calls over the internet or an internal network. However, while reaping the benefits of (i) cost savings, (ii) data integration, and (iii) portability, are businesses also ignoring the legal risks?

With any new technology, it is important to understand the legal and regulatory impact across jurisdictions, and to understand how this might change as the market evolves. With regard to VoIP, it is important to be aware that:

  • There is an increasing likelihood of government regulation as the popularity of VoIP grows.
  • Certain governments are keen to protect the position of legacy telecoms incumbents.
  • There is no common regulatory standard (despite attempts by various international institutions).
  • The regulatory burden may be high as each country needs to be considered separately (although there are moves to harmonize this at EU level).  
  • You may need to obtain a telecoms license from the local regulator and may be required to provide:
    • emergency call access 
    • number portability between traditional public switched telephone networks ("PSTN") and VoIP services, and 
    • net neutrality.
  • The operating restrictions are often reflected in the local telecoms service agreements entered into between telecoms operators and users.
  • In some countries, such as China and India, certain VoIP services may be illegal or heavily taxed.
  • You may be restricted from bypassing the local telecoms incumbent's PSTN gateway, using local phone numbers, and using or importing encryption technology.

However, there are options for businesses to mitigate these issues and to roll out VoIP systems that are tailored in compliance with local rules. For example, a company may configure its VoIP system in such a way that it either falls outside of, or is exempt from, local toll bypassing restrictions. 

In addition, a company may want to make sure that the relevant agreements with local telecoms providers contain the appropriate regulatory warranties and guarantees. In other instances, the regulatory risk may be so small, or the sanctions for noncompliance so trivial, that a company may want to take a commercial view that the risk is worth taking.

So, while regulators across the world are grappling with the challenge of how to regulate VoIP services, there are still significant opportunities for businesses across all sectors to take advantage of this new technology. 

However, as is the case with any new technology, it pays to understand the regulatory environment and to protect your long-term investment.