On October 1, eBay announced it was writing down the value of its investment in Skype, the internet telephone company. Skype has reportedly been adding users at a fast rate but has so far failed to translate its popularity into e-commerce and advertising revenue.

eBay continues to be optimistic over Skype for the long term. However, there has so far been a lack of certainty surrounding Voice over Internet Protocol (VoIP) generally. For a business model to succeed, especially an innovative model using new technology, one of the required ingredients is a constant and predictable legal framework, yet this does not exist for VoIP in Europe at present. The EU directives governing electronic communications were adopted in 2002, before VoIP had become popular. Moreover, the directives have been applied to VoIP in different ways across various member states, resulting in disparity and inconsistency.

The European Commission is expected to announce proposals for revised directives later this year, which could come into force in 2009. Hopefully, the new legislation will give more clarity for VoIP operators. In the mean time, it is important to ensure that they are not required to carry out or implement measures that are beyond the capabilities of an internet-based technology.

VoIP is used in a number of different ways, by different types of people and organisations. This can range from two PC users talking to each other via the internet (“peer to peer”), such as on Skype Classic, through to internet-based services that enable telephone calls to or from ordinary telephone numbers, whether fixed or mobile. The latter could be for making (“VoIP out”) or receiving (“VoIP in”) calls only, or both (“full service VoIP”).

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Whether or not telecommunications regulation applies to VoIP services depends on the type of service. Each member state must apply European laws at a national level but in all cases a service must fit the definition of an “electronic communications service” (ECS) to be subject to regulation. That could mean operators are required to notify their services (though Ofcom does not impose this requirement in the UK), or to ensure interoperability with other telecommunication services. If the VoIP service also comes within the narrower category of being a “publicly available telephone service” (PATS), it can be required to offer number portability, access to emergency services numbers and caller location information. All of which could be hugely costly.

The problem is in determining which services fit the definition of ECS and PATS. Many believe that peer to peer VoIP services should not fall within the scope of European laws because they comprise only a software programme with no ongoing software service provision. More challenging questions arise for VoIP out, VoIP in and full service VoIP offerings.

The EU Framework Directive defines an ECS as a service that “consists wholly or mainly in the conveyance of signals on electronic communications networks”. An electronic communications network includes the internet; hence, services provided over the internet can constitute an ECS. However, providers of VoIP in and VoIP out services could argue that an ECS only involves added functionality whereby the subscriber can make and receive calls from fixed line and mobile telecommunications equipment by virtue of gateways to other operators’ networks.

Perhaps not surprisingly, many national regulators, Ofcom among them, have declined to follow such an approach. In a consultation in July, Ofcom stated that all VoIP in and VoIP out services — along with full service VoIP — are ECS. The reasoning given, however, is curious. Referring to the Communications Act 2003, Ofcom described the service as being under the “direction or control” of the VoIP provider. This is a high hurdle, and it is not clear to what extent operators of those services would satisfy such a legal test, despite the general assumption made by Ofcom.

PATS is defined in the EU Universal Service Directive as a service available to the public for originating and receiving calls and access to emergency services, through numbers in a national or international telephone numbering plan. There is a complete lack of uniformity across the EU as to whether VoIP services are PATS. For a start, the position is complicated by translation differences. The German-language version of the directive does not make clear that a PATS must be for incoming and outgoing calls. This has contributed to a degree of disharmony of implementation. Second, a fundamental problem has been that the provision of access to emergency services numbers is both part of the definition of a PATS and an express obligation on PATS providers.

In July, Ofcom proposed that all VoIP out and full service VoIP services should provide access to 999/112 emergency calls regardless of whether they are PATS. By contrast, in Spain, the obligation is limited to what is technically possible, whilst in Germany and Italy the obligation is relaxed where the user has a traditional telephone service providing emergency call access.

If VoIP services are to flourish, it is necessary to have a clear legislative direction across Europe that takes into account the specific nature of the different types of VoIP service. The forthcoming revisions to the electronic communications regime will be important in this respect.

The regime also needs to be implemented at national level in a way that takes into account the technical capability of an internet-based service and reflects the extent to which users also rely on traditional telephone systems in parallel with their VoIP service. Respecting these principles would help ensure a firm basis for investment and expansion of VoIP services.

Richard Eccles is a partner in the EU and competition group at Bird & Bird and chairman of The Law Society's European Group

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