In late October the government of Panama, prodded by Cable & Wireless Panama, issued a regulation requiring all Panamanian ISPs to block all Internet traffic using any one of 24 User Datagram Protocol ports on the border router connecting the ISPs to any others. The stated aim of the regulation is to block the use of IP telephony to bypass C&W's monopoly on international phone calls.

The regulation points out that people using IP telephony do harm to Panama by not paying taxes on international phone calls. This regulation could be seen as a valiant attempt to uphold an exclusivity contract that Panama signed with C&W or as a vain attempt to hold back the inevitable.

This regulation is noteworthy because the Panamanian regulator so clearly says what its aims are and that the block was at the request of the incumbent voice carrier. But Panama is far from alone in trying to regulate IP telephony; a couple dozen other countries do the same. U.S. IP telephony folk should not feel too smug, as the Federal Communications Commission has said that it believes it has the authority to regulate IP telephony but has not yet made the decision to do so.

A basic question comes to mind is why should telephony be regulated at all, even non-IP telephony? Part of the reason is based in the historical fact that most telecom services have been supplied by monopolies at some point, but my guess is that the most important continuing reason is that telecom services are highly taxed and regulators want to preserve the revenue stream.

This reason will not go away soon and has meant that in some countries IP telephony providers already have to pay some of the same taxes as traditional carriers. In the U.S. you do not need a license to put up a Web site, even if that site offers to complete IP telephony calls. There are quite a few people who think this should not be the case.

The path that Panama has taken in its attempt to ban IP telephony is particularly troubling. The most important factor in the success of the Internet has been the ability for individuals to develop new applications. This ability is enabled by the basic Internet architecture, which transparently carries information over the Internet from one computer to another. This transparency has been hurt, and thus innovation has been hurt, by the insertion of firewalls and network address translators into the 'Net (see RFC 2775 for more details). Government-mandated blockages in the 'Net will further exacerbate the situation, but will not be that successful in controlling the targeted activity because IP telephony servers can be reconfigured to use different ports.