Voice over IP will be boosted or stifled based on the regulatory decisions made over the next three years, according to experts addressing the Fall VON 2004 show in Boston.

Regulators in the U.S. and around the world are trying to figure out whether and how to place restrictions on IP telephony, knowing that they could change the economics of VoIP as a business to make it impossible for start-up providers to survive.

In a keynote address, U.S. Rep. Edward Markey (D-Mass.) said he thinks regulations should be imposed on VoIP providers gradually so they are not crushed by regulator economic demands. "There is little question VoIP providers will eventually pay into universal funds and to [federal] e-rate [funding of IT gear for schools] and provide 911 emergency services," he says. "The question is at what expense?"

"There's 255 pages of telecom regulation in Colorado," says Greg Sopkin, chairman of he Colorado Public Utilities Commission. "Imagine if we imposed that on every new little provider that offered VoIP and they had to meet regulations in every state."

In California, where the state has decided to apply wireless regulations to VoIP providers, these carriers would have to respond to every customer question - whether it is their customer’s or someone else’s - within three business days. This would create crippling overhead costs, says Susan Kennedy, a California PUC commissioner. "It is so far beyond ridiculous that I'm sure it will be thrown out by a court," she says.

Internationally, the International Telecommunications Union is working on VoIP regulation recommendations that would be incorporated in treaties, says Walda Roseman, CEO of telecom consultancy Compass Rose. In addition, groups within the United Nations are looking at VoIP from the perspective of regulation, but also weighing how to promote funding of the technology, she says. "The results will affect costs, what services are allowed and who is allowed to enter the market," Roseman says.

Government stances on telecom regulation vary widely around the world, says Eric Loeb, international regulatory law and policy director for AT&T. In Canada, the government is leaning toward imposing traditional telephone regulations on start-up VoIP companies.