Rules set for Internet telephone providers

By Santosh Menon

LONDON (Reuters) - The telecoms regulator on Thursday ordered Internet telephone service providers to explain to customers upfront the limitations of their services as it unveiled a new set of rules to regulate the fast-growing sector.

Ofcom said suppliers of Voice over Internet Protocol (VoIP) services would at the point of sale have to detail limitations such as the phone going dead during power cuts and the inability to call emergency services numbers.

The regulator plans to launch a consultation this year on how Internet telephony providers could offer access to emergency services, after a similar previous exercise concluded that a lack of access to such services was bad for customers.

Internet-based telephone services, which depend on customers having broadband connections, have grown in popularity in recent years because they are cheaper than regular telephone services with calls carried over the Internet.

Ofcom said industry forecasts expect the number of VoIP users in the UK to rise to 3 million by end-2007, as customers are drawn to offers that sometimes allow free calls to relatives and friends worldwide along with a choice of numbers.

Providers of VoIP services in the UK include Skype (EBAY.O), Vonage (VG.N), BT (BT.L), France Telecom's (FTE.PA) Orange and Tesco (TSCO.L), and many of them have previously called Ofcom's plans to regulate the fledgling sector as unnecessary.

The Internet Telephony Services Providers' Association, an body representing VoIP providers in the UK, said Ofcom's new rules could have unfortunate implications.

"The extra regulatory costs that Ofcom's rules impose put the UK VoIP industry at a competitive disadvantage against international competitors, and risk hindering the creative development of the industry at an early stage," it said.