UK: UK Regulatory Issues Surrounding the Provision of Internet Voice Telephony

Last Updated: 31 July 1996
This bulletin provides a brief survey of UK regulatory issues surrounding the provision of Internet voice telephony.


  • The UK's regulatory regime
  • Telecommunications Service Licence
  • Practical application of the Act?
  • ISDR and television programmes


Recent months have seen the emergence of software which allows users to use the Internet for voice communication. Although still in a fairly rudimentary form, Internet voice technology has the potential to put further pressure on telcos, hitting them precisely where their margins have historically been the largest. (The impact of the Internet on telco revenues will be the subject of a separate bulletin.) ACTA's (the America's Carriers' Telecommunications Association) recent petition to the FCC makes it clear that telcos are taking the threat seriously.

How Does The Technology Work?

Most 'Internet phones' are software which, using the speakers and microphones which are standard with multimedia PCs, convert voice into a digital bit stream and send the data, in packets, to the recipient. As the packets arrive, they are converted into analogue stream which is played back on the loudspeakers. The sound quality is generally poor as the nature of the Internet is such that the packets can be delayed, resulting in choppy, uneven speech. The callee usually needs to be running the same software in order to receive the call, but it is likely that, as technology improves, servers will detect the incoming call, convert it to analogue, and route it to a standard phone number over the PSTN.


Despite its permissive operating regime, the UK telecoms regulatory structure is restrictive - telecoms activity is prohibited except where allowed by class or specific licences. The structure has three keystones:

1. The Telecommunications Act 1984 contains a definition of "telecommunications system" which is so wide it covers just about any kind of signaling system including, as many commentators have pointed out, biological ones.

2. The Act makes it an offence to "run" a telecom system without a valid licence. "Run" is not defined anywhere in the Act, but is generally assumed to mean to have operational control over the system.

3. The Act makes it an offence to:

  • connect any unauthorised telecommunications system or apparatus to a licensed telecommunications system, and
  • provide a telecommunications service which falls outside the activities permitted by the licence through a licensed telecommunications system.


Internet access providers (ISPs) are running a telecommunications system within the meaning of the Act, and will generally be doing so under a Telecommunications Service Licence (TSL). A TSL class licence permits the carriage of all traffic other than:

  • international simple voice resale (ISVR);
  • international simple data resale (ISDR); and
  • television programmes.

In theory...

ISVR is defined as "two-way live speech telephone calls" which break out into the PSTN at either end. Since most Internet voice calls will break out into the PSTN at each end of the call (at least in relation to dial-up users), the ISP's carriage of voice telephony is in breach of the TSL unless it can be successfully argued that:

  • the call taking place is not a telephone call within the definition of the TSL; or
  • that the call technology is so rudimentary as to be alternating one-way rather than two-way.

The Act is drafted in such a way that an ISP is prima facie guilty of the offence, whether or not it was responsible for the decision to carry the traffic. However, the person charged has a defence if it can be shown that all reasonable steps were taken and due diligence exercised to avoid committing the offence. Where the defence consists of claiming that the breach was brought about by the acts of another person (ie the end user) the Act (somewhat unrealistically) expects the licence holder to assist the prosecution by providing information identifying the end user.

Practical Application Of The Act?

In practice, given the difficulty of establishing a two-way break out and the uncertainty over what constitutes "two-way live telephone speech", it seems that, as long as the ISP is not actively promoting voice traffic as part of its service, there is very little that the DTI will be able to do about it. Going after the end-users would be impractical and pointless because the licence under which end-users operate, the SPL, does not prohibit the use of data networks to carry voice. Given that voice telephony is due to be liberalised in most of the EU by 1998, it would make little sense for the regulators to pursue this issue.


The above analysis also applies to ISDR to those countries not on the permitted list, and to the provision of television programme services. Although the Broadcasting Act has no clear definition of television programmes, it seems that any representational images (ie still or moving visual images) are to be treated as television programmes. This would catch, for example, video material which is part of a WWW site and which is experienced as a still or moving image by the end user (ie not downloaded purely as a file). Once again, however, it is hard to see what what either Oftel or the DTI will be able to do about it.

This newsletter is correct to the best of our knowledge and belief at the time of going to press. It is, however, written as a general guide, so it is recommended that specific professional advice is sought before any action is taken.

Garretts is authorised by the Law Society of England and Wales to carry out investment business. Arthur Andersen is authorised by the Institute of Chartered Accountants in England & Wales to carry on investment business.

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