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Username: Chalandon
Date/Time: Tue, November 14, 2000 at 4:28 PM GMT
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Subject: .TEL Paper from Squire Sanders & Dempsey re ITU letter to ICANN

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TELNIC LIMITED: A PAPER IN RESPONSE TO THE
LETTER FROM ITU TO ICANN ON TELEPHONY-RELATED TLDS
DATED 1 NOVEMBER 2000

I. EXECUTIVE SUMMARY

This document sets out a response to the letter from the International Telecommunication Union (“ITU”) to the Internet Corporation for Assigned Names and Numbers (“ICANN”) on 1 November 2000 (the “Letter”) and profiles the position adopted by Telnic Limited (“Telnic”) in respect of its application for the .TEL top level domain (“TLD”).  In essence, ITU’s recommendation to ICANN is that it would be “…premature for ICANN to grant any E.164-related TLD application …”.  The ITU only takes on a “coordinating role” regarding numbering assignment which should be contrasted with the administration and operation of the network infrastructure.

The success of the Internet is due largely to its accessibility and facilitation.  The Internet allows access by a wide variety of hosts due to the numerous protocols available to the Internet community, and these protocols allow disparate machines to communicate over a disparate network.  ITU wants the development of a global numbering/addressing scheme to accommodate PSTN and IP-based networks before telephony-related TLDs are issued.  However, as advocated by ITU itself, there is a convergence of networks that allow one network to be integrated with any other network.  The use of IP and this ability to integrate with existing networks allows for the global integration of voice, video and data facilities.

In contrast to the other three telephony related applications which make use of digits in their addressing system, Telnic’s .TEL uses characters and words and follows current domain naming schemes. The Telnic .TEL concept is therefore, a character/word based addressing system reliant on DNS, and the relevancy of the E.164 related argument is questioned.  The Telnic .TEL relies on existing IP technology in that it allows for DNS look up to enable the IP-enabled device to make the call.  This means that, fundamentally, Telnic does not use E.164 numbers in its domain names and therefore Telnic’s application should not be affected by the ITU recommendation or be subject to the telecommunications regulatory regime.   Accordingly, Telnic’s .TEL TLD application should fall under the remit of ICANN. 

Telnic agrees that the regulatory aspect of the Internet should be managed in a transparent way that ensures that domain names and addressing systems are maintained on an equitable basis, to facilitate the protection of intellectual property rights and to promote a fair competitive environment. However, the development of the Internet is largely driven by private initiative and is, of course, market led.   

II. “.TEL” A NAME AND ADDRESS MAPPING SYSTEM : A BASIC OVERVIEW

In order to understand the complex issues raised by the ITU in its Letter with respect to the position of Internet Protocol Telephony (“IP Telephony”) in the highly regulated world of the telecommunications industry and the .TEL TLD application, it is essential to understand both IP Telephony and its relationship with the domain name registry business.
In a nutshell, this Telnic .Tel concept is to create a new telephone addressing system based on words and names instead of numbers.  Telnic’s objective is to allow for identification of voice-enabled Internet devices through the DNS i.e. in order to call John Smith in London a caller would simply enter johnsmith.london.tel instead of having to dial a traditional telephone number for John Smith,  such as + 44 207 498 7257.

1. IP Telephony

1.1 IP Telephony is generally a term which is used for many different ways of transmitting voice, fax and related services over packet switched Internet Protocol based networks.  IP Telephony can be subdivided into two major groups: Internet Telephony and Voice over IP (“VoIP”).  IP Telephony presents a fundamental transformation of the global telecommunications industry.  The most important concept in IP Telephony is packet switching which breaks up electronic transmissions into smaller packets which are then transmitted and reconfigured at the receiving end.  This differs significantly from traditional public switched telephone networks (“PSTN”) where circuits remain open until the connections are terminated even when no information is being transmitted.  As a result, IP Telephony not only represents a cheaper and more efficient use of bandwidth but is also more versatile as data and voice related services can be supported on the same backbone.

1.2 IP Telephony takes several different forms and not all voice related services are the same, nor are they treated uniformly by governments and industry around the world.  IP Telephony is used as an umbrella term for the various different ways of transmitting voice over packet switched IP-based networks. 

1.3 IP Telephony can generally be distinguished by three characteristics:

· The use of gateways between the IP Networks and the PSTN;
· The type of terminal devices; and
· The underlying means of transmission.

Gateways

Gateways are the link between an IP network and a circuit switched telephone network.  This is the point at which voice signals become digitised, converted into packets or converted from packets into voice.  The use of gateways are determined by the type of terminal devices.

Terminal Devices

The three most common types of IP Telephony are:

PC/Internet Enabled Device (“IED”) to PC/IED (“PC to PC”)

PC to PC was the first generation of IP Telephony which transmitted voice related services over the public Internet.  The connection and transmission takes place entirely over the Internet and no gateway with the PSTN is required because calls are never switched by the PSTN.  This form of IP Telephony and the following PC to Phone is the platform in which a .TEL domain name would serve its function.

PC/IED to Phone (“PC to Phone”)

This enables voice related services to be transmitted from a PC/IED to an individual on a regular non-Internet enabled device but requires a gateway in order to convert the packet data into a receivable form on the circuit network.  From a service providers position, this is more complex than a PC to PC service because calls need to be billed and routing arrangements negotiated with Public Telephone Operators (“PTOs”) who operate the circuits.

Phone to Phone

Phone to Phone or “Voice terminating on PSTN” IP Telephony, is currently the major developing market for voice data.  Whilst this involves phone to phone communication, which utilises the Internet as the transmission medium, a PSTN connects each party to an IP voice provider, who in turn processes the call and gains the revenue therefrom.  Phone to Phone technology is seen by many as the future of consumer IP Telephony as it reflects a more cost effective copy of the present telecommunications structure.

Means of Transmission

As mentioned earlier, IP Telephony is a generic term for the transmission of voice related services over packet switched IP-based networks.  However, IP Telephony can in turn be characterised by the distinction between Internet Telephony and VoIP which lie in the nature of the underlying IP network, or the means of transmission.  The former primarily uses the public Internet while the latter utilises managed private IP based networks. 

IP Telephony is therefore the means of transmission that a domain name such as .TEL would utilise in order to transmit a voice related service as domain names work within the public Internet platform and not a closed private network.

1.4 As a result of the developments in IP Telephony, concerns have been raised by the telecommunications industry and regulators at the impact of this potentially cheaper environment and hence the desire to restrict the progression of IP Telephony, or at least bring them under the same standard as the PTOs. 

2. Domain Name Registry Business

2.1 Telnic’s service supports the PC to PC and PC to Phone Internet Telephony as its use of domain names indicates that voice data will be sent largely through the public Internet via Internet Service Providers (“ISPs”) rather than any PTO or private IP based network.

2.2 Whilst the US Federal Communications Commission (the “FCC”), the ITU and the Internet community continue to debate IP Telephony and where their roles within this new communication environment fit into these converging industries, it is essential to remind ourselves that the Telnic application to ICANN for the issuance of the new .TEL TLD is simply an application for the licence to operate the new TLD.  Although ICANN has identified Telnic, whose potential domain name may have strong connections with telecommunications and in particular IP Telephony, it is essential to remember that domain names simply map a series of numbers which enable data to be identified.  Neither the TLD nor Telnic’s registry service enable voice related services to be transmitted over an IP-based network.  Telnic’s .TEL TLD is simply a highly versatile “tool” whereby a PC/IED can identify another a PC/IED and transmit any form of electronic data including voice related services.

2.3 Telnic, is not, therefore an IP Telephony company. However, it can be likened to a domain name registry that provides, in addition to domain names for use as websites, domain names which can equally be utilised by the IP Telephony industry.  Telnic’s service is therefore a “tool” which aids and assists identification of a DNS address rather than an application which enables IP Telephony.  IP Telephony works, not because of the domain name, but because of the software which converts data into packets and then routes that data.  The domain name simply eases the identification of individuals, businesses and organisations.  The transmission is routed according to the network arrangements of the caller’s telecom provider, over which Telnic has no influence.

3. Whilst it is arguable that governments and the ITU may have some, as yet unidentified, role in the regulation and standardisation of IP Telephony, it is harder to see how they may have any role in the allocation of TLDs.  The telecommunications industry is clearly unsettled by the competition created by these technological advances, and given that the ITU may determine, in conjunction with interested parties, that IP Telephony should fall under the remit of telecommunications regulations, it is arguable, as has been noted by industry observers, that IP Telephony does not fall under the same rules and regulations as the PTOs because the transmission over IP-based networks is of data rather than specifically voice related services. 

III. ARE IP - COMMUNICATIONS SERVICES REGULATED BY THE TELECOMMUNICATIONS REGULATORY FRAMEWORK?

1. Internet Protocol Telephony v traditional PSTN Telecommunication services

By way of background, there has been a shift from the traditional PSTN circuit switched voice networks to packet switched data networks amongst the telecommunications industry for the following reasons:

a. voice represents an ever-diminishing percentage of overall telecommunications traffic when compared to data;

b. all else (i.e. quality, convenience and reliability) being equal, IP Telephony potentially offers a cheaper alternative to traditional voice telephony (i.e. direct dial telephone calls on either fixed lines or mobile phone networks) as fees charged for such services will be at the rate of a local call; and

c. packet switched networks do not restrict the use of the available bandwidth for an unnecessary period of time (i.e. “during silences in an IP voice conversation, no packets are sent and the available bandwidth is used by other IP applications”) thereby allowing a much higher volume of information to be transmitted in a shorter period of time.

Given the increasing use of packet switched networks by the telecommunications community and the use by ISPs of circuit switched networks, in their provision of IP Telephony services (i.e. PC to PC, PC to Phone; and Phone to Phone), there is a convergence of the functions and services provided, and the technologies used by these industries, so that both types of networks are becoming and will become more alike.

Considering that IP Telephony runs in parallel with and is functionally equivalent to traditional PSTN voice telephony, the telecommunications community argues that IP Telephony should fall within the ambit of a telecommunications service and should be regulated under the telecommunication regulation regimes.

Notwithstanding the foregoing, Telnic’s application for the .TEL TLD is merely a name/address mapping system (as discussed under Section II above) that aids and assists the identification of a DNS address by way of utilisation of the IP-based network.  Telnic’s .TEL concept does not therefore provide IP Telephony services as such. Telnic does not reroute calls, but only “allows a look up” of the routing instructions, i.e. a domain name server or “DNS” look up, which the IP-enabled device will then use to make the call. The call is then routed according to network arrangements of the caller’s telecom provider, in respect of which Telnic has no influence.

In addition, it should be noted, that Telnic’s business predominantly takes place between a generic “PC to PC” model (i.e. the next generation of IP communications device to IP communications device), making use of IP-based networks, thereby reinforcing the argument that Telnic’s business is not part of the traditional telecommunications system, as it makes no use or very limited use of the telecommunications PSTN network. Telnic’s approach and model for .TEL is totally neutral, it does not impinge or conflict in any way with PSTN or related structures.

Therefore, Telnic’s .TEL TLD application does not relate to telecommunications services and should not be prevented from being granted on the basis that the ITU considers the issuance of such a TLD as being premature.

2. Should IP - Communications be governed under the Telecommunications Regulatory Framework (“TRF”)?

If ICANN takes the view that in running the .TEL TLD Telnic provides IP Telephony services rather than just the enabling tools, the question arises whether and/or how IP Telephony fits into the telecommunication regulatory regimes.

Until recently, most Internet services have been classified by regulators as "non-basic or non-voice services” and as such ISPs have generally not been subjected to the “more restrictive and onerous licensing or market entry requirements that frequently apply to conventional voice telephony service providers”.

Currently there are no explicit regulations relating to IP Telephony (in most countries), including without limitation, the European Union and the United States of America.

Although, arguably the telecommunications regulatory regimes may be applied to IP Telephony on the basis that:

a. IP Telephony is functionally equivalent to traditional voice telephony;
b. IP Telephony is likely to make use of the public switching telecommunication networks more frequently in the future;
c. the Internet is not covered by a regulatory framework as such; and
d. the telecommunication regulations are already well established,

neither the European Union nor the United States of America have taken the approach that IP Telephony services should be covered by the telecommunication regulations.  Please refer to Annex A hereto for a more detailed discussion relating to the position in the European Union and the United States of America.

3. IP - Communications regulated by a completely new Regulatory Framework and new Regulator?

Given the above discussions (as well as those in Annex A) it does seem inevitable that IP Telephony will in time be regulated in some way or form. However, whether or not such a regulatory framework will be in the form of the telecommunications regulatory framework or a new regulatory framework needs to be considered.

As the nature of IP Telephony is in effect a convergence between the functions and technologies relating to both the Internet and telecommunications, it may seem unreasonable and/or even impractical for such services to be governed solely by the TRF, as that regime was set up to deal with traditional voice telephony and not the “new generation IP Telephony”. Therefore, this new generation of IP Telephony should arguably be subject to new regulations (some of which may not be too dissimilar to the telecommunication regulations), that would be specifically adopted to deal with the convergence of these two technologies. There is a strong argument for such a new regulatory framework to be controlled and administered by a regulator that protects the interests of both industries, considering the convergence of not only the technologies but also the industries. 

IV. RESPONSE TO ITU LETTER TO ICANN DATED 1 NOVEMBER 2000

It would appear that ITU’s primary concern is the claim that the .TEL TLD (as a telephony-related TLD) would involve the mapping of the E.164 numbering plan onto the DNS.  E.164 is the ITU-T standard that specifies telephone number type address formats.  Addresses are a maximum of 15 digits and are arranged in a geographical hierarchy to enable worldwide routing.  As a contrast, IP addressing schemes are organisationally oriented. 

In brief, Telnic intends to offer its users Internet addressing by way of domain names.  Each user will be allocated a .TEL address called a “Telname” to allow users to communicate without the requirement for a conventional telephone number.  After a review of the Letter, it appears that there is a misunderstanding of Telnic’s .TEL concept and Telnic’s use of the IP network.  For example, is a Telname a telephone number and therefore an E.164 number?  Further, is a Telname a TLD which involves the “mapping of the E.164 numbering plan onto the DNS”?  The ITU firmly objects to the issuance of telephony-related TLDs that involve the mapping of the E.164 numbering plan onto DNS. .TEL is not a telephone number, it uses characters and words and follows current domain naming schemes. The Telnic .TEL concept is therefore, a character/word based addressing system reliant on DNS, and the relevancy of the E.164 related argument is questioned. 

ITU further argues that the issuance of telephony-related TLDs would jeopardise the technical standards work currently being undertaken by the ITU and the ITEF.  Perhaps the ITU has a desire for the transformation of E.164 numbers onto DNS and the subsequent use of existing DNS services so that “E.164 telephone numbers would reach a subscriber regardless of whether IP-based or PSTN network technologies are used”. 

Telnic considers that Internet regulators should seek to find an acceptable median between the desire to rigidly control the network and the freedoms expected by users and the business community.   ITU state that URL scheme names are generally associated with “widely-deployed protocols or existing naming/addressing resources”.  Following on from this statement, Telnic’s concern stems from ITU’s assertion that control over a corresponding TLD “may suggest control over the corresponding protocol or naming/addressing resource”.  It is questioned whether this is a legitimate claim by ITU.  Telnic is developing an Internet addressing system, however, this addressing system is inside the .TEL namespace and is reliant upon existing IP technology.  How can Telnic therefore, control the “corresponding protocol” when Telnic is not and never has been in control of IP, Telnic simply uses the existing IP-based network for transmission.

In trying to understand ITU’s concern, it is concluded that some of ITU’s apprehension potentially rests with the issue of ownership and thus control over the .TEL domain name/Telname, rather than control of the protocol.  For example, if a .TEL applicant is successfully issued a .TEL domain name and Telnic effectively “owns” that name, it could be argued that Telnic may not allow competing IP Telephony providers access to information regarding the Telname, i.e. the underlying IP address.  The use and protection of DNS voiced by ITU in its Letter is likely to be as a result of the fact that telephone numbers can be mapped directly to the hierarchical structure of DNS.  DNS can then be used for identifying available services connected to an E.164 number. 

Another argument raised by ITU in its Letter is that it may not benefit the Internet community to allocate certain TLDs at this time. Telnic would assert that it is in the interests of the Internet community to issue additional TLDs at this time because it will lead to increased TLD availability and a better choice for individuals and businesses.

It may be perceived in the marketplace that the ITU’s concern stems from the capability of the Telnic concept to be able to supply users with an Internet-communication address for life that can be used to make a call anywhere in the world, where the maximum call-cost is at the local rate. Accordingly, the implications of .TEL and a mature Internet-communication industry could be far-reaching on the billing structure and revenue streams of the PTOs. Even if there is a move to levy charges or exercise control more familiar to the traditional telecommunications industry, ICANN should not use the inevitable convergence and progress of technology, on the recommendation of the ITU, as a reason to supress the innovation of the Internet.  As technologies continue to converge and blur the already indistinct boundaries, the pressure to deregulate and simplify the global regulation of telephony and Internet integration will increase.

As discussed above, the Telnic .TEL concept relies on existing technology in that it allows for DNS look up to enable the IP-enabled device to make the call.    The call is then routed according to network arrangements of the caller’s telecom provider, over which Telnic has no influence.  It always has been and still is Telnic’s intention to not reroute calls using its own technical arrangements.  For the Telnic concept to work and for Telnic to succeed as a registry of .TEL, Telnic realises that it needs to be perceived as a neutral and impartial organisation and has consequently devised its .TEL application in such a way that it is reliant on DNS rather than PSTN so as not to encroach on the telecommunications sector. The concept of addressing how calls pass from circuit switched to packet switched networks is a technical argument utilised by ITU to dissuade ICANN from issuing telephony-related TLDs.  Integration technology exists already to allow calls to pass from one technology to another without the ITU’s suggestion of the creation of “an integrated global subscriber access plan”.  Telnic therefore considers this to be a rather weak argument because gateway technology has, is and will continue to be developed to improve network connectivity and quality of service. 

Telnic agrees that the regulatory aspect of the Internet should be managed in a transparent way that ensures that domain names and addressing systems are maintained on an equitable basis, to facilitate the protection of intellectual property rights and to promote a fair competitive environment. However, the development of the Internet is largely driven by private initiative and is, of course, market led.  Telnic does not believe that ICANN’s possible decision not to issue telephony-related TLDs will prevent or slow down the development of IP-based networks and the growth of the e-global economy.

*   *   *
Contact Details

Squire, Sanders & Dempsey, London Telnic Limited
Cathy B. Horton (Partner) Fabien Chalandon (Director)
Tel: + 44 207 7765244 Tel: + 331 47 03 34 24
Fax: + 44 207 7765233 Fax: + 331 47 03 33 71
E-mail: chorton@ssd.com E-mail: fabienchalandon@compuserve.com

Martin Augier
Tel: + 44 207 7765221
E-mail: augier@telnic.org

ANNEX A

Should IP - Communications be governed under the Telecommunications Regulatory Framework?

European Union

Voice telephony in the European Union is defined in Article 1 of Directive 90/388/EEC  (“the Directive”), which provides that “voice telephony means the commercial provision for the public of the direct transport and switching of speech in real-time between public switched network termination points, enabling any user to use equipment connected to such a network termination point in order to communicate with another termination point”.

On 20 October 1995, the European Commission (“the Commission”) published a Communication  on the status and implementation of the Directive, which set out the Commission’s approach on the implementation of the definition of voice telephony. In particular, the Commission emphasised that, for a service to be defined as voice telephony, all the cumulative criteria set out in the definition had to be fulfilled, namely: (1) the service had to be provided on a commercial basis; (2) for the public; (3) for the purpose of direct transport and switching; (4) of speech in real time; (5) between public switched termination points.

In 1998, taking note of technological development allowing for the transmission of voice communications over the Internet, the Commission issued a Notice on the status of voice communications on the Internet under Community law (“the Notice”)  particularly in light of the definition of voice telephony contained in Directive 90/388/EEC. The Notice considered two issues: (i) whether IP telephony fulfilled the conditions for voice telephony; and (ii) the extent to which the obligations attached to voice telephony services (especially in terms of licensing and the financing of universal service) should apply to voice communications services provided over the Internet.

The Commission took the view in the Notice that, at the time, the cumulative criteria of the voice telephony definition were not, in most cases, met in relation to the provision of IP telephony. In particular, the Commission considered that:

· the commercial provision of the transport of voice was, at the time, not the principal aim of the access providers (in most cases IP telephony services were provided as only one part of an integrated Internet service, where the voice services only was ancillary to other elements of the Internet service); and

· as regards real-time transmission, the Commission took the view that “the time period required for processing and transmission from one termination point to the other [was] generally still such that [IP telephony service] [could not] be considered as of the same quality as a standard real-time voice service”.

IP telephony services were, consequently, considered to fall outside the scope of voice telephony services.  As such, no individual licence could be required for the provision of IP telephony services and no contribution for the financing of the universal service could be required from Internet access providers.

The Commission highlighted, however, that the position of IP telephony under Community law might change in light of further technical and market developments. The Notice consequently provided for a periodic review of the Notice, and at the latest, before 1 January 2000.  The review of the Notice was therefore launched in June 2000 with the publication by the Commission of a Consultative Communication.   In the Consultative Communication, the Commission takes the view that, despite market trends indicating a development of IP telephony services, the impact of Internet voice has not been felt yet in a major way in the European Union. In particular, the Commission considers that while “Internet telephony can be viewed as a positive and innovative activity, which will indirectly put pressure on existing price structures in the same way as call-back or calling-card services”, Internet voice services, when offered as a discrete and stand alone service, have remained a limited activity due to the difficulty of guaranteeing a quality level as normally expected from voice telephony and the user inconvenience due to technical complexity and to evaluating different market offers. Moreover, margins have also eroded subsequent to a decline retail process for telephone services over the PSTN, particularly for long distance and international calls.  

There is every indication to suggest that the Commission will confirm its proposal to maintain the position set out in the Notice. Accordingly, it will confirm that Internet telephony continues to fall outside the definition of voice telephony, since:

(i) it does not in most cases meet the criteria of reliability and sound quality as normally required for voice telephony; and

(ii) it is not offered as a single service or the main element of a range of bundled services marketed as voice telephony.

The consultation procedure is now coming to an end. The Commission has received a broad support for its proposed conclusions. The publication of a short notice confirming the findings of the original Notice is scheduled to occur before the end of year 2000.

In this context, it should be noted that the current drafts of the EU regulatory framework intended to come into force on 1 January 2003 use the Electronic Communications Services concept in place of the voice telephony concept.  Electronic Communications Services are services provided for remuneration which consist wholly or mainly in the transmission and routing of signals on electronic communications networks.  It therefore seems likely that VoIP services provided for remuneration will be regulated in the same way as electronic services.

United States of America

In 1998 the Federal Communications Commission (“FCC”) considered in its “Universal Service Report” to Congress whether IP Telephony service providers qualify as “telecommunications carriers”, who fall within the telecommunications regulatory regime or whether they qualify as information service providers who fall outside the parameters of such a regime.

The arguments raised for and against IP Telephony service providers qualifying as “telecommunications carriers” were as follows:

· Argument for IP Telephony service providers qualifying as telecommunications carriers

It was argued that IP Telephony is “simply another form of technology, like satellite or fiber-optic transmissions” which provides the same function as traditional voice telephony. Therefore, the choice by the user of a new technology should not deter from the underlying function “which squarely falls within the definition of telecommunication services”.  As such it was argued that the telecommunications regulatory framework should regulate IP Telephony service providers.

· Argument against IP Telephony service providers qualifying as telecommunications carriers

The FCC in the “Universal Service Report” considered and found that Internet Service Providers and IP voice providers are not “common carriers that offer telecommunications” but rather argued that they offer an “information service” as they are “capable of generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information”. 

The FCC appeared prepared to distinguish between computer to computer and Phone to Phone IP voice offerings, placing emphasis on the “packetising of the transmission”. Therefore, although the FCC stopped short of holding that IP voice providers supply either telecommunications or information services because there “was insufficient information in the public record to come to a definitive standard treatment of IP voice services” it stated that:

“We recognise that our treatment of Phone to Phone IP Telephony may have implications for the international telephony market.  In the international realm, the FCC has stated that IP Telephony serves the public interest by placing significant downward pressure on international settlement rates and consumer prices.  In some instances, moreover, IP Telephony providers have introduced an alternative calling option. We continue to believe that alternative calling mechanisms are an important pro-competitive force in the international services market. We need to consider carefully the international regulatory requirements to which Phone to Phone providers would be subject. For example, it may be appropriate to apply the international accounting rate regime (part of the telecommunications regulatory regime) to IP Telephony”.

In view of the above, it is possible that IP Telephony services may in due course be subject to similar regulations as traditional voice telephony (although it is not clear whether the current telecommunications regulatory framework will apply or whether a new framework will be created).

 


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