SAN JOSE--Voice over IP providers coming to the Voice on the Net (VON) show expecting positive reinforcement got a rude awakening Monday morning. Blair Levin, the former Federal Communications Commission chief of staff turned Wall Street analyst with Legg Mason, opened VON's pre-conference Telecom Policy Summit with a half-hour speech explaining why Wall Street doesn't like standalone VoIP providers.

"I don't love you," Levin said bluntly. "But then, I work on Wall Street and there love means creating a business with growing and sustainable revenue streams."

By contrast, Levin went on to say, VoIP service providers not affiliated with incumbents such as telephone and cable companies, come up short in the basic requirements for long-term success, which he defined in three ways.

First, unlike the wireless and data service providers whose business exploded in the 1990s, VoIP providers don't have access to sufficient facilities to assure competition and competitive pricing, Levin stated. Wireless service didn't explode until there were more than two wireless service providers and data took off when multiple independent ISPs began offering options, he reminded.

"There's a lot of hype/hope around broadband over powerline and some municipal Wi-Fi activity but hope is not an investment strategy," he said. The best news for VoIP providers would be if the FCC or the Congress moved to force the broadcast industry to hand over the analog spectrum it currently uses on the original schedule, as part of the transition to digital TV, Levin said. But despite the best efforts of Texas Congressman Joe Barton, the chairman of the House Committee on Energy and Commerce, those wanting to use that spectrum for greater wireless access "face an uphill battle," he added.

Secondly, the VoIP community doesn't have real protection against incumbents squashing competition by raising prices for access beyond what is economic, Levin stated. In addition to federal regulatory uncertainty--"The rhetoric of non-discrimination is false comfort," Levin said--there is the greater likelihood that the Bell companies will simply get better at providing VoIP and bundling it with their broadband transport.

Finally, there is no assurance that VoIP will remain free from federal regulation, especially as Congress and the FCC tackle the difficult issues surrounding inter-carrier compensation, which is likely to be reformed. The recent ruling, which retroactively labeled AT&T's prepaid calling cards a telecom service, not an information service, reinforced a precedent that "might allow the telcos to go after you for retroactive payment" of access fess or other charges.

If the Bell companies were successful in defeating UNE-P requirements by arguing that it was unfair to force them to sell access to their networks at 50 cents on the dollar, Levin argued, won't they be similarly successful in arguing it's unfair to provide access on their networks to companies, such as VoIP players, who pay nothing?

Levin did provide an out at the end, actually encouraging VoIP providers "to ignore everything I just said," reminding them that, as Bob Dylan said, "Love is just a four-letter word."

And he ultimately encouraged VoIP providers to flex some political muscle, back efforts such as Congressman Barton's and work to get the debate about future telecom regulations expanded. "You have to move the debate outside, and be very public about it, like Barton has been," he said. "If the debate stays inside, it will always go to the status quo. The political power of the [incumbent telcos] is stronger than the VON community."