Ofcom, the telecoms and media regulator, tookthe first step towards regulating the nascent internet telephony market as more customers take up so-called VoIP services.

The watchdog on Wednesday published a consultation document in which it outlined basic consumer protection measures and moves to investigate complaints and potentially take punitive action. Interested parties have until May to respond to the document with Ofcom expected to publish its decision in August.

VoIP is the emerging technology that offers cheap calls to users by routing them via a broadband connection over the internet, instead of traditional phone networks.

Ofcom, which published initial guidelines for VoIP service providers in September 2004, said it had decided some regulation was necessary because of recent technological changes and increasing consumer appetite.

Mark Main, an analyst at Ovum, estimated there were 500,000 VoIP users compared with tens of thousands when Ofcom looked at the market 18 months ago.

"At the time only Skype and BT had products in the market, which has grown about 20-fold since," said Mr Main. In the past year, these two operators have been joined by other big names, including Vonage of the US; Wanadoo, a unit of France Telecom; and Tesco.

Despite the promise of low-cost and sometimes free calls, VoIP is dogged with problems of reliability and quality.

Ofcom is proposing that service providers make clear to consumers what their services offer.

Most service providers do not give users access to the emergency services on 999, nor will they allow their customers to use their existing phone numbers.