FCC Deals Victory to Internet Phone Industry

The maturing Internet phone industry is the beneficiary of a federal ruling, but the FCC has not settled some of the most contentious issues involving the technology.

The FCC has declared Vonage Holdings Corp., the poster child for Internet phone service, is not subject to traditional state telecommunications rules. The commission also said in the November ruling it is likely it would block state regulation for companies offering services that share similar characteristics to Vonage’s DigitalVoice.

The ruling clearly prohibits state regulators from requiring Internet phone companies - or VoIP service providers - to comply with state-endorsed 911 provisions, says Bob Nelson, a commissioner with the Michigan Public Service Commission and Chair of the Committee on Telecommunications with the National Association of Regulatory Utility Commissioners (NARUC).

The FCC order came in response to a petition Vonage filed with the agency in 2003 after the Minnesota Public Utilities Commission sought to assert jurisdiction over the Edison, N.J., company. The FCC granted the petition, prohibiting the Minnesota PUC from requiring Vonage to comply with traditional state regulations. The FCC ruled Vonage’s service falls under federal oversight and cannot be separated practically into intrastate and interstate components.

The “decision lays a jurisdictional foundation for what consumers already know - that the Internet is global in scope,” FCC Chairman Michael Powell says in a statement. “The genius of the Internet is that it knows no boundaries. In cyberspace, distance is dead.”

Brad Ramsay, general counsel with NARUC, says the ruling is likely to be appealed. He says the association’s leadership and state commissioners would decide any role it would have in an appeal.

The ruling left unanswered several crucial questions challenging U.S. regulators, such as whether and how Vonage and other companies routing America’s calls over data networks should contribute to billions of dollars in federal subsidies and pay access charges, the fees long-distance carriers pay local phone companies to complete calls. (VoIP providers say they indirectly contribute to state and federal universal service programs to subsidize phone service and pay other fees through their relationships with such competitive local providers as Level 3 Communications Inc. and MCI Inc. to complete calls).


AT&T Corp.
Michigan Public Service Commission
Minnesota Public Utilities Commission
National Association of Regulatory Utility Commissioners
Vonage Holdings Corp.

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