- The Washington Times - Tuesday, November 9, 2004


U.S. regulators ruled yesterday that providers of Internet-based phone services fall under the jurisdiction of the federal government, exempting them from some key regulation by states.

The Federal Communications Commission voted 5-0 in favor of Vonage Holdings Corp. of Edison, N.J., which had asked the agency to declare the company’s product an interstate service, giving the FCC regulatory control.

Vonage has been resisting public-utilities officials in Minnesota who want the company to register in the state as a tele-communications service, subjecting it to rate regulation and other state rules.

The FCC ruling applies to cable, phone and other companies offering an Internet phone service similar to the one Vonage provides. The decision does not, however, preclude states from imposing some taxes and fees. It also does not address access charges, which are fees paid to local phone companies for completing calls sent via the Internet to conventional phones.

Vonage also had asked the commission for certification as an information service, instead of a telecommunications company. Such a move would have a profound effect on the industry because it would mean providers of Voice over Internet Protocol, known as VoIP, wouldn’t have to pay the taxes and fees that traditional phone companies do. The commission did not rule on that request.

FCC Chairman Michael K. Powell said streamlining regulation of VoIP companies is key to growth of the industry.

“To subject a global network to disparate local regulatory treatment by 51 different jurisdictions would be to destroy the very qualities that embody the technological marvel that is the Internet,” said Mr. Powell, a Republican.

The two Democratic commissioners on the five-member panel expressed concerns that the decision didn’t go far enough to address other issues facing VoIP providers, such as universal service fees for bringing telephone service to rural areas and emergency 911 services.

“The commission’s constricted approach denies consumers, carriers, investors, and state and local officials the clarity they deserve,” said Commissioner Michael J. Copps. “These issues can’t be ducked and they can’t be dodged if we are truly serious about these technologies.”

Vonage said the ruling was a victory for consumers.

“Because the FCC has acknowledged the reality of the Internet — which knows no state boundaries and no borders — more people will enjoy the benefits of Internet phone service,” said Vonage Chief Executive Officer Jeffrey Citron.

There are more than 600,000 subscribers to VoIP services in the country, up from about 130,000 last year, said the Yankee Group. The Boston-based communications research firm projects about 1 million subscribers by the end of the year.

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