Monday, November 8, 2004

FCC Rules Vonage is Not Subject to State Jurisdiction

The FCC ruled that Vonage's broadband telephony service is not subject to traditional state public utility regulation and asserted its federal authority over VoIP. The ruling found that the VoIP service cannot practically be separated into intrastate and interstate components, precluding dual state and federal regulatory regimes. The FCC reasoned that efforts by the Minnesota public utilities commission, or other such state agencies, could impede the rollout of VoIP.

However, one requirement that Minnesota was seeking to impose was that Vonage provide emergency 911 service comparable to that provided by the incumbent phone companies. On this issue, the FCC said its ruling does not signal that Vonage may cease its efforts to develop workable solutions. Furthermore, the FCC said its order does not express an opinion about the applicability to Vonage of general laws in Minnesota governing taxation, fraud, commercial dealings, marketing, advertising and other business practices. The FCC said it expects states to continue playing a vital role in protecting consumers from fraud, responding to complaints, and enforcing fair business practices.

The FCC also stated that other types of IP-enabled services, such as those offered by cable companies, that have basic characteristics similar to Vonage, would also not be subject to traditional state public utility regulation.

In a statement, FCC Chairman Michael Powell, said "Today's decision lays a jurisdictional foundation for what consumers already know -- that the Internet is global in scope.... 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."

In a counter statement, FCC Commissioner Michael Copps wrote "Proclaiming the service "interstate" does not mean that everything magically falls into place, the curtains are raised, the technology is liberated, and all questions are answered. There are, in fact, difficult and urgent questions flowing from our jurisdictional conclusion and they are no closer to an answer after we act today than they were before we walked in here. So rather than sailing boldly into a revolutionary new Voice Over communications era, we are, I think, still lying at anchor. By not supplying answers, we are clouding the future of new technology that has the power to carry us over the horizon.

Some industry reactions:

Jeffrey A. Citron, Vonage CEO: "This forward-thinking decision from the FCC assures that competition from VoIP is here to stay... Clarity for the VoIP industry benefits not only the U.S. economy, but will also drive broadband penetration."

Richard C. Notebaert, CEO of Qwest, "This pro-consumer ruling will ensure the most efficient deployment of this revolutionary new technology. Through today's decision the FCC has recognized that the face of telecommunications is changing. We're pleased the FCC has taken a progressive view of this service, and hope regulators would apply the same light touch to outdated regulations governing traditional telephone service."

John Legere, CEO of Global Crossing: "We are pleased that the FCC is continuing its efforts to regulate VoIP services with a 'light touch.' We believe this approach will foster continued innovation and investment in IP networks and services. The ever-quickening acceleration of technological change in the telecommunications industry demands a regulatory process that is swift, efficient and final."

Jeff Pulver: "We are encouraged by the FCC's decision preempting states from imposing economic regulations on nomadic VoIP services. Today's decision was essential to allow the IP-based communications industry to develop and flourish free from traditional telecommunications regulation and to ensure that a hodge- podge of archaic telecom regulations do not stifle the nascent IP-based communications industry."

Bryan R. Martin, Chairman and CEO of 8x8: "By declaring that these services are interstate by their very nature, and asserting federal jurisdiction over how such services are regulated, the FCC has taken a decisive step towards ensuring that innovative new IP-based applications, services and choices will be available to all consumers."

  • In February 2004, FCC Commissioners voted 4-to-1 to approve a Declaratory Ruling that's Free World Dialup (FWD) service is neither a “telecommunications service�? nor “telecommunications,�? and therefore not subject to traditional telephone regulation. The FCC also declared FWD to be an unregulated information service that is subject to federal jurisdiction. The FCC noted that its classification of FWD as an unregulated information service was based on the fact that FWD acts as a type of directory service, informing its member when fellow members are online or present. "Thus, even if FWD were providing transmission (which it is not), the information that FWD provides is not information of the user's choosing, without change in the form or content of the information as sent and received. Instead, FWD provides new information: whether other FWD members are present, at what IP address a member may be reached; or, in some cases, a voice mail or email response. Finally, the fact that Pulver's server is connected to the Internet by some form of transmission is not in and of itself, as some commentators argue, relevant to the definition of telecommunications. The FCC also noted that FWD does not charge for its service and that to be a telecommunications service, the service provider must assess a fee for its service.


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