FCC: VONAGE SERVICE INTERSTATE

When the FCC unanimously voted to assert sole jurisdiction over voice-over-IP services offered by Vonage, many industry observers expected state commissions to file a lawsuit immediately. Instead, the leading association of state regulators passed resolutions indicating that FCC pre-emption may be appropriate in certain instances.

In declaring Vonage's DigitalVoice service to be interstate, commissioners said such services should not be subject to a patchwork of state economic regulations or to 911 regulations that are a barrier to entry in a market.

“This order should make clear the commission's view that all VoIP services that integrate voice communications capabilities with enhanced features and entail the interstate routing of packets — whether provided by application service providers, cable operators, LECs or others — will not be subject to state utility regulation,” Commissioner Kathleen Abernathy said.

While ruling on “Vonage-like” offerings, the order did not assert FCC jurisdiction for all forms of VoIP, meaning the commission still must answer jurisdictional questions in subsequent VoIP proceedings — something Abernathy acknowledged. Although he concurred with the decision, Commissioner Michael Copps criticized the FCC regulatory approach toward VoIP.

“While I agree that traditional jurisdictional boundaries are eroding in our new Internet-centric world, we need a clear and comprehensive framework for addressing this new reality,” Copps said. “Instead, the commission moves bit-by-bit through individual company petitions, in effect checking off business plans as they walk through the door.”

One of the primary reasons the FCC approved the order when it did was to assert jurisdiction before the 8th Circuit Court heard oral arguments in the Minnesota state commission's appeal of a restraining order that blocks the state regulators' efforts to have Vonage certified as a telecom provider subject to 911 requirements.

The FCC action had the desired effect, according to Bill Wilhelm, an attorney from the firm Swidler, Berlin, Shereff, Friedman representing Vonage.

“In some ways, the issuance of the FCC limited the review of the substance of the case,” Wilhelm said. “The court was focused entirely on procedural issues.”

Wilhelm said the Minnesota PUC would have to open a new case to challenge the legality of the FCC's Vonage ruling.

Whether Minnesota or any other state would pursue such litigation was questionable as of press time. A week after the FCC approved the order, members of the National Association of Regulatory Utility Commissioners (NARUC) voted for resolutions indicating the organization would not necessarily oppose all FCC pre-emption efforts.

“NARUC is open to the possibility that, as markets evolve and local products and services take on more national and international characteristics, traditional jurisdictional principles may need to be re-evaluated,” one of the NARUC resolutions stated.

One of the biggest proponents of the resolutions was Thomas Welch, chairman of the Maine state commission and a member NARUC's telecommunications committee. Welch said the open-ended resolutions are designed to dispel the perception that state regulators are interested only in maintaining their telecom oversight.

“I think the support for these resolution indicates that NARUC is prepared to put more things on the table than previously seemed to be the case,” Welch said.

By taking this stance, NARUC and state officials are not precluded from challenging FCC jurisdictional actions. However, Welch said he hopes that the resolutions indicate NARUC's willingness to consider pre-emption in instances where state concerns regarding consumer protection and E-911 compliance are addressed in a comprehensive manner.

Wilhelm said he believe states should exercise caution before challenging the Vonage ruling, which he described as a narrow decision.

“I know everyone says this applies to cable, but I think the order only applies to Vonage,” Wilhelm said. “If you build a [VoIP] service that isn't mobile, I think there is some question whether the FCC order applies.”