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FCC Declares Authority Over States On VoIP

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FCC Declares Authority Over States On Voip

November 10, 2004

By John Woolfolk

Federal regulators Tuesday declared authority over the states in governing Internet phone services, a move providers called crucial to fostering growth, innovation and competitive pricing in the budding industry.

But the Federal Communications Commission's 5-0 vote left for later key decisions on how Internet phone companies will be regulated with regard to 911 emergency calls, consumer protection and telecommunication access subsidies for the poor, disabled and remote.

The FCC order declared Web-based phone services known as Voice over Internet Protocol, or VoIP, to be interstate in nature and therefore under federal rather than state jurisdiction.

``By fencing off these services from unnecessary regulation, this order will help unleash a torrent of innovation,'' said Commissioner Kathleen Abernathy.

Vonage, a leading Voip provider based in New Jersey with 300,000 customers nationwide, requested the FCC order after attempts by Minnesota and New York to regulate its service.

Federal courts have since overruled regulators in those states, but others including California have signaled plans to regulate VoIP.

Industry advocates praised the FCC for telling the states to back off.

``This sends an unmistakable signal to consumers, investors, wary businesses and state regulators that America's global economic competitiveness will not bog down under the weight of state and local red tape,'' wrote Larry Irving and Bruce Mehlman of the Internet Innovation Alliance, an industry trade group, in a statement after the vote.

Wide authority

The FCC also declared that its order applies to all Voip services, an important move. Cable companies and Baby Bells such as SBC that offer Voip over their broadband networks feared a competitive disadvantage if the FCC narrowly tailored an order to Vonage's business.

Voip hooks standard phones to an adapter and broadband connection. The adapter packages voice calls as data and sends them over the Internet to a service provider, where they are converted and sent to the recipient's phone.
Consumer advocates and two commissioners were dismayed that in heading off state regulation, the FCC failed to say how it would govern VoIP.

``I want it to be well regulated and that's not what's happening today,'' said Mark Cooper, research director for the Consumer Federation of America. ``That doesn't mean it couldn't happen at the FCC, but that's not what they did today, and that's a problem.''

One crucial issue left undecided is the quality of Voip 911 service. Because Voip requires broadband access, the phone goes dead if the connection is disrupted, say, by a power failure. And because Voip calls can be made from anywhere with a broadband connection, 911 dispatchers may not automatically get accurate information on the caller's location.

Vonage and other Voip providers have been working to resolve those shortcomings with battery backup and other measures. Minnesota regulators had sought to require Vonage to provide 911 access on par with the traditional copper-wire phone network.

Also undecided is how Voip providers will be regulated with regard to consumer privacy and fraud protection, as well as universal service funding that subsidizes phone access to remote areas, to schools, libraries, the poor and the disabled. Critics say letting Voip providers avoid paying for universal service will force rate increases on traditional phone users.

The FCC has been studying those issues since February and is expected to consider recommendations in March.

Clear framework

``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,'' said Commissioner Michael Copps. ``Instead, the commission moves bit by bit through individual company petitions, in effect checking off business plans as they walk through the door. This is not the way we should be proceeding.''

Abernathy said the decision of some states to forge ahead with their own regulations ``makes it imperative for the commission to establish our exclusive jurisdiction as a first order of business.''

The California Public Utilities Commission has notified Voip companies to register as phone companies subject to regulation but has held off taking action pending an FCC ruling. Some, such as PUC Commissioner Susan Kennedy, who praised Tuesday's order, felt the state should defer to the FCC.

``A patchwork of various state regulations will only stand in the way and hurt consumers,'' Kennedy said.
The FCC order did not address a second part of Vonage's request to declare it an information service not subject to telecommunications regulations at all.

The FCC order was aimed at thwarting state efforts to set terms for market entry and rates. Commission Chairman Michael Powell stressed that it does not mean states will be ``complete bystanders'' with no role whatsoever, but rather that the FCC will work with them to address 911 and other issues.

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†AK and HI residents pay $29.95 shipping. ††Limited time offer. Valid for residents of the United States (&DC), 18 years or older, who open new accounts. Offer good while supplies last and only on new account activations. One kit per account/household. Offer cannot be combined with any other discounts, promotions or plans and is not applicable to past purchases. Good while supplies last. Allow up to 2 weeks for shipping. Other restrictions may apply.

1Unlimited calling and other services for all residential plans are based on normal residential, personal, non-commercial use. A combination of factors is used to determine abnormal use, including but not limited to: the number of unique numbers called, calls forwarded, minutes used and other factors. Subject to our Reasonable Use Policy and Terms of Service.

2Shipping and activation fees waived with 1-year agreement. An Early Termination Fee (with periodic pro-rated reductions) applies if service is terminated before the end of the first 12 months. Additional restrictions may apply. See Terms of Service for details.

HIGH SPEED INTERNET REQUIRED. †VALID FOR NEW LINES ONLY. RATES EXCLUDE INTERNET SERVICE, SURCHARGES, FEES AND TAXES. DEVICE MAY BE REFURBISHED. If you subscribe to plans with monthly minutes allotments, all call minutes placed from both from your home and registered ExtensionsTM phones will count toward your monthly minutes allotment. ExtensionsTM calls made from mobiles use airtime and may incur surcharges, depending on your mobile plan. Alarms, TTY and other systems may not be compatible. Vonage 911 service operates differently than traditional 911. See for details.

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