FCC: States Can't Regulate Net Phones

FCC: States Can't Regulate Net Phones Dozens Of Rules Are Too Many, The Agency Says. But Worries About 911 And Universal Service Remain

November 10, 2004

By Anne C. Mulkern

Washington - Phone calls made over the Internet cannot be regulated by states, the Federal Communications Commission said Wednesday.

By a 5-0 vote, the FCC said Internet-based phone service, called voice-over-Internet protocol or VoIP, should be free to grow without a "patchwork" of regulations put in place by 50 states and the District of Columbia.

Moreover, Internet-based service is not local, or even national in nature, commissioners said.

"The genius of the Internet is that it knows no boundaries. In cyberspace, distance is dead," FCC Chairman Michael Powell said. "Communication and information can race around the planet and back with ease."

The number of residences equipped with VoIP phones is expected to mushroom from 600,000 today to 17.5 million by 2008, said Kate Griffin, a senior analyst with the Yankee Group, a Boston-based technology research firm.

The FCC decision was widely lauded by phone companies.

Denver-based Qwest offers the Internet-based phone service to homes in Minneapolis and plans to offer it in major metropolitan areas in its 14- state region by year's end. In Colorado, it will be offered in the Denver and Colorado Springs areas.

The service also is available for businesses in that 14-state region and will expand to 12 other high-population regions in California, New York, Pennsylvania and Washington, D.C. by year's end.

"This pro-consumer ruling will ensure the most efficient deployment of this revolutionary new technology," said Richard Notebaert, chairman and chief executive of Qwest.

Two major consumer groups said the FCC failed to address important issues such as enhanced 911 and universal service.

VoIP, in most cases, does not have an enhanced 911 equivalent to that of traditional phones, where police or fire departments can locate the site of the call immediately.

Universal service, which helps provide phone service in remote areas, is funded by users of traditional long-distance phone service.

"Companies are now free to market VoIP as an alternative to traditional phone service, while consumers are left in limbo over vital issues, such as whether E911 will work on their Internet phone," said Janee Briesemeister, senior policy analyst for Consumers Union.

The ruling applies to all businesses that provide calling over the Internet, including phone and some cable companies.

The FCC vote came up after Minnesota phone regulators tried to impose regulations on Vonage Holdings Corp. of New Jersey as a condition of offering Internet calling there.

That state wanted Vonage to register its rates, provide 911 service and meet other requirements.

Vonage asked the FCC to declare the Internet calling product an interstate service, which would make the FCC the pre-eminent regulator.

The Colorado Public Utilities Commission said it would have to read the order and then see what, if any, steps it needed to take.

The commission is not imposing any regulations on the service, deciding to hold off on looking at the issue until the FCC made its ruling.