CEA Hails FCC Decision To Preempt State Regulation Of VoIP Services

The ruling, which asserts federal jurisdiction over Vonage-like services, came in response to a preemption petition filed last year by Vonage. Although referring to Vonage service, the decision applies to other types of IP- enabled services, the Commission said. CEA Pres. Gary Shapiro said the advancement of VoIP services would be “a key element in driving consumer demand and adoption” of broadband technology. There’s “a unique synergy between VoIP and broadband that allows each to be used as a purchase incentive for the other,” he said. The Commission’s action was “a strong step toward regulatory clarity, which is needed to advance VoIP services that will provide enormous benefits to consumers and the economy,” Shapiro said. “We commend the FCC’s leadership in taking action to avoid a patchwork of state regulations that would stifle the advancement of this new form of communication.”

FCC Wireline Bureau Chief Jeffrey Carlisle told reporters the Commission acted now on the jurisdiction issue -- rather than waiting for action on the broader IP- Enabled Services proceeding -- because the 8th U.S. Appeals Court, St. Louis, is set to hold an oral argument Nov. 17 on the same issue. By acting now, the FCC adds its expertise to the court’s deliberation, Carlisle said. “We want to get as much clarity out as possible,” he said.

The FCC’s decision -- and the 8th Circuit oral argument -- stem from a Minn. PUC decision last year finding that Vonage is a telephone service subject to traditional regulation such a requirement to provide E-911 similar to that offered by ILECs. On an appeal by Vonage, a lower court overrode the PUC’s decision. The 8th Circuit is considering the PUC’s appeal of that ruling. Vonage asked the FCC to rule that its VoIP service is interstate and thus shouldn’t be regulated by states -- the action the FCC took Tues.

FCC commissioners said they decided it wasn’t possible to separate intrastate from interstate calls because of the nature of IP telephony, so the service had to be considered interstate. It was a “pretty basic preemption analysis,” said Comr. Abernathy. “We don’t enter the business of preempting lightly,” she said. The Commission found that regulations imposed by the Minn. PUC “were inconsistent with the FCC’s deregulatory policies and that preemption was consistent with federal law and policies intended to promote the continued development of the Internet, broadband and interactive services,” the FCC said in a news release.

The FCC news release offered a glimpse of what some said was heavy lobbying by cable companies to gain protections similar to those Vonage received, for services they offered. The news release said the decision applied to “other types of IP-enabled services such as those offered by cable companies,” but it didn’t elaborate. An FCC spokesman said the order, expected out within 2 weeks, will list the characteristics of a VoIP service that would be considered “similar” to Vonage and thus covered by the order. “Cable has some of those characteristics,” he said, adding he couldn’t speak further until the order came out. At issue is a situation in which a cable company acts not just as a conduit for other companies’ VoIP services but offers its own VoIP service to customers. Medley Global Advisors said in a report that “the inclusion of cable telephony into the basket of services that qualify as interstate under today’s decision… will provide cable with a stronger legal rationale for making its information service claim if challenged in court.” Comr. Abernathy said the order is intended to cover “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.”

The FCC didn’t rule on the heated issue of whether the VoIP service was a telecom or information service. That issue will be dealt with in the IP-Enabled Services proceeding, the Commission said. The FCC also said this decision doesn’t signal an intent to let Vonage stop seeking ways to provide E-911. That and other public safety issues will be addressed in the IP-Enabled Services proceeding, along with whether VoIP providers must provide access to the disabled, pay intercarrier compensation and contribute to the universal service fund, the Commission said.

The FCC emphasized that its ruling doesn’t affect other state regulatory roles such as consumer protection. Comrs. Copps and Adelstein concurred in the decision. Copps objected to dealing with the Vonage petition separately from the bigger IP proceeding. The Commission has been making too many “piecemeal” decisions rather than setting a broad framework, he said. Adelstein said he was concerned about “unintended results” of the order, including jeopardizing the universal service program. Comr. Martin said he shared concerns about the effect the order could have on pending issues such as intercarrier compensation but he didn’t think that should stop the FCC from acting on the Vonage order.

Chmn. Powell responded to Copps’ concerns about the limited nature of the order, saying it would be a “formula for paralysis” to defer action until all issues could be dealt with at once. Sometimes it’s in consumers’ interest to act on individual issues like this, he said. “Today’s decision lays a jurisdictional foundation for what consumers already know -- that the Internet is global in scope,” Powell said. “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.” Powell said the action doesn’t mean there’s no governmental interest in VoIP: “There will remain very important questions about emergency services, consumer protections from waste, fraud and abuse and recovering the fair costs of the network. It is not true that states are or should be complete bystanders with regard to these issues.” He said the order preempts a Minn. PUC decision applying its “traditional telephone company” regulations to Vonage’s service, but “I emphasize that the Commission expresses no opinion here on the applicability to Vonage of the state’s general laws governing entities conducting business… such as laws concerning taxation, fraud, general commercial dealings, marketing and advertising.”

Abernathy said it would have been ideal if the FCC could have dealt with E-911, universal service and other important matters before addressing the jurisdiction issue. However, she said: “The decision of several states to impose utility regulations on VoIP services, and the ensuing litigation arising from such forays, makes it imperative for the Commission to establish our exclusive jurisdiction as the first order of business. This Commission runs significant risks if we remain on the sidelines and leave it to the courts to grapple with such issues of national import without the benefit of the expert agency’s views.”

Vonage CEO Jeffrey Citron called the FCC decision “forward-thinking” and said Vonage can now “focus our resources exclusively on building an even better service,” including rolling out E-911 service. “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,” he said.