The decision further consolidates the FCC's non-regulatory
approach to the growing VoIP industry.
The ruling related to Vonage's DigitalVoice service, which
allows customers to use their phones from broadband connections
anywhere in the world. This, and other other types of IP-enabled
services that have basic characteristics similar to DigitalVoice,
are not subject to traditional state public utility regulation,
said the FCC.
In particular, the FCC found that the company's DigitalVoice
service could not practically be separated into intrastate and
interstate components, precluding dual state and federal regulatory
regimes.
The Commission also found that the regulations that would have
been imposed by the Minnesota Commission were inconsistent with the
FCC's deregulatory policies, and that the preemption was consistent
with federal law and policies intended to promote the continued
development of the internet, broadband and interactive
services.
But the Commission was keen to stress that the ruling did not
relate to general laws in Minnesota governing taxation, fraud,
commercial dealings, marketing, advertising and other business
practices. States, said the Commission, are expected to continue
playing a vital role in protecting consumers from fraud, responding
to complaints, and enforcing fair business practices.
The ruling will be further considered next week when a suit on
the issue, filed by Vonage against the Minnesota regulator, is
heard by the Court of Appeals for the 8th Circuit.
Background
IP telephony, also known as VoIP or Voice over Internet
Protocol, is basically the transport of telephone calls over an
internet connection. For a company that already pays for a
broadband connection, long distance calls can become free of
charge, albeit that VoIP handsets tend to be much more expensive
than standard handsets.
In the US, where internet access charges are free, the
technology has the added attraction of being tax free. However,
cash-strapped US states, concerned at losing revenue previously
provided by highly taxed telephone calls, are calling for VoIP
calls to be regulated and taxed.
In February, the FCC began investigating the growth of VoIP,
taking as its starting point the premise that internet services
should remain largely free of regulatory burdens and that it should
apply regulatory requirements only where needed.
At the same time, the FCC announced an investigation into the
technical issues associated with law-enforcement access to VoIP
services. The FBI has expressed concern that VoIP offers terrorists
a low risk means of communicating, as the structure for phone
tapping and surveillance is less easy to implement.
There are further practical concerns, such as the effect of the
new services on the emergency 911 systems, and the difficulty of
funding low income or rural-based subscribers from VoIP services.
At present these are subsidised by what are known as universal
service fees, but costs might rise if funding cannot also be raised
from the internet telephone service.
While pondering these difficult issues, the FCC has also been
faced with petitions from individual companies over the imposition
of regulations at the state level, and in the course of three
important rulings, has begun to set out its non-regulatory approach
to VoIP.
The first of these, issued in February this year, found that
provider Pulver.com – which allows free access over the internet to
other members of the service – was not a telecom service and
therefore not subject to the usual telephone taxes and
regulations.
Then in April the Commission found that AT&T was still
liable to pay other providers over whose network a call was
carried, even if the call, generated by an AT&T customer on a
normal phone, was carried part of the way on AT&T's "internet
backbone".
The third ruling, issued yesterday in respect of the Vonage
petition, extends the approach even further.
"Internet voice is an internet application that takes its place
alongside e-mail and instant messaging as an incredibly versatile
tool for communicating with people all over the world. As such it
has truly unique characteristics," said FCC Chairman Michael
Powell. "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."
"This forward-thinking decision from the FCC assures that
competition from VoIP is here to stay," said Vonage CEO Jeffrey
Citron. "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."
