FCC: VOIP Is Not Subject to State Rules

In what amounts to a big win for Vonage Holdings Corp., the Federal Communications Commission on Tuesday ruled that the broadband phone companys service was exempt from state and local regulation and tariffs.

In a 5-0 vote, the FCC backed a petition from Edison, N.J.-based Vonage Holdings Corp. that its IP-to-PSTN (Public Switched Telephone Network) communications business was "interstate" in nature and therefore insulates the company from regulation by individual states.

"This is an incredibly important victory. Without this ruling, our industry would be stuck in litigation for the foreseeable future," Vonage chief executive Jeffrey Citron told eWEEK.com just moments after receiving word of the FCCs ruling.

The FCC vote could provide a boost to Vonage, which is locked in legal battles with some states that want to regulate the rates, terms and conditions of its telephony service.

Minnesota, for example, has appealed a ruling that Vonages service was not subject to laws regarding traditional telephone carriers. That case is scheduled to start in the U.S. Court of Appeals for the Seventh Circuit on Nov. 17, but Citron said it was unclear how the latest FCC ruling would affect that litigation.

Click here to read about Vonages recent victory in a U.S. District Court in New York.

"We have taken a pause in the last eight months in terms of investing in new markets. Now that we have clarity [from the FCC], well aggressively enter new markets again," he said.

The FCC ruling will also apply to other IP-enabled services with similar characteristics, including VOIP (voice over IP) services offered by cable companies.

"This landmark order recognizes that a revolution has occurred," said FCC Chairman Michael Powell. "Internet voice services have cracked the 19th century mold."

Not all five commissioners were pleased with the decision to address the interstate nature of Vonages DigitalVoice service apart from the other regulatory matters pending.

"Rather than sailing boldly into a revolutionary new voice over communications era, we are, I think, still lying at anchor," said Commissioner Michael Copps. "By not supplying answers, we are clouding the future of new technology that has the power to carry us over the horizon."

The ruling is the third in a series of IP-enabled services petitions that establish the role of the FCC in the regulation of the changing telecommunications landscape.

Editors Note: This story was updated to include comments from Michael Powell and Michael Copps.

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