California Mounts Appeal of FCCs VOIP Order

Vonage wins in Minnesota but faces a new challenge in California over an FCC ruling that exempts VOIP services from state regulation.

The state of California is mounting a legal challenge to a recent Federal Communications Commission ruling that VOIP phone services sold by Vonage Holdings Corp. were exempt from state and local regulations and tariffs.

In a petition for review filed with the U.S. Court of Appeal for the Ninth Circuit, the Public Utilities Commission of California said it plans to argue that the FCC exceeded its statutory jurisdiction in its November ruling.

The 5-0 FCC ruling, seen as a big victory for Edison, N.J.-based Vonage, effectively meant that the broadband phone companys IP-to-PSTN (Public Switched Telephone Network) communications business was "interstate" in nature and therefore insulated the company from regulation by individual states.

In its filing, the California PUC said the appeal will seek a judgment on whether the FCC acted "arbitrarily, capriciously and contrary to law" in ruling that it had exclusive jurisdiction over voice services and facilities-based providers.

Interestingly, word of the California PUCs petition follows a federal appeals courts decision on Tuesday to uphold a lower court ruling that blocks the state of Minnesota from regulating VOIP services.

Vonage spokesperson Brooke Schulz said the company was not officially aware of the California appeal. "We have heard that they intend to appeal but nothing has actually been filed yet. We have not yet received anything from the California PUC," she said.

Schulz said Tuesdays decision in Minnesota, which rules that the FCC order was grounds for affirming the lower courts information service findings, reflected the courts thinking on VOIP regulation.

"The FCC order gives us firm ground and a firm understanding [of jurisdiction issues]," she said.

/zimages/5/28571.gifClick here to read more about the FCCs ruling.

Internet telephony pioneer Jeff Pulver, who won an FCC ruling that his companys Free World Dialup was an unregulated information service, said he was not surprised by the California decision to appeal.

"We knew there would be appeals and I suspect well see some more," Pulver told

He said the continued legal uncertainty surrounding VOIP regulation could dampen innovation and investor interest in the burgeoning sector.

"When business start looking for outside investment, this uncertainty could have a ripple effect across the industry. When you build your company, you need to know who you have to deal with on regulatory side. It simplifies things tremendously to get this all sorted out," he said.

Pulver said it was "doubtful" that the FCCs Vonage order would be reversed, but he said the "lingering threat" of a possible court reversal was bad for business.

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