FCC on Right VOIP Track

The FCC made the right call in rejecting taxes on state VOIP services.

The Federal Communications Commission made the correct decision recently when it labeled the services of VOIP providers such as Vonage Holdings fundamentally interstate in nature and therefore exempt from regulation by state public utilities commissions.

The decision came in response to the actions of states such as Minnesota and New York, which had begun moving to subject VOIP services to the same regulations they apply to traditional phone services. The FCC did well to push its decision out early, before the start of Minnesotas appeal of a federal court decision rebuffing the states attempt to exert regulatory control over Vonage.

/zimages/4/28571.gifClick here to read more about the FCCs decision.

Requiring VOIP providers to tangle with regulatory bodies in 51 jurisdictions would have placed an undue burden on this promising Internet application.

While the FCC decision is a step in the right direction, it is only a first step. The state-versus-federal-jurisdiction ruling addresses only one piece of the VOIP regulation puzzle. A fuller treatment by the FCC of VOIP awaits the commissions forthcoming and broader IP-enabled-services proceedings, at which we expect FCC Chairman Michael Powell to continue to push for a loose regulatory stance on VOIP. That approach is best not only for VOIP providers but also for the businesses and consumers that stand to save money and benefit from voice and data convergence.

Critics of unregulated VOIP say the access fees and service charges that apply to traditional phone services provide states with tax revenue and help ensure that sparsely populated rural communities remain linked to the phone system. Some worry that as homes and businesses shift to VOIP, those without broadband access may see telephone costs rise.

Its important to consider what effects the growing use of VOIP—and the regulations or lack thereof that attend it—will have on the communities affected by this trend. However, as Powell pointed out in his comments that accompanied the FCC ruling, the Internet is an open platform thats fundamentally different from the phone system.

On the Internet, voice is among many applications, and we fail to see the logic of singling out VOIP above other Internet applications to saddle with the same arcane jumble of regulations that grew up around the traditional phone system, just because VOIP services resemble telephony.

If state and federal regulators find taxes are needed to maintain good access to communication services for all, there are alternatives. One approach would be to apply fees not to particular applications but, rather, to the network as a whole. Weve opposed Internet access taxes in the past, but if the U.S. government were to levy taxes equally to Internet services provided across telephone, cable and wireless networks and use those funds to ensure fast, reliable Internet access in every community, such taxes might make sense. The Internet demands new ways of thinking; it must not be hobbled by ill-applied, outmoded regulation.

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