the lowdown on voip regs

IT’S OFFICIAL.VOIP SERVICES ARE UNDER FEDERAL jurisdiction only and states may not require VoIP services to meet their existing regulations for traditional telephone services, the FCC has ruled. But that doesn’t necessarily mean the states are completely out of the VoIP picture.

Late last year, the FCC ruled that Vonage’s Digital Voice service “is not subject to traditional state public utility regulation.” The ruling further stated “other types of IP-enabled services, such as those offered by cable companies that have basic characteristics similar to Digital Voice, would also not be subject to traditional state public utility regulation.”

The commission based its decision on its power to preempt state regulations that “thwart or impede federal authority over interstate communications.” States cannot require, as the State of Minnesota attempted to do, for example, that Vonage or other similar services obtain a certificate to offer service in the state.

One requirement of the Minnesota certificate was that Vonage offer E911 service in the same way that TDM telephone companies do, which would have been impossible.

The vote on the ruling was 3 to 2, a margin that did not reflect the commission’s resolve to protect VoIP from unnecessary regulation. They were more reflective, observers say, of the fact that some on the FCC want the agency to go further to change telecom rules.

“The differences of opinion were based on Commissioner Copps, who wanted them to decide more issues than they did today,” says Chris Murray, director of government affairs, Vonage. “There are all sorts of questions such as access charges and the Universal Service Fund. Those are the big two.” However, Murray points out, the Universal Service Fund is running a deficit near $2 billion, and any revenue from VoIP would do little to ease that crunch.

While VoIP is not critical to the issues with the Universal Service Fund, making noise about anyone who doesn’t pay into the fund is good politics for legislators from largely rural states, such as Ted Stevens (R-Ark.) and Conrad Burns (R-Mont.).

The FCC is scheduled to tackle the truly onerous issue of intercarrier compensation this year. Efforts within the industry to hammer out some kind of compromise so far have not been successful. And recent effort to bring the myriad concerned parties to the table to negotiate fell apart after a few weeks. There are proponents of the view that all compensation should be market-based, and carriers should be able to charge whatever the market will bear, while others feel the playing field will be more level if regulated.

However, the FCC decision does not address the rights of the states to impose other regulation on IP-voice providers, such as for “taxation, fraud, commercial dealings, marketing, advertising and other business practices.” The FCC says it “expects states to continue playing a vital role in protecting consumers from fraud, responding to complaints, and enforcing fair business practices.”

In his statement, FCC Chairman Michael Powell emphasized the ongoing role for the states. “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. Indeed, there is a long tradition of federal/state partnership in addressing such issues, even with regard to interstate services.”

He outlined cooperative action by the states and federal government to halt offenses, such as “slamming and cramming.” Also, “With regard to critical 911 capability for VoIP, I noted already that several Internet voice providers have entered into an agreement with the National Emergency Number Association to extend 911 capabilities to Internet voice services.”

The issue of taxation immediately became an issue as two cities in California began to ask VoIP service providers to pay city taxes on utilities. Many cities now charge taxes on traditional telephone services.

For example, Burbank, Calif., the locale of several large television and movie studios, recently sent a letter to VoIP business and consumer provider VoicePulse asking the company to pay the city’s 7 percent tax, which would amount to $1.40 per month for a typical $20-per-month service.