[December 2, 2004]

FCC to Minnesota: Get Off VoIP�s Back

BY JOHANNE TORRES

Most of us in the VoIP ( define - news - alert) industry thought that the pending issue of taxation and regulation of VoIP-based calling services at state level ended positively last month after the Federal Communications Commission (FCC) ruled the services as interstate -- exempt from most taxes and regulations at state level.

The Commission declared Vonage’s (news - alert) Voice over Internet Protocol telephone service -- which uses a broadband connection to process calls from PC to PSTN lines -- an interstate service, protecting it from state regulations such as rate regulation, required certification and some emergency 911 services. Last month’s rules would also apply to telecommunication companies such as telephone carriers and cable operators offering VoIP-based calling services.

About a week after the decision was announced, however, the Public Utilities Commission (PUC) of the state of Minnesota kept its court hearing appealing a decision made in October that banned the state from regulating Vonage Holdings VoIP-based services. Both parties were asked to wait a period of 90 days until the judge made a decision on the appeal. Many of us didn’t really understand why this appeal hearing even took place, considering the FCC’s ruling the services as interstate a week before.

Minnesota’s PUC was urged by the FCC yesterday to halt efforts for regulation of VoIP-based calling service providers at state level. The state’s PUC announced it complied with the FCC’s order by temporarily putting its actions on hold for now. It was reported that the PUC would continue its efforts only if after the 90-day waiting period a judge decides to validate the appeal and declare U.S. District Court Judge Michael J. Davis’ decision in October an erroneous judgment.

It would be tricky at this point to try my luck at predictions, but I believe some problems could lie on the slight chance of other states’ lining up in masses to appeal the FCC’s decision. The issue of regulation and taxation at state level has kept VoIP-based calling service providers walking on eggshells for quite some time. The state of Minnesota has not been the only one to fight the battle. New York State too has voiced worries about whether or not this temporary ban will ever become permanent.

As always, I will keep you posted in case anything develops before the 90-day period is over!