State governments should leave regulation of the Internet to the federal government, which in turn should largely let Web business operate as a free market, Federal Communications Commission Chairman Michael Powell said.

"The Internet desperately needs to enjoy fairly uniform regulatory treatment," Powell told lawyers at the Washington- based non-profit Federalist Society. "I personally believe the market is the best standard on which the Internet runs."

The FCC has scheduled a Dec. 1 hearing on regulating use of the Internet to route telephone calls with a technology known as "voice over Internet protocol," or VOIP, which is less expensive than traditional phone service. Powell has said the FCC will soon start considering rules on how Web calling should be overseen.

California state regulators met today to discuss VOIP-related rules. In Minnesota, a federal judge said last month that the state's regulators can't classify Internet call-router Vonage Holdings Corp. as a local phone company to regulate it more closely.

"Internet service has been a regulatory-free zone, and I don't see any problem with that for the foreseeable future," said Billy Jack Gregg, head of West Virginia's state consumer advocacy unit. "The states should stay out unless there's a demonstrated problem with Internet access, which actually has gotten better -- not worse -- over the years."

Shares of companies that seek to serve the Internet phone market, such as SpectraLink Corp. and Sonus Networks Inc., have risen with increased demand for VOIP systems. Their competitors include Cisco Systems Inc., Comcast Corp. and Avaya Inc.

Powell, a Republican appointed by President George W. Bush, said state regulatory efforts "could suck the life force out of Internet development" by imposing "multiple and competing rules."

The rules could add cost and complexity to Web businesses, while impeding company growth and innovation, he said.