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April 2009 | Volume 12 / Number 4
Regulation Watch

The State Regulation Continues to Creep in on VoIP Providers

After the release of the FCC’s Vonage (News - Alert) Order in 2005, many states scaled back their plans to regulate VoIP for fear of tripping over the FCC’s jurisdictional framework. Several went so far as to pass legislation preventing local public utility commissions (PUCs) from regulating VoIP services whatsoever. However, in recent years many states legislatures and PUCs have started to dip their toes in the VoIP regulatory waters. The first wave of state-based VoIP regulation began with the adoption of E911 assessments on VoIP lines. These rules, however, differ among most states, and careful examination is required to determine how they apply, and what services they cover – one result the Vonage Order sought to prevent. The next wave saw several states attempt to bring VoIP services into their Universal Service Fund contribution systems. Several VoIP providers have pushed back, and in so doing, have obtained some favorable court decisions upholding the federal-state jurisdictional lines drawn in the Vonage Order. Litigation over the permissibility of these charges is ongoing.

Recent legislation in several states has sought to regulate VoIP on a new range of issues. For example, New Mexico is currently considering legislation that could subject VoIP providers to rules on the discontinuation of services to customers, and would allow customers or other service providers to file complaints with the New Mexico Public Regulation Commission for service discontinuations that violate state standards. Washington State is likewise considering a bill that would prohibit state agencies from regulating VoIP rates, terms or conditions of service, but would potentially allow those agencies to impose fees for E911, telecommunications relay service, and the state universal service fund. It would also give the Washington State agencies the ability to require VoIP providers to pay any switched access charges or other intercarrier compensation that may eventually be determined to apply to VoIP services. Other states have recently sought to clarify issues related to taxation, service quality standards, access to E911 systems and infrastructure, and other matters. Until Congress, the FCC (News - Alert) or the courts provide a more specific jurisdictional demarcation, VoIP providers should prepare for the infusion of more state-based rules, fees and surcharges. IT

William B. Wilhelm (News - Alert) is a partner and Jeffrey R. Strenkowski is an associate at the global law firm of Bingham McCutchen LLP. ( The preceding represents the views of the authors only and does not necessarily represent the views of Bingham McCutchen LLP or its clients. Bingham McCutchen represented the Petitioners in several of the cases described above.

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