November 09, 2004

Legalese and VoIP

FCC Rules VOIP Not Subject to State Rules (big win for Vonage)

In what amounts to a big win for Vonage Holdings Corp., the Federal Communications Commission on Tuesday ruled that the broadband phone company's service was exempt from state and local regulation and tariffs.

In a narrow 3-2 vote, the FCC backed a petition from the Edison, N.J.-based Vonage that its IP-to-PSTN (Public Switched Telephone Network) communications business was "interstate" in nature and therefore insulates the company from regulation by individual states.

"This is an incredibly important victory. Without this ruling, our industry would be stuck in litigation for the foreseeable future," Vonage chief executive Jeffrey Citron told just moments after receiving word of the FCC's ruling.

The FCC vote could provide a boost to Vonage, which is locked in legal battles with some states that want to regulate the rates, terms and conditions of its telephony service.

Minnesota, for example, has appealed a ruling that Vonage's service was not subject to laws regarding traditional telephone carriers. That case is scheduled to start on November 17, but Citron said it was unclear how the latest FCC ruling would affect that litigation.

Click here to read about Vonage's recent victory in a U.S. District Court in New York.

"We have taken a pause in the last eight months in terms of investing in new markets. Now that we have clarity [from the FCC], we'll aggressively enter new markets again," he said.

It is not yet clear if the FCC ruling applies to VOIP (voice over IP) services offered by companies such as AT&T Corp., Comcast Corp. and Verizon Communications Inc.

The ruling is the third in a series of IP-enabled services petitions that establish the role of the FCC in the regulation of the changing telecommunications landscape.

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Posted by Craig at November 9, 2004 08:57 PM