Additional VoIP Regulatory Developments
In an advisory last week, we summarized recent regulatory developments at the FCC and in a number of states affecting Voice over Internet Protocol ("VoIP") telephony services. As reported in that advisory, the Minnesota Public Utilities Commission (“PUC”) has ruled that Vonage Holdings Corp., a well-known VoIP provider, is “offering a two-way communication that is functionally no different that any other telephone service … and is clearly subject to regulation by the Commission” and ordered Vonage to comply with all Minnesota statutes and rules relating to the offering of telephone service, including the requirements to obtain a certificate to provide service, to file tariffs, and to submit a plan to provide 911 service. The PUC also ordered Vonage to remit unpaid 911 fees to the Minnesota state government. Vonage has responded to the PUC’s action by filing petitions at the FCC and in federal court.
FCC Declaratory Ruling Petition
On Sept. 22, 2003, Vonage filed a petition with the FCC requesting that the Commission preempt the PUC’s order. Vonage claims that it is a provider of information services—not a telecommunications carrier or common carrier—and that “[s]tate regulation of [VoIP] services unavoidably would conflict with the national policy of promoting unregulated competition in the Internet and information services market.” Vonage asserts that the PUC’s ruling conflicts with the FCC’s “long-standing policy of deregulating information services” and is contrary to the FCC’s findings in its Universal Service Report to Congress and its Cable Modem Declaratory Ruling issued in March 2002 (in which the FCC found cable modem service to be an information service). Vonage asked that the FCC find that it would be impossible for Vonage to provide certain of the 911 requirements imposed by the PUC, because Vonage does not have access to telco 911 tandem trunks and because Vonage’s user’s physical location can change without notice. Vonage further contends that preemption is necessary because of the impossibility of separating the Internet, or any service offered over it, into intrastate and interstate components, because “[t]here is no reliable technical means of consistently determining the actual physical location of Internet users.”
The Commission has established a docket for this proceeding (WC Docket No. 03-211) and has requested comment from interested parties. Comments are due by Oct. 27, 2003, and reply comments are due by Nov. 24, 2003.
U.S. District Court Case
On S25, 2003, Vonage filed suit against the PUC in the U.S. District Court for the District of Minnesota (Vonage Holdings Corp. vs. Minnesota Public Utilities Comm’n, No. 03-5287 MJD/JGL), requesting preliminary and permanent injunctive relief against enforcement of the PUC’s order. In its complaint, Vonage asserts that services offered over the Internet are exempt from state and federal common carrier regulation and that the FCC has classified Internet services like VoIP as information services. Vonage further claims that even if Internet services could be classified as telecommunications services, then such services would be interstate services over which the PUC has no jurisdiction. Vonage also argues that the PUC’s decision violates the commerce clause of the U.S. Constitution by imposing an impermissible burden on interstate commerce. Finally, Vonage contends that the PUC’s failure to provide Vonage with adequate notice of the meeting during which it voted to issue its order violated Vonage’s due process rights by denying it meaningful opportunity to be heard.
If you have any questions about these proceedings, or wish to file comments in the FCC declaratory ruling proceeding, please contact us.
The following VoIP regulatory and legal developments have occurred since our Update on Sept. 30:
In early October, FCC Chairman Michael Powell told reporters that during the fall of this year, the Commission will likely initiate a proceeding to begin examining VoIP issues, including whether VoIP should be deemed an information service or a telecommunications service. Chairman Powell's comments echo those of the Chief of the FCC's Wireline Bureau, who indicated in September that the FCC would commence a VoIP proceeding before the end of this year. FCC staff recently stated that the proceeding will likely take the form of a notice of proposed rulemaking, rather than a notice of inquiry.
On Sept. 24, the Director of the Telecommunications Division of the California PUC sent a letter to six VoIP providers in California stating that the Division “concludes that your company … is offering interstate telecommunications service for profit in California without havingreceived formal certification.” The VoIP providers were directed to file an application with the PUC for authority to provide telecommunications service by Oct. 22. Since that time, one of the commissioners has called for public hearings on this issue. Commissioner Susan Kennedy put the matter on the Commission's regular agenda for its Oct. 30 meeting, and the public will have an opportunity to comment. Observers of the PUC speculate that the four of the five commissioners are evenly split on the question of whether VoIP should be regulated, and one commissioner remains the swing vote.
In early October, staff of the Missouri PSC requested that the Commission open a proceeding to address VoIP regulatory issues. AT&T opposed the staff motion, and the PSC asked its Public Counsel for advice on whether it should open such a proceeding. The Public Counsel’s opinion is expected on Oct. 22.
In New York, Frontier Telephone of Rochester, Inc., filed a complaint with the New York PSC against Vonage, alleging that Vonage is providing telephone service without authorization. Because the complaint raises “generic concerns” that could affect other entities besides Frontier and Vonage, the PSC is seeking public comment. Comments are due by Oct. 31.
In Oregon, the Oregon Exchange Carriers Association ("OECA") filed suit in Clackamas County Circuit Court against VoIP provider LocalDial Corp. for failure to pay access charges. The court dismissed the suit on the grounds that the Oregon PUC had no opportunity to decide whether VoIP service constitutes telecom service. The OECA has now asked the Oregon PUC to declare that LocalDial must submit to state certification, file tariffs and pay access charges or cease operations. The PUC has not yet acted on the OECA petition.
The Science & Technology Committee of the Pennsylvania Senate is considering a bill that would prohibit the Pennsylvania PUC from regulating VoIP service. Hearings were held on Oct. 20.