The Federal Communications Commission (FCC)’s “Vonage order” exempting VOIP providers from state-level regulation is perhaps the VOIP industry’s biggest regulatory win to date. But state regulatory agencies are trying to reverse it, and Vonage Holdings Corp. CEO Jeffrey Citron sees that movement as a huge threat to VOIP companies (see FCC Shields VOIP From States).

“If that order gets reversed there will be very serious consequences for the industry -- it could kill it,” Citron tells Light Reading.

That order, issued November 9, preempted an order by the Minnesota Public Utilities Commission applying to Vonage VOIP service the state’s own long list of “telephone company” regulations, which include rules on everything from E911 services to billing practices.

The California and Minnesota state utilities commissions have now filed separate appeals in circuit courts, while New York and Ohio are reportedly considering following suit.

Representatives from the state commissions claim the FCC’s Vonage ruling leaves many regulatory questions unanswered, and opens the door for traditional carriers to begin VOIP offerings just to skirt state regulations.

Citron claims Minnesota PUC’s regulations were written for wireline carriers and do not fit the way VOIP providers conduct business. For instance, the state’s rules on billing practices apply only to after-the-fact payment, Citron says, while Vonage service is all pre-paid.

The Minnesota regulations also require phone numbers to be closely associated with physical addresses (for E911 purposes), while Vonage service can be used anywhere a broadband connection is available. “They wanted our users to stay in one place,” Citron says.

Of course, Citron and Vonage are also being challenged in Texas, where the provider says it intends to settle a lawsuit brought on by that state's attorney general over how Vonage advertises and executes its 911 capabilities (see Texas: Vonage 911 Is a Joke).

Citron's gripe is that it takes too much time and money to comply with a patchwork of regulations. He complains that Vonage is often caught in a position of uncertainty on whether to follow state or federal guidelines, which often contradict one another.

“Every state, and even different municipalities within every state, wants to apply their own sets of rules around telephone service should work,” Citron says. “Well, we’re not going to follow 6,000 different sets of rules, now, are we? It doesn’t make sense.”

There is a solution, Citron says. Neither Congress nor the FCC alone can solve all of VOIP’s regulatory problems, but Citron says "you can get 90 percent of the way to where you want to go by doing four or five things.” They are as follows:

• Create an obligation for VOIP carriers to offer 911 emergency service, and give them the interconnection rights they need to do so
  

• Require that VOIP providers comply with the requirements of the Communications Assistance for Law Enforcement Act (CALEA)
  

• Let VOIP providers interconnect to terminate their traffic for fair, just, and reasonable rates
  

• Resolve Universal Service reform so it's clear who has to pay and how much they have to pay for the federal subsidy
  

• Federal law should preempt the states so that there's one set of rules and less confusion overall
  

“These are the five really big ones that need to get solved sooner rather than later,” Citron says.

Citron says he's hopeful that there could be an overhaul of federal telecom legislation this year. “Clearly, there is a lot of impetus in the Senate and House to resolve these issues; hopefully there will be some bill presented this year in committee, and hope some of those bills will be good.”

“I think many of these bills do preempt the states for a large part of what goes on, many of these bills do require CALEA support, many require 911, some don’t, and some are weirdly weird,” Citron says. “But I think... it’s beginning to look like you could get a bill passed this year that covers those five major items.”

— Mark Sullivan, Reporter, Light Reading