November 9, 2004
Vonage Holdings Corp. avoided what it calls "strangulation by regulation" on Tuesday as the Federal Communications Commission (FCC) found that its DigitalVoice VOIP service is not subject to state public utility regulation (see FCC Rules on Vonage). The Commission also found that other types of services, such as those offered by cable companies would be exempt as well -- a huge victory for IP-based communications.
The decision was seen by many as the first step to determining that the FCC, not individual states, has the final say over interstate communications. Vonage has been battling with state regulators, which are demanding the company obtain state certification, be subject to rate regulation, and offer emergency 911 services comparable to landlines.
Vonage CEO Jeffrey Citron said in a statement that without relief from the FCC, IP-enabled services would be subject to different rules from each state. “The direct result [of regulatory relief] will be explosive growth of an industry that delivers cost-savings and innovation to consumers,” Citron says.
But will Vonage's VOIP service be classified as an unregulated “information service” under the '96 Communications Act or a telecommunications service? That question will be handled in the Commission’s IP-Enabled Services proceeding. The proceeding, which has been going on since February, will also address whether VOIP providers must provide access to the disabled, pay intercarrier compensation, and contribute to the universal service fund.
Vonage's victory, of course, is a victory for all VOIP providers. Securities and Exchange Commission (SEC) filings reveal that Packet8, for example, has been told by the Public Service Commission of Wisconsin (the WPSC) last year that it needed certification to offer intrastate telecommunications services and that if it didn't get certification, it might have to pay back the service fees it charged to residents of the state.
Reaction to the ruling by incumbent carriers, arguably the most threatened by a company like Vonage, was positive.
“Consumers will clearly benefit from a national policy framework that eliminates regulatory roadblocks to the rollout of new-generation networks and services,” says SBC Communications Inc. (NYSE: SBC) senior VP, James C. Smith. “Today’s ruling appears to be another positive step forward in developing a national policy that ensures consumers will receive innovative and low-priced IP-based services. These services could be delayed or stymied altogether, if 50 states are permitted to saddle these emerging technologies with a hodgepodge of inconsistent and conflicting regulations.”
Jonathan Banks, BellSouth Corp.'s (NYSE: BLS) VP of executive and federal regulatory affairs says, “The FCC took a critical step towards encouraging the deployment of IP-enabled services, such as VOIP, by recognizing the inherent interstate nature of such services.
"The future of these and new, innovative, IP-enabled services depends critically on investment in next-generation network facilities. We encourage the commission to complete in short order the work it has started here by establishing a similar regime for all IP-enabled networks and services in its 'IP-enabled' rulemaking proceeding. Such a decision would go a long way toward eliminating uncertainty and allowing quicker introduction of new and more efficient services."
— Chris Somerville, Senior Editor, Next Generation Services
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