VONAGE VoIP RULED INFORMATION SERVICE, PREEMPTING STATE REGULATION
A federal judge ruled Thurs. that Internet voice service between computers, or between computers and phones, couldn’t be regulated by the states. U.S. Dist. Judge Michael Davis, Minneapolis, classified Vonage’s offering as an information service and therefore concluded that Minn. PUC regulation had been preempted by Congress in its protection of nascent Internet activity. The opinion was hailed by Vonage and by voice-over Internet protocol (VoIP) promoter Jeff Pulver, but was criticized by NARUC and the Media Access Project (MAP).
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
The FCC had no comment while it reviewed the opinion, a Wireline Bureau spokesman said. Chmn. Powell has said that in coming months the Commission would start a proceeding and hold a forum on VoIP, but that he favored protecting the nascent service. Under the FCC’s 1998 Universal Service Report to Congress, VoIP was considered an information service, the spokesman said. Davis’s order relied heavily on the document, known as the Stevens report.
The Minn. PUC won’t consider an appeal of Davis’s order before Wed., said its exec. secy., Burl Haar. Although the PUC had stayed its own action against Vonage and might have preferred to await FCC action, the judge’s issuance of a permanent injunction compelled the PUC to appeal, NARUC Gen. Counsel Brad Ramsay said.
The ruling should give pause to other states looking into VoIP regulation, Citron said. Cal. regulators have said they want to move forward, he noted. Counterparts in Wis. have backed off substantially, and Vonage will participate in a Pa. Senate Science & Technology Committee hearing Mon. that could produce a bill by Sen. Jake Corman (R-Bellefonte) to stop regulators from taking action on the service, Citron said. Ala., N.Y., Ore. and Tex. also are considering regulation, he said. The Cal. PUC was meeting Thurs. and no one was available to comment on Davis’s order, a spokeswoman said.
Davis had announced last week he would rule in Vonage’s favor but didn’t immediately release his rationale, which provides the basis on which other courts would evaluate the case as precedent and any appeal would be decided. The judge acknowledged the issue was difficult and expressed some sympathy with the losing Minn. PUC’s functional “quack-like- a-duck” analysis that VoIP should be regulated like conventional phone service because it’s sold and used as a substitute for it.
But “Congress has clearly stated that it does not intend to regulate the Internet and information services,” Davis said: “Vonage’s services do not constitute a telecommunications service. It only uses telecommunications, and does not provide them. The court can find no statutory intent to regulate VoIP, and until Congress speaks more clearly on this issue, Minnesota may not regulate an information service provider such as Vonage as if it were a telecommunications provider. What Vonage provides is essentially the enhanced functionality on top of the underlying network, which the FCC has explained should be left alone.”
The “ruling is a great day for the voice-over-IP industry, particularly those that want to be IP communications service providers,” Pulver said: “The finding that Vonage is in fact an information service -- it’s what I expected, but it’s nice to see the words.” Corman said the order “sets a very strong precedent which we believe others should follow.”
But NARUC’s Ramsay and MAP Assoc. Dir. Harold Feld said the judge showed his lack of expertise in communications law and policy. By Davis’s reasoning, CDMA (Code Division Multiple Access) wireless voice also would an information service, and state attorneys gen. would be preempted from prosecuting Internet fraud, Ramsey said. Feld said that by focusing narrowly on the Stevens report, Davis overlooked FCC analysis in Title II cases that would allow VoIP to be classified as communications service based on its function equivalence.