The recent ruling by the Minnesota state Public Utilities Commission, which declared Voice over IP provider Vonage in violation of state law by offering “telephone services . . . without first obtaining a certificate under state statutes,” is already having a ripple effect on the industry. The ruling may lead to regulations elsewhere in the country and could result in higher prices and less innovation, VoIP advocates worry. Includes sidebar describing all state actions taken so far.
The recent ruling by the Minnesota state Public Utilities Commission, which declared Voice over IP provider Vonage in violation of state law by offering "telephone services in Minnesota, including local exchange service and long distance service, without first obtaining a certificate under state statutes," is already having a ripple effect on the industry.
VoIP advocates worry that the ruling, which also declares Vonage in violation of state law for failing to "to provide adequate 911 service," will most certainly be applied to other VoIP providers who offer their service in Minnesota, and could open the door to VoIP regulation across the country.
According to Brooke Schulz, a spokeswoman for Vonage, the company is concernedthe ruling "will create a domino effect" that will lead to regulations in other states that could increase the cost of VoIP and stifle innovation in the fledgling iindustry.
"They are trying to shoehorn new technologies and services into an archaic regulatory framework that's not designed to handle them," said Schultz.
The company will challenge the ruling both in Minnesotta state courts and federal courts, arguing that the state PUC is not empowered to determine whether Vonage offers a true telecommunications service. "Our position is that the decision llies with the Federal Communications Commission, not the states," Shulz said.
According to Jeff Pulver, founder of Free World Dialup and a leading advocate for VoIP, movements to regulate broadband telephone providers may also be afoot in Alabama, Colorado, Illinois, North Carolina, Ohio, Pennsylvania and Virginia. Florida's PUC considered, but decided against, including VoIP under its regulatory umbrella.
The Minnesota PUC ruling, has generated a considerable amount of media attention in recent days. In a cNet article published in a number of places, writer Ben Chamy wonders if the "free ride is over for VoIP?" According to Chamy, VoIP providers "say consumers should brace themselves for higher prices, slower introductions of new Internet telephony services and the demise of some of the same start-ups that are just beginning to win customers."
Pulver and other VoIP supporters argue a more apt description of those offering the technology to consumers is as "information services providers," and not telecommunications service providers. They believe VoIP should not be subject to the same level of regulation faced by traditional phone companies, most of which were enacted when landline phone companies held monopoly control over phone service in most areas.
According to internetnews.com, Pulver believes "widespread use of IP for voice applications is still a good 20 years away, because of the regulatory thicket that the application has run into in recent months."
Schulz said that defining Vonage as a telecommunications company is misleading. "We're a data company," she said. "We could easily be offering any kind of data service. We chose to do voice transmission."
"We're voice today, but the future of our company is not just voice," Shulz said, adding that Vonage is working on providing enhanced services such as "IM chat and video-conferencing."
"What happens when we start offering these services?" she wondered. "Are we still a phone company then?"
The following states are considering regulations that could have an impact on VoIP:
Alabama -State's Public Service Commission is considering action to make VoIP subject to same rules as telephone service.
Colorado – State's Public Utilties Commission initiated an investigation into VoIP service. At this point, the investigation is closed.
Florida – State's Public Service Comission considered, then rejected, new VoIP regulations.
Illinois – State's Commerce Commission held workshops on VoIP regulation.
Minnesota – State's Public Utilities Commission ruled to regulate VoIP.
Ohio – State Public Utilities Commission conducted inquiry on VoIP.
Pennsylvania – State Public Utilities Commission began investigation into VoIP.
Virginia – State's Corporation Commission indicated it may investigate VoIP.