FCC Exempts Web Phones from State Rule

Tue Nov 9, 2004

WASHINGTON (Reuters) - U.S. communications regulators on Tuesday exempted Internet telephone services from certain state oversight, a boon for Vonage Holdings Corp. and other providers aggressively pushing the new service.

The Federal Communications Commission approved a petition from Vonage that would exempt the company from being required to seek certification before offering service in a state as well as shield it from rate regulation, among other rules.

The exemptions would also apply to other telephone and cable companies like AT&T Corp. (T.N: Quote, Profile, Research) and Comcast Corp. (CMCSA.O: Quote, Profile, Research) that offer the same service, according to the FCC.

Vonage, which has more than 300,000 lines in service, allows a customer to make telephone calls nationwide and to Canada for a flat fee using equipment attached to a high-speed Internet, or broadband, connection.

"If we let competition and innovation rage, unencumbered by the high cost of regulation, consumers can expect more of the same, lower prices, more choice and more innovative offerings," FCC Chairman Michael Powell said at the agency's monthly open meeting.

Vonage has been battling with state regulators, like Minnesota, which are demanding Vonage obtain state certification, be subject to rate regulation and offer emergency 911 services comparable to those of land lines.

A federal judge put on hold Minnesota's attempt to regulate Vonage's service. A federal appeals court is slated to hear the state's appeal next week and the FCC's decision could be a factor given its expertise in the field.

The FCC's decision did not address more difficult issues, such as whether VOIP providers must pay fees to connect calls to the traditional telephone network and if they must contribute to a fund that subsidizes service in rural areas.

Commissioner Michael Copps had reservations about the way the FCC reached its decision. "This is not the way we should be proceeding," he said. "We need a framework for all carriers and all services, not a stream of incremental decisions based on the needs of individual companies." The board was re-elected by a 97-percent majority.

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