The Jeff Pulver Blog: VoIP in America: A Tale of Two States:

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November 06, 2007

VoIP in America: A Tale of Two States:

Last week two states – New Jersey and Missouri -- took radically different approaches to VoIP regulation that could have far reaching consequences for the future of Internet communication.

New Jersey – helping consumers take advantage of new technologies. On the one hand, New Jersey’s Governor Jon Corzine (D) -- joining a number of other forward looking states – signed into law new legislation prohibiting state regulation of many aspects of VoIP.

I couldn’t outline the justification any better than the bill itself which specifically states:

“The growth and enhancement of services using Internet Protocol technology provide consumers more choice in voice, data, and video service than at any other time;

The proliferation of new technologies and applications and the growth in the number of providers developing and offering innovative services using Internet Protocol is due in large part to a light regulatory touch, including freedom from traditional telephone regulation that these new technologies and services and the companies that offer them have enjoyed in New Jersey; and

These economic benefits, including consumer choice, new jobs, and significant capital investment, will be jeopardized and competition minimized by the imposition of traditional State entry and rate regulation on Voice over Internet Protocol service and Internet protocol-enabled service.”

I applaud the New Jersey legislature, Governor Corzine, and the many other states who have enacted similar legislation to help their consumers take advantage of the lower prices, new services, and advanced features that VoIP can deliver. Such legislation shouldn’t even be necessary. But Missouri reminds us why.

Missouri – stuffing tomorrow’s technologies into yesterday’s regulatory boxes. But last week the Missouri Public Service Commission (PSC) took a starkly different approach. After a year-long proceeding, the PSC found that Comcast’s fixed VoIP service, unlike Vonage’s service, is offering a telecommunications service in Missouri and therefore it is requiring Comcast to get certified by December 10th, or stop offering their VoIP service. Even though in the FCC’s landmark “Vonage decision” the Commission found that Vonage and Vonage like services should not be subject to state jurisdiction, the Missouri PSC has found otherwise. Unfortunately, while the Missouri Senate proposed legislation similar to New Jersey’s to prevent the Missouri PSC from regulating VoIP, the Senate adjourned before completing work on the bill. The bill found “that the provision of VOIP service free of regulation, regardless of the provider, is in the public interest.” And therefore the “public service commission shall not regulate or otherwise exercise jurisdiction over VOIP service regardless of how the service is classified by” the FCC. Passage of that legislation would have prevent the PSC from acting.

This PSC decision has vast and far reaching implications. It doesn’t just effect cable VoIP, it has the potential to affect any type of VoIP services that state Commission’s determine is unlike Vonage’s service.

Implications: This decision is likely to set off a chain of reactions including a possible appeal, and if left in place, unleash a number of other state actions similarly adopting state regulation of fixed VoIP. These actions are like to raise rates for consumers and slow innovation as state seek to require Internet technologies to subsidize the 100 year old phone network through the application of state universal service contributions, and the application of state access charges. It would be like having the first automobiles subsidize horse and buggy’s, or e-mail subsidize postal mail, or PCs subsidize mainframes.

Outside of this court, policymakers at all levels have taken approaches more similar to New Jersey’s. In Congress, at the FCC, in the states, and in the courts, policymakers have generally come to recognize that to unleash the vast benefits that VoIP can deliver, policymakers must avoid applying a potential patchwork of multiple and inevitably conflicting state regulatory models.

In Congress: 62 House members wrote the FCC is support of exclusive federal jurisdiction for Vonage and like services. Similarly last year a majority of the Senate Commerce committee voted to codify the Vonage decision and dismiss all court challenges to it.

States: 7 state legislatures have adopted bills preventing state regulation of VoIP, ALEC adopted a model state VoIP bill preventing regulation of VoIP, and the New Jersey’s governor signed into law such a bill just this last week.

Courts: Earlier this year, the 8th circuit affirmed federal jurisdiction earlier this year for nomadic VoIP. In its decision the court expressly noted that the FCC, “if faced with the precise issue” of state attempts to regulate facilities-based VoIP services, it would preempt” state regulation of such “fixed VoIP services.”

Throughout industry: Almost every high tech and telecom trade group has supported exclusive federal jurisdiction for VoIP.

These leaders recognize that the global nature of IP communications – traversing national and international boundaries – calls for a single uniform regulatory framework for VoIP.

This is one of the most important policy decision’s to get right. As many of you remember, I petitioned the FCC, and the FCC agreed with me, that pulver.com’s Free World Dialup service should remain free from unnecessary regulation at both the federal and state levels. Economists now estimate that ensuring continued VoIP competition can save consumers an astounding $100 billion over the next 5 years – putting real money back into consumers’ pockets through the power of competition. That is especially important today as mortgage mom’s are struggling to make ends meet, and as the prices of oil hits new highs. But the biggest advantages from adopting a uniform light-handed national regulatory framework for VoIP us the what it means for innovators using VoIP technologies to enable new ways to communicate never before possible. We saw some of these on display at last week’s Fall 2007 VON conference. Regulators need to create a consistent, uniform and light-handed regulatory framework (more like New Jersey than Missouri) for consumers across the country to be able to take advantage of them. This is something that the VON Coalition, which I founded more than 11 years ago, has worked tirelessly to promote. If you care about these issues, I encourage you to join the VON Coalition and its efforts.

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Tags: VoIP, Public Policy, FCC, VON, VON Coalition, Governor Corzine, Jeff Pulver