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Feds rule on VoIP control
FCC blocks a US state from regulating a VoIP firm like a telco but tax still an issue...

By Declan McCullagh

Published: Tuesday 16 November 2004

US federal regulators have asserted their control of internet phone service but have not yet fleshed out important details, including potential taxes and fees.

In an order made public late on Friday, the Federal Communications Commission said it will address those "critical issues" in a separate decision that's expected next year. The order was announced earlier in the week.

The most striking short-term impact of the FCC's decision is how it undercuts Minnesota's efforts to treat Vonage, a prominent voice over Internet Protocol (VoIP) provider, as a traditional phone company. The 8th Circuit Court of Appeals in St. Paul, Minnesota, is scheduled to hear arguments on Wednesday morning.

Phillip Marchesiello, an attorney at Akin Gump Strauss Hauer & Feld in Washington, D.C., who has followed the lawsuit, said: "The court doesn't have a lot of room after this recent decision by the FCC."

A federal judge blocked Minnesota from forcing Vonage to comply with a stack of regulations, including obtaining business licensing and paying certain telephone taxes. Minnesota has appealed to the 8th Circuit.

Bill Wilhelm, an attorney at Swidler Berlin Shereff Friedman who is representing Vonage, said he's puzzled by why Minnesota has not abandoned its appeal after Friday's FCC ruling. "I'm somewhat surprised that they're going to continue to pursue this," Wilhelm said on Monday. "I think at this point, it's silliness - frankly, a waste of resources."

The court clerk's office said Minnesota had asked the 8th Circuit to postpone this week's hearing, but the appeals court rejected the request. Burl Haar, a spokesman for the state utilities commission, declined to comment, saying: "I don't think we're going to have a comment to make prior to the oral argument."

The forthcoming broader ruling on VoIP is expected to clear up a slew of outstanding topics, such as how Universal Service taxes - levied on telecommunications providers to pay for discounted phone service in rural areas - will apply to VoIP firms. Other topics include 911 service, disability access and "access charges" that traditional telephone companies pay to use each other's network.

FCC chairman Michael Powell has said he favours a light regulatory touch for VoIP. But complicating an already complex situation is how Congress might rewrite the nation's telecommunications laws when it revisits the 1996 Telecommunications Act. One Senate panel has already voted to impose what would amount to heavy taxes on VoIP providers.

Declan McCullagh writes for CNET News.com.