FCC

FCC Includes Cable in Vonage Ruling

11/09/2004 8:40 AM Eastern

Cable’s voice-over-Internet-protocol service was included in a Federal Communications Commission ruling Tuesday that barred states from imposing traditional phone-industry rules on VoIP providers.

The FCC’s decision came as a surprise because agency staff had originally proposed excluding cable VoIP from the decision. But over the past few weeks, the National Cable & Telecommunications Association, Cox Communications Inc. and Time Warner Inc. pressured the commission to broaden the scope of its ruling.

Republican FCC members Kathleen Abernathy and Kevin Martin adopted cable’s cause and won the internal battle to broaden the staff’s recommendation.

Under the FCC’s ruling, cable companies that offer VoIP won’t need to obtain state permission to enter the business and won’t need to file pricing plans with state regulators or offer 911 emergency services.

“To subject a global network to disparate local regulatory treatment by 51 different jurisdictions would be to destroy the very qualities that embody the technological marvel that is the Internet,” FCC chairman Michael Powell said moments before the vote.

States were not totally pushed aside. The FCC did nothing to interfere with their ability to enforce consumer-protection laws dealing with fraud and false advertising. The agency also left the door open for states to tax VoIP revenue.

Many cable companies -- including Time Warner, Comcast Corp. and Cablevision Systems Corp. -- have already received state permission to provide VoIP services. The real benefit from the FCC’s ruling was that cable operators now know that they will not need to cope with a patchwork of regulations varying from state to state.

"By establishing a national framework for the regulation of VoIP services, the FCC has taken a significant step toward promoting competition in enhanced voice services,” NCTA president Robert Sachs said in a prepared statement.

The FCC’s ruling was based on a request for relief sought by Vonage Holdings Corp., a leading VoIP provider that is fighting the state of Minnesota in federal court over that state’s decision to require Vonage to comply with traditional state telephone rules.

The FCC ruled that Vonage’s “Digital Voice” service was an interstate communications service that fell within the agency’s regulatory ambit. The commission did not decide whether VoIP is an information service or telecommunications service, putting off a decision until at least next spring.

The FCC said it was pre-empting the states with regard to Vonage and “other types of IP-enabled services, such as those offered by cable companies, which have basic characteristics similar to [Vonage].”

FCC staff once explained that Vonage was different from cable VoIP because Vonage routes traffic over the public Internet (cable uses private networks) and offers a nomadic service, meaning that consumers can plug into any broadband connection using the same phone number, while cable VoIP, for now, is a static product.

But those two characteristics were not the ones the agency relied on in deciding that its pre-emption decision would cover both Vonage and cable VoIP, FCC sources said.

Instead, the FCC concluded that Vonage and cable VoIP were similar because both involved the offering of a suite of features and functions, a broadband connection and certain customer-premises equipment compatible with IP technology.

The commission also relied on the fact that Vonage and cable VoIP route traffic across state lines based on network architectures that do not conform with state boundaries.

“The order is very specific. It states that to the extent that these other entities are offering services that have similar characteristics [to Vonage], as we have defined those characteristics in the order, then, yes, there would be a similar pre-emptive effect,” said Jeff Carlisle, chief of the FCC’s Wireline Competition Bureau.

FCC Democrats Michael Copps and Jonathan Adelstein concurred with the decision but voiced concerns that the agency was acting in a piecemeal fashion and avoiding action on a host of important issues, including sustaining the fund to keep phone rates affordable; reforming the scheme on intercarrier compensation; public-safety issues, such as 911 requirements; and customer privacy.

“There are, in fact, difficult and urgent questions flowing from our jurisdictional conclusion, and they are no closer to an answer after we act today than they were before we walked in here,” Copps said.

Carlisle said virtually all of those issues were contained in other proceedings that the FCC would take up over the next year.

September