States Miffed About Pending Vonage Ruling

10/25/2004 8:10 AM Eastern

State regulators are complaining that federal adoption of rules governing some voice-over-Internet-protocol services would represent a piecemeal approach that could raise phone rates in rural America.

State officials want to derail a Federal Communications Commission vote slated for Nov. 9 that would declare VoIP services offered by Vonage Holdings Corp. an interstate service not subject to a host of state and local regulations.

In a letter to the FCC Friday, the National Association of Regulatory Utility Commissioners argued that the agency should tackle nearly all VoIP issues at once in a comprehensive manner.

The NARUC said that if Vonage is declared an interstate service and does not have to pay intrastate access charges -- which many states use to subsidize local phone service in high-cost areas -- the company would have every incentive to lobby the FCC to ensure that the agency doesn’t tax its revenue in the future to replace the subsidy money the states had lost the ability to collect.

The association said 24 states rely on about $1.9 billion in intrastate access charges to subsidize local phone service, and the revenue drain precipitated by the Vonage ruling “could increase pressures on the federal universal-service program or potentially lead to rate increases for rural and low-income consumers.”

The better approach, the NARUC added, was to address compensation issues first and then all other VoIP issues (jurisdiction, universal service, disability access) quickly thereafter.

“Regardless of what the FCC ultimately decides on jurisdictional issues, we urge the FCC to resist the temptation to act in piecemeal fashion,” the NARUC said.

The FCC’s Vonage decision is expected to be narrow and not include cable’s VoIP offerings.


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