Sources: VoIP Ruling to Exclude Cable

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Despite soaring deregulatory rhetoric from Federal Communications Commission chairman Michael Powell just this week, a pending FCC decision to bar state regulation of voice-over-Internet-protocol services is not expected to include cable’s VoIP product.

The FCC is likely to vote at its Nov. 9 open meeting to pre-empt state regulation of Vonage Holdings Corp. and entities that offer VoIP in a similar fashion. That’s the narrow proposal now before the five FCC commissioners, and it is always subject to change and compromise, according to informed sources.

“It just depends on what the commission believes is appropriate at this time to do, how broad they want to go,” Jeffrey Carlisle, chief of the FCC’s Wireline Competition Bureau, told reporters Wednesday.

The FCC wants to act on Vonage’s request to pre-empt state jurisdiction mainly because the company is engaged in litigation with the state of Minnesota, which sought to regulate Vonage as a traditional common carrier, requiring such things as certification and tariffing.

Oral argument in the case is scheduled for Nov. 17 in the U.S. Court of Appeals for the Eighth Circuit, and the FCC wants to get the Vonage ruling on the books in order to avoid a court ruling that runs counter to agency policy and replicates the setback the FCC suffered in the U.S. Court of Appeal for the Ninth Circuit over the classification of cable-modem service, sources said.

“If we don’t move forward on [jurisdiction] relatively soon, we are running the risk of having multiple conflicting state and federal district court decisions,” Carlisle said. “So far, the federal district court decisions have been consistent, but it may be that future district court decisions are not so consistent.”

Powell, in a speech Tuesday in Boston, used broad language to indicate that the VoIP ruling would embrace a range of VoIP providers, and not just Vonage-like services.

“We cannot avoid this question any longer. To hold that packets flying across national and indeed international digital networks should be subject to state-commission economic regulatory authority is to dumb down the Internet to match the limited vision of government officials. That would be a tragedy,” Powell said.

In its petition, Vonage has asked the FCC to rule that its VoIP service is an interstate product that is functionally indistinguishable from e-mail and instant messaging and does not fall within state jurisdiction.

Sources said the FCC’s initial goal is to shield Vonage because the company’s service has characteristics not shared by cable VoIP. For example, Vonage originates calls that traverse the public Internet and often terminate on the public switched telephone network.

Cable’s VoIP service is run over managed networks and also interconnects with the PSTN through third-party common carriers.

Another distinction is portability. A Vonage subscriber may take his or her multimedia-terminal adapter on the road and plug it into any broadband connection to send and receive calls using the same phone number. Time Warner Cable’s digital-phone service, for example, does not include similar portability features.

“Vonage does not have actual knowledge of its customers’ location when they use the service,” Vonage outside counsel William B. Wilhelm told the FCC in a letter Oct. 19.