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FCC

FCC VoIP Rule To Omit Cable, Sources Report

10/24/2004 8:00 PM Eastern

Washington— Hold the phone, cable. It might not be your turn to offer deregulated voice-over-Internet protocol (VoIP) service.

Despite soaring deregulatory rhetoric from Federal Communications Commission chairman Michael Powell just last week, a pending FCC decision to bar state regulation of VoIP calling services is not expected to include cable’s version of the 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’s 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 last Wednesday.

Cable-industry sources said they were aware of the FCC plan and indicated that the industry had a few weeks to urge the agency to broaden the scope of the ruling.

“I think what we are hearing reflects the snapshot today,” an industry source said.

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

Because oral argument in the case is scheduled for Nov. 17 in the 8th U.S. Circuit Court of Appeals, the FCC wants to get the Vonage ruling on the books to avoid a court ruling that runs counter to agency policy and replicates the setback the agency suffered in the 9th Circuit over the classification of cable-modem service.

“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.”

9th CIRCUIT FACTOR

In the 9th Circuit, the FCC’s decision to classify cable-modem service as interstate information service did not receive the traditional form of court review, because the court had ruled in 2000 that cable’s high-speed data product was partly a telecommunications service and had to adhere to precedent. The case is now before the U.S. Supreme Court.

In a speech last Tuesday in Boston, Powell used broad language to indicate that the VoIP ruling would embrace a range of providers, 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 told the Voice on the Net conference.

VONAGE: STATES OUT

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

Sources said the FCC’s initial goal is to shield Vonage because Vonage’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 (PSTN).

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

PORTABILITY ANGLE

Another distinction is portability. A Vonage subscriber might take his or her multimedia terminal adapter (MTA) 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.

September