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Analysts: VoIP Ruling Could Hurt Cable

11/08/2004 9:33 AM Eastern

A Federal Communications Commission ruling Tuesday that would deregulate certain providers of voice-over-Internet-protocol service could put cable operators at a regulatory disadvantage, according to a report Monday by Medley Global Advisors.

Cable operators have been pressing to be included in the decision, but the FCC is expected to limit the scope of its deregulatory ruling to Vonage Holdings Corp. and other VoIP providers that use the public Internet to route traffic.

Medley analysts Jessica Zufolo and Christopher Stern warned that if cable is excluded, cable VoIP services would continue to pay intrastate access charges to the Baby Bells and contribute to universal service, while Vonage -- which currently has 300,000 paying customers -- would not.

The FCC’s ruling raises “the specter that such obligations could create a regulatory disadvantage when cable competes against deregulated VoIP services, including those owned by the Bells,” Zufolo and Stern wrote.

The Medley analysts did say that their sources believe Republican FCC member Kevin Martin is trying to include cable VoIP in the decision.

The FCC is expected to say at a minimum that Vonage is an interstate service not subject to economic regulation by the states -- a decision that would help Vonage in its court battle with the state of Minnesota, which attempted to force the company to certify as a traditional phone company.

They also said the FCC’s decision could deny cable a precedent to use next year in lobbying Congress on new telecommunications legislation; could lead to price controls on the fees cable might charge to third-party VoIP providers for helping law enforcement to eavesdrop on calls; and could lead to FCC rules that bar cable operators from diminishing the quality of VoIP calls of competitors.

“Although it is technically possible, there is no evidence that cable or telcos have ever disrupted a competitor’s service,” Zufolo and Stern wrote.

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