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Court Backs FCC on VoIP Regulation

A three-judge panel of the U.S. Court of Appeals for the Eighth Circuit Wednesday upheld Federal Communications Commission rules that banned states from applying their telecommunications laws to a class of voice-over-Internet-protocol providers, such as Vonage Holdings.

The court concluded that the FCC acted reasonably in pre-empting state regulation and that the agency could assert its jurisdiction without first having to determine whether VoIP is an information service or a telecommunications service as those terms are defined in federal law.

The FCC’s rules were adopted in late 2004 under former FCC chairman Michael Powell, who wanted to shield nascent VoIP providers from complex and inconsistent state regulation. Minnesota’s effort to regulate Vonage triggered Powell’s moves at the FCC.

In its order, the FCC protected Vonage and other VoIP services that are largely nomadic, meaning that consumers can use the same phone number while relying on broadband connections anywhere in the world. The agency said it would offer the same regulatory protection to non-nomadic cable VoIP providers, if necessary.

New York state regulators asked the court to set aside the FCC’s cable VoIP-related language, but the court refused, arguing that the issue wasn't ripe for review because the commission hadn’t actually adopted rules pre-empting state regulation of cable VoIP and other fixed VoIP providers.

“The order only suggests that the FCC, if faced with the precise issue, would pre-empt fixed VoIP service. Nonetheless, the order does not purport to actually do so and until that day comes, it is only a mere prediction,” the court said in a 22-page opinion by Circuit Judge Kermit E. Bye.

Last December, FCC chairman Kevin Martin suggested that an FCC victory in the Eighth Circuit with regard to VoIP service could pave the way for the agency to assert jurisdiction over IPTV service, which AT&T is spending billions of dollars to deploy. Entry into local cable markets is currently controlled by state and local governments, not the FCC.

“There is still a question about whether IP video should be treated as a traditional cable service subject to local franchising authority or whether it’s not a service subject to Title VI in the same way that voice-over-IP isn’t traditional telecommunications subject to all of the [common-carrier] regulations,” Martin told a telecommunications forum.

“I think the decision [that] will come out of that [Vonage] case will be critical in trying to craft whether or not the commission’s authority to deal with all of these IP services will continue to be affirmed,” he added.