FCC Rules VoIP Outside State Regulations

The US Federal Communications Commission (FCC) has ruled that US states are now barred from imposing telecommunications regulations on Internet phone providers, treating Voice Over IP(VoIP) calls no differently than any other application on the Internet.

The significance of the ruling is that US states cannot subject VoIP providers to their rules – the difference between a draconian and very light regulatory environment for the carriers. However, FCC Chairman Michael Powell and two of the four FCC commissioners suggested that states still have a role to play – namely to protect consumer interests.

Of course, Internet phone service providers were pleased with the decision. Vonage, for example, had postponed plans to expand into several rural areas while it awaited the FCC action. It can now ramp up those plans again and expects to announce it has entered those new markets in the next two to three months, according to a company representative.

The ruling will come as very bad news to the four regional Bell operating companies, which had a near-monopoly lock on local phone services until Internet phone providers came onto the scene. In a statement, BellSouth Vice President Jonathan Banks urged the FCC to “create a similar regime for all IP-enabled networks and services.” He describes the FCC’s decision as a “critical step towards encouraging the deployment” of such services nationwide.

Cable providers, such as Time Warner Cable, most of which now sell VoIP plans, fear that they’ll be left out of the ruling because their services run over privately owned and operated networks, not the public Internet. “In a perfect world, it would be great in just one proceeding to deal with all the issues, but we can’t do that here,” said FCC Commissioner Kathleen Abernathy. “It would be a mistake to be on sidelines and try and deal with these other regulatory framework issues.”

However, a tougher FCC ruling would have hurt projections that VoIP services will expand from the 1 million homes foreseen at year’s end to about 10 million by the end of the decade. As traditional phone carriers see more local calls flow over the Internet rather than their own more expensive networks, they have been adding their own VoIP-based services to lure business customers away from those companies that specialise in Internet phone technology.

On a slightly different note, Communications Commission Chairman Michael Powell said on Tuesday he planned to stay at the agency, possibly through 2007 when his term expires, now that President Bush has been re-elected. Powell, the son of Secretary of State Colin Powell, became a commissioner in 1997 and was elevated to chairman in 2001 by Bush. “It’s been one of my great privileges to serve under his leadership and right now that’s what I plan to continue to do,” Powell told reporters. “I’m happy where I am for the moment”, although he also stated that he plans to stay “no later than 2007.”