State Regulators Initiate Review of Regulatory Status of VoIP Providers

State regulators are stepping up their interest in Voice over Internet Protocol (“VoIP”) telephony, which could have important long-term implications for those offering VoIP today or considering doing so in the future. Significant recent developments in three key states are discussed below.

Ohio

On April 17, 2003, the Public Utilities Commission of Ohio (“PUCO”) initiated an inquiry concerning how telecommunications providers are utilizing VoIP in Ohio to provide telecommunications services to end users. Specifically, the proceeding will investigate how “telecommunications services with an Internet Protocol and/or voice over the Internet component” are being provided in Ohio. (Note that this framing of the question assumes that VoIP constitutes or could constitute “telecommunications.”) The PUCO is inviting comments on whether a company providing VoIP services is “transmitting telephonic messages” as that term is used in Ohio statutes. Under Ohio law, an entity that is “transmitting telephonic messages” is a common carrier subject to the PUCO’s jurisdiction. Comments in the Ohio proceeding must be submitted no later than June 13, 2003. In addition, the PUCO has also asked that existing VoIP providers submit a questionnaire to the PUCO no later than May 16, 2003. Because the PUCO may already have concluded that some VoIP activity is subject to regulation, VoIP providers should carefully assess whether and how to respond to the questionnaire.

Virginia

The Virginia State Corporation Commission (“SCC”) is also moving forward on this topic. The SCC staff recently sent a letter to a Vonage, a well-known VoIP provider. In response Vonage reportedly asserted that it is not subject to the SCC’s jurisdiction. Dissatisfied with that response, the SCC is now reportedly considering formal action against Vonage, either in the form of a “show cause” order to the company or by opening a formal inquiry (similar to the proceeding in Ohio) to determine whether VoIP providers are subject to SCC jurisdiction. The SCC has not announced timelines for either of these two possible proceedings.

Florida

The Florida Public Service Commission (“FPSC”) is considering the same issue. The FPSC staff held a “workshop” on this issue in late January and received written comments in late February. Legislation pending in Florida would declare VoIP to be unregulated, but would leave open the question whether VoIP providers are liable for access charges to local phone companies when they offer end users services akin to traditional long distance service.

Other States and the FCC

These states are not the first to address this issue. In 2002 the New York PSC determined that a carrier who utilized IP telephony to carry voice traffic over part of its network was subject to intrastate access charges. Conversely, the Colorado PUC ruled during an interconnection arbitration proceeding in 2000 that a carrier that utilized VoIP to deliver long distance traffic should not be subject to intrastate access charges. Also, several years ago, both the South Carolina and Nebraska state commissions opened similar proceedings. But neither commission ruled on this question and both proceedings have since been terminated.

In addition, in February, the National Association of Regulatory Utility Commissioners (“NARUC”), an association of state utility commissioners, issued a resolution calling on the FCC to declare that phone-to-phone calls over IP networks are telecommunications services. For that reason, VoIP providers, and those considering offering services on a VoIP platform, must be prepared to enter this debate and respond to the efforts of state regulators attempting to regulate this nascent technology.

Finally, the FCC has at least two VoIP-related proceedings pending. In one, AT&T has sought a declaratory ruling that interstate VoIP arrangements in general are exempt from access charges. In another, a VoIP provider, pulver.com, seeks a ruling that its service is an information service, rather than a telecommunications service. The pulver.com petition is particularly interesting in that pulver.com’s service is only available through independently-provided high-speed Internet connections, and does not at present access the traditional public network at all.

If you have any questions about these proceedings, or any other issues related to the regulation of VoIP providers, please contact us.