Vonage Records Regulatory Victory

A federal magistrate is poised to issue a preliminary injunction blocking
New York officials from regulating broadband telephony upstart Vonage.

Magistrate Judge Douglas F. Eaton of the U.S. District Court announced late Wednesday his intent to rule against the
New York Public Service Commission (PSC), and he is expected to
release a written order shortly. He may also consider making the injunction permanent. A hearing to
consider that move would likely come in January, Vonage said.

“The six-month window gives the [Federal Communications Commission] breathing
room to take leadership of this issue by creating a national framework for
VoIP policy,” Brooke Schulz, a Vonage spokeswoman told

Meanwhile, New York PSC Chairman William M. Flynn issued a statement saying
that the state “will continue to make its case in the Federal
Communications Commission’s ongoing rulemaking on IP-enabled services.”

This is the second such victory for Vonage. In October 2003, another federal
judge ruled that
Minnesota regulators could not require Vonage to register as a telephone
provider to provide its IP telephony services to customers in the state.

Vonage and other VoIP providers argue that they operate as “information
services providers,” not telecommunications services providers, and are
therefore outside the jurisdiction of the state officials who oversee

States don’t buy that distinction. They also worry about the prospect of
losing revenue for worthy programs. Telephone tariffs comprise a major part
of state revenues, and they help fund Internet connections to schools and
libraries, as well as support local 9-1-1 services.

In addition to the Minnesota decision, Vonage believes the FCC’s
posture on the emerging technology helped its case.

The FCC, led by Chairman Michael Powell, has indicated it wants a light
regulatory touch, so the growth of the technology isn’t suppressed.

At the same time, there are a number of issues that must be hammered out,
whether by government mandate or voluntary compliance, including 9-1-1
service and the ability of law enforcement agencies to be able to tap into
VoIP calls. The FCC is working with both sides to craft guidelines.

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