VoIP Gets A Boost From The FCC

Voice over the Internet (VoIP) telephoning received a boost Tuesday by the Federal Communications Commission (FCC), which voted to bar state regulators from exercising key jurisdiction over VoIP.

Specifically, the FCC approved a petition from VoIP provider Vonage Holdings that asked for approval to provide Internet-phoning service in Minnesota. The positive FCC action--whose approval had been telegraphed by chairman Michael Powell for months--is not only a victory for Vonage, but also for AT&T, which has been promoting its CallVantage VoIP service.

"There was a risk that individual states would have created a patchwork of regulations," said Jan Dawson, research director of the Ovum consultancy, in an interview. "A consensus developed over time that [VoIP] would be best regulated on the federal level and not on the state level."

Dawson said VoIP will likely exacerbate tax shortfall issues that will have to be addressed, particularly regarding the rural phone subsidies. The Universal Service Administration--which supervises rural phone service and receives funding from urban and suburban phone subscribers--has predicted there will be a $575 million shortfall early next year. The fund also includes some money for schools.

Several states have fought the anticipated FCC decision, and some observers have predicted the decision will be challenged in courts and possibly in Congress.Vonage claims commercial leadership in VoIP subscribers with some 300,000 signed up.

The pacesetter in a broadband-based VoIP approach, generally requiring the use of earphones, is Skype, which also hailed the FCC action. A Skype spokeswoman said Skype supported the FCC decision because of fears that state regulation of VoIP would tend to confuse users, who would have to deal with 50 different regulations. Skype has some 14.5 million worldwide users.

FCC commissioners said the exemptions approved Tuesday would also apply to VoIP service offered by cable and former regional Bell operating companies (RBOCs).