Calif. PUC Files Appeal To FCC's Vonage Decision -- Maybe

Setting itself up for a potential regulatory flip-flop, the California Public Utilities Commission has filed a petition for review with the U.S. Court of Appeals for the Ninth Circuit challenging the FCC's recent decision to exempt Voice over IP provider Vonage Holdings from state-by-state regulations -- a petition that the CPUC itself may seek to overturn when new commissioners come on board Jan. 11.

The CPUC's petition, filed with the court on Dec. 22, asks that the FCC's Vonage ruling be found "in excess of the Commission's statuatory jurisdiction, authority, or limitations and is arbitrary, capricious, an abuse of discretion and otherwise contrary to law." According to Ellen LeVine, a counsel for the CPUC, interested parties have a 30-day window to present oral arguments to the court before any action is taken.

During that time, the CPUC itself may move to strike its own petition -- a seemingly schizophrenic action that actually makes sense given the fact that the CPUC's recently acrimonious commissioner roster is due for imminent overhaul, with two new appointees for 2005. The outgoing commissioners, Democrats Carl Wood and Loretta Lynch, are being replaced by Republican Steve Poizner and Democrat Dian Grueneich, who were recently appointed to the posts by Gov. Arnold Schwarzenegger.

While the CPUC's LeVine would not reveal details of the commissioners' vote on the FCC/Vonage petition, sources close to the matter said the commissioners were sharply divided on the issue. The CPUC could, in fact, change its mind entirely on the subject when the new slate of commissioners holds its first formal business meeting on Jan. 13 in San Francisco.

Wood, who has in the past favored strong state regulation of VoIP, was likely in favor of filing the petition. Poizner, a Silicon Valley entrepreneur who sold his global-positioning technology company to Qualcomm in 2000, is likely to favor less instead of more telecom regulation, and may tilt the argument in favor of a lighter state touch on VoIP, a stance favored by commissioner Susan Kennedy. Poizner representatives said Poizner wouldn't comment on PUC policy matters until after he is sworn in as commissioner, a ceremony scheduled for Jan. 11 in Sacramento.A reversal of course wouldn't be the first for the CPUC on VoIP issues. And while legal challenges to the FCC's Vonage ruling have been anticipated, the CPUC's choice of using the Ninth Circuit Court (instead of the historically state-friendly Eighth Circuit Court) is also a curious one, according to VoIP impresario Jeff Pulver, who first reported the CPUC's appeal on his personal weblog.

Then there's the timing of the appeal, which was apparently filed just before this week's decision by the Eighth Court to uphold a lower court's ruling in favor of Vonage, a decision where the court used the FCC's Vonage ruling as supporting evidence.

While Vonage representatives hadn't seen any official notification of the CPUC's appeal, Vonage senior vice president Brooke Schulz said in an email reply that the company is ready for such challenges.

"We are not surprised to hear of the CPUC's intent to appeal the FCC Order, however imprudent it may be in light of the consistent Federal precedent on this particular matter of policy," Shulz said. "The FCC and the Federal Courts have consistently found the kind of VoIP Vonage provides is an interstate service, solely under the jurisdiction of the federal government, not the states."