Can states regulate so-called interconnected Voice over Internet Protocol phone calls?
Getting a firm to answer such a seemingly simple question is giving fits to federal and state regulators as well as executives of phone and cable companies.
Tens of millions of dollars in potential state tax revenues are hanging in the balance. And some lawyers see American phone companies seizing on a state-friendly answer as a huge loophole for them simply to disregard most federal regulations.
But first, the regulators – as well as state officials and telecom executives – need the federal courts to define an “interconnected VoIP†service.
It’s crucial because the Federal Communications Commission finalized a ruling last week in an Alabama caseOpens a new window that left the waters murky.
For some a bridge too far
The FCC held that while state regulators cannot levy higher fees for 911 emergency calls on VoIP systems than on landline systems, the commission didn’t make clear whether interconnected VoIP services, which may also go through the former Bell phone companies, are subject exclusively to federal regulation.
Some lawyers believe that the Alabama FCC ruling did not go far enough. Currently, interconnected voice services are not being classified as interstate information services unlike, for example, Internet-based broadband and video data.
Both the FCC and the Supreme Court are avoiding a final decision on whether interconnected VoIP should be accorded the same status as broadband. This flies in the face of market reality.
High court refuses
The Supreme Court is refusing to hear the appeal of a lower court decision that Charter VoIP can be exempted from Minnesota regulations, in this case a legal wrangle with the Minnesota Public Utilities Commission. Both a lower federal district court and the 8th U.S. Circuit Court of AppealsOpens a new window have agreed that Charter VoIP is now an information service and outside state jurisdiction.
The Supreme Court declined to hear an appeal and thus federalize the decision across all Circuit Court districts.
The courts that have heard the Charter case have pointed out a lack of needed definition from the FCC. Given that the FCC has already defended broadband Internet as outside the jurisdiction of state governments, lawyers for VoIP companies would expect the high court to apply the broadband ruling to Internet phone calls.
According to FCC Commissioner Michael O’RiellyOpens a new window , a Republican, the market needs clarification. VoIP uses data packets like broadband and video but because it involves voice communication it’s being treated differently by federal regulators.
One issue with an interconnected VoIP call is that conversion sometimes occurs at home or the office, and in its journey the call may use traditional landlines.
An exit loophole
Some regulators are concerned that traditional telephone companies would seek to dodge federal regulatory responsibilities if they could argue that their handling of VoIP calls exempted them from federal regulations.
While the clarification from the FCC that customers should not pay higher fees for 911 calls has been welcomed by the VoIP industry, it remains likely that Internet phone calls will give regulators headaches for years to come.
Key takeaways:
- The VoIP industry is awaiting a clear definition of whether it should – or shouldn’t – be regulated and taxed at state level.
- A recent FCC ruling on the taxation of VoIP for 911 calls seems to have missed the opportunity to bring clarity to the issue.
- Interconnected VoIP services remain in a limbo of sorts since they also make use of telephone company PBX lines. Federal lawyers and regulators may be concerned that a clear decision would create a loophole for mainstream telcoms to avoid state regulations.