Minnnesota to appeal FCC Vonage ruling

WASHINGTON - The Minnesota Public Utilities Commission (PUC) plans to appeal a November decision by the U.S. Federal Communications Commission (FCC) prohibiting states from regulating VOIP (voice over Internet Protocol) services, such as those offered by Vonage Holdings.

The appeal of the FCC's ruling would be the second appeal by a state public utilities commission after California filed a petition for review with the U.S. Court of Appeals for the Ninth Circuit in December. The Minnesota appeal, to be filed with the Eighth Circuit appeals court, may be filed by the end of the week, said Burl Haar, executive secretary of the Minnesota PUC. The commission directed its lawyers to begin the appeals process earlier this week.

The commission's chief concern over the FCC ruling was how E911 services would be implemented by VOIP carriers without state regulation, Haar said. Commissioners also expressed concern over whether VOIP providers would contribute to the federal Universal Service Fund, which subsidizes phone service in rural and poor areas, and what services VOIP carriers would provide to people with hearing loss, Haar said.

In November, the FCC ruled that Vonage-style VOIP service should be free from most state regulation because the service can't practically be separated into intrastate and interstate components. Because Vonage customers can use the service to make a call from a broadband connection anywhere in the world, it's hard to determine whether a call is local, interstate or international, the FCC said.

The FCC action came partly in response to an August 2003 Minnesota PUC ruling that Vonage file with the state for a telephone operator's license.

Vonage Chief Executive Officer Jeffrey Citron noted the Minnesota appeal comes after the state lost a court case in which Vonage appeals the PUC's August ruling. "When are they going to realize they've just lost?" Citron said. "Minnesota, you're wrong, and it's time you accept the fact you're wrong."

Vonage announced this week its customer base grew from about 100,000 lines at the end of 2003 to more than 390,000 lines at the end of 2004. The FCC action limiting 50 states from imposing 50 different regulatory plans on VOIP is key for the future growth of the company, Vonage officials say.

Vonage, which is focused on small-business and residential customers, expects to have close to 1 million customer lines by the end of 2005, Citron said.