VoIP has escaped regulation by individual states in the US after a ruling by the Federal Communications Commission.
The FCC decided that Vonage Holdings' DigitalVoice service could not be governed by dual state and federal rules because it was not possible to separate the VoIP service into intrastate and interstate components.
Because DigitalVoice customers can make a call from a broadband connection anywhere in the world, it's hard to determine whether the call is local, interstate or international.
The FCC's decision extends to similar services, such as those offered by cable operators.
It has broad implications for increasingly popular VoIP services, which convert voice calls into packets for transmission over data networks. VoIP promises lower cost, portability and advanced usability and ahs opened up new opportunities for cable operators to offer a "triple play" of voice, video and data services in competition with traditional telecoms and broadband providers.
However, the FCC did not rule on whether DigitalVoice was a telecoms service or an unregulated information service, nor did it address the requirement for 911 emergency services over the VoIP service. Those issues fall under the FCC's IP-enabled services proceeding, which began in February.
FCC chairman Michael Powell called VOIP a revolutionary service, citing lower prices, personalisation and global service as key benefits. He said that internet-based applications such as VoIP ranked alongside long-distance and mobile telecoms as interstate services.
"If we let competition and innovation rage, unencumbered by the high cost of regulation, consumers can expect more of the same - lower prices, more choice and more innovative offerings," said Powell.
Vonage had asked the FCC to pre-empt a 2003 order by Minnesota that DigitalVoice service should be regulated like a traditional telecoms service. That would have meant Vonage obtaining a certificate of authority from the state, providing the emergency 911 service and meeting other requirements.
The FCC said states still had a role to play with VoIP in protecting consumers from fraud, responding to complaints and enforcing fair business practices.
"This forward-thinking decision from the FCC ensures that competition from VOIP is here to stay," said Vonage chief executive Jeffrey Citron. "Because the FCC has acknowledged the reality of the internet - which knows no state boundaries and no borders - more people will enjoy the benefits of internet phone service."
The decision did not come as a surprise to LeRoy Koppendrayer, chairman of the Minnesota Public Utilities Commission, but he sees a silver lining in the FCC's encouraging Vonage to keep working on 911 service. Because VoIP is not tied to a particular location, existing 911 systems can't automatically pinpoint the caller's location - the Minnesota commission's main reason for regulating DigitalVoice under traditional telecommunications rules.
"In allowing Vonage to be a telecoms service provider, we wanted it to comply with the 911 safety issues," said Koppendrayer. "I'm confident that Vonage will work with us to resolve our concerns about 911."
Stephen Lawson writes for IDG News Service