The Minnesota VOIP case

The US District Court in Minnesota has released its opinion (PDF)
holding that Vonage’s voice over IP service may not be regulated by the
state as a telecom service. Here’s the key language:

“The
process of transmitting customer calls over the Internet requires Vonage to “act
on” the format and protocol of the information. 47 C.F.R. § 64.702(a). For
calls originating with one of VonageÂ’s customers, calls in the VoIP format must
be transformed into the format of the PSTN before a POTS user can receive the
call. For calls originating from a POTS user, the process of acting on the
format and protocol is reversed. The Court concludes that VonageÂ’s activities
fit within the definition of information services.”

I have a hard time seeing how this will hold up. Essentially, the
court found that Vonage was an information service rather than a
telecommunications service because it engages in protocol
conversion. That’s not a good distinction on which to base a
regulatory distinction as important as this one. Signals get
transformed inside communications and data networks all the time.

I come back to my conviction that the FCC needs to step in and come up
with rational rules for VOIP, or the courts will make a hash of
things. The Minnesota case may be a good outcome in the short
run, because it doesn’t make sense for individual states to impose
obligations on VOIP at their choosing. In the long run, though,
stability and
clarity must be the foundation of the regulatory system. That’s
ultimately the only way to keep VOIP out of unreasonable and
unnecessary requirements.