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 NEWS  Federal  Communications  Commission  445  12  th  Street,  S.  W.  Washington,  D.  C.  20554  This  is  an  unofficial  announcement  of  Commission  action.  Release  of  the  full  text  of  a  Commission  order  constitutes  official  action.  See  MCI  v.  FCC.  515  F  2d  385  (D.  C.  Circ  1974).  News  Media  Information  202  /  418-  0500  Internet:  http://  www.  fcc.  gov  TTY:  1-  888-  835-  5322 
 FOR  IMMEDIATE  RELEASE:  NEWS  MEDIA  CONTACT:  November  9,  2004  Mark  Wigfield,  202-  418-  0253 
 Email:  mark.  wigfield@  fcc.  gov 


 FCC  FINDS  THAT  VONAGE  NOT  SUBJECT  TO  PATCHWORK  OF  STATE  REGULATIONS  GOVERNING  TELEPHONE  COMPANIES 
 Commission  Clears  Way  for  Increased  Investment  In  VoIP  Services  Like  Vonage’s 
 Washington,  D.  C.  –  The  Federal  Communications  Commission  declared  today  that  a  type  of  Internet  telephony  service  offered  by  Vonage  Holdings  Corp.  called  DigitalVoice  is  not 


 subject  to  traditional  state  public  utility  regulation. 
 The  Commission  also  stated  that  other  types  of  IP-  enabled  services,  such  as  those  offered  by  cable  companies,  that  have  basic  characteristics  similar  to  DigitalVoice  would  also  not  be 


 subject  to  traditional  state  public  utility  regulation. 
 The  decision  adds  to  the  regulatory  certainty  the  Commission  began  building  with  orders  adopted  earlier  this  year  regarding  Voice  over  Internet  Protocol  by  making  clear  that  this 


 Commission,  not  the  state  commissions,  has  the  responsibility  and  obligation  to  decide  whether  certain  regulations  apply  to  IP-  enabled  services.  The  Commission  has  the  power  to  preempt  state 
 regulations  that  thwart  or  impede  federal  authority  over  interstate  communications. 
 Acting  on  a  petition  from  Vonage  seeking  federal  preemption  of  an  order  by  the  Minnesota  Public  Utilities  Commission,  the  FCC  found  that  the  company’s  DigitalVoice  service 


 cannot  practically  be  separated  into  intrastate  and  interstate  components,  precluding  dual  state  and  federal  regulatory  regimes.  DigitalVoice  customers  can  use  their  phones  from  a  broadband 
 connection  anywhere  in  the  world,  making  it  difficult  to  determine  whether  a  call  is  local,  interstate  or  international  in  nature. 


 The  Commission  also  found  that  regulations  that  would  have  been  imposed  by  the  Minnesota  Commission  were  inconsistent  with  the  FCC’s  deregulatory  policies,  and  that 
 preemption  was  consistent  with  federal  law  and  policies  intended  to  promote  the  continued  development  of  the  Internet,  broadband  and  interactive  services.  Divergent  state  rules, 
 regulations  and  licensing  requirements  could  impede  the  rollout  of  such  services  that  benefit  consumers  by  providing  them  with  more  choice,  competition  and  innovation. 


 The  Minnesota  Commission  in  August  of  2003  concluded  that  Vonage’s  DigitalVoice  was  a  telephone  service  for  which  Vonage  was  required  to  obtain  a  certificate  of  authority  and 
 meet  other  rules  and  regulations  governing  telephone  companies  in  the  state.  One  requirement 
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 was  that  Vonage  provide  emergency  911  service  comparable  to  that  provided  by  the  incumbent  phone  companies.  Although  the  Commission  found  that  the  Minnesota  requirements  must  yield 
 to  the  extent  they  bar  entry,  the  Commission  does  not  signal  that  Vonage  may  cease  its  efforts  to  develop  workable  solutions.  The  Commission  looks  forward  to  addressing  public  safety  issues 
 comprehensively,  with  the  participation  of  our  state  and  local  colleagues,  in  the  broader  IP-Enabled  Services  Proceeding. 


 The  Commission’s  order  does  not  express  an  opinion  about  the  applicability  to  Vonage  of  general  laws  in  Minnesota  governing  taxation,  fraud,  commercial  dealings,  marketing, 
 advertising  and  other  business  practices.  But  the  Commission  expects  states  to  continue  playing  a  vital  role  in  protecting  consumers  from  fraud,  responding  to  complaints,  and  enforcing  fair 
 business  practices. 
 The  Commission  noted  that  the  question  of  whether  DigitalVoice  should  be  classified  as  an  unregulated  “information  service”  under  the  Communications  Act  or  a  telecommunications 


 service  will  be  addressed  in  the  Commission’s  IP-  Enabled  Services  Proceeding.  The  Commission  will  also  address  whether  VoIP  providers  must  provide  access  to  the  disabled,  pay 
 intercarrier  compensation  and  contribute  to  the  universal  service  fund,  in  the  Commission’s  IP-Enabled  Services  Proceeding,  which  commenced  in  February  of  this  year. 


 Action  by  the  Commission  November  9,  2004,  by  Memorandum  Opinion  and  Order  (FCC  04-  267).  Chairman  Powell,  Commissioners  Abernathy,  and  Martin,  with  Commissioners  Copps 
 and  Adelstein  concurring.  Separate  statements  issued  by  Chairman  Powell,  Commissioners  Abernathy,  Copps,  and  Adelstein. 


 Wireline  Competition  Bureau  Staff  Contact:  Terri  Natoli,  202-  418-  1574,  terri.  natoli@  fcc.  gov. 
 -FCC- 
 News  about  the  Federal  Communications  Commission  can  also  be  found 
 on  the  Commission’s  web  site  www.  fcc.  gov. 
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