State enjoined from regulating voice-over-IP

Via Findlaw, this AP article says that a federal court has entered an injunction prohibiting the State of Minnesota from regulating voice-over-IP provider Vonage like a regular telephone company. The article notes that Vonage "advertises unlimited calls to anywhere within the United States and Canada for $39.99 per month."

VoIP is one of those things that I wonder whether the regular phone companies will either jump on the bandwagon or figure out how to suppress it or both. A consultant in this NY Times story from October 12 is quoted as saying, "VoIP is going to change everything," while another says that "The big telecom companies worry that VoIP could completely undermine their business within 12 months." A fellow I know in Bristol told me the other day that his office has voice-over-IP. It won't work when the server is down, but then I generally start thinking about going out to hit some golf balls when the server is down, anyway.

The Times article explains what is VoIP: "With VoIP, when someone speaks into the telephone, or microphone, the sounds are broken down into ones and zeros, sorted into packets of information, and then shot across the worldwide network of fiber lines, just like e-mail messages. At the designated end points, the packets of binary code are reassembled and turned back into sounds. In the regular phone network, calls initially pass over less efficient copper wires and the phone companies must maintain dedicated connections between users, instead of just mixing the information in with the rest of the Internet."

The Times article goes on to say, regarding the phone companies' response: "On the one hand, they are rapidly building the technology into their own offerings. MCI expects to have made a complete transition to VoIP by 2005. AT&T will offer a major digital voice service to businesses in 2004 and has begun a consumer pilot program, based mainly in New Jersey.

On the other hand, the regional Bell companies are arguing for new regulations that would tie up VoIP companies that let consumers make calls to customers on the regular phone network, as Skype hopes to do soon.

According to critics, VoIP companies receive an unfair advantage because the F.C.C. and state governments regulate them as information, not phone, companies because they rely completely on the Internet. That frees them from multiple tax and regulatory commitments, like directly paying into the federal "universal service fund" that subsidizes rural telephone access. Some state governments are considering that issue; in Minnesota last week, a federal judge overruled a decision by the state's Public Utilities Commission to force Vonage and other VoIP companies to submit to the state's traditional phone regulations. The F.C.C. and Congress will almost certainly take up the issue soon, too."