"I think telecom reform is going to happen probably faster than most people expect," said Bryan Martin, chief executive officer of VoIP provider Packet 8, who said that the FCC took "a huge step forward" with Tuesday's approval of the petition by Vonage Holdings to have its VoIP services classified as interstate in nature and therefore not subject to state-by-state regulations.

While the FCC's actions left some important questions unanswered — such as whether or not VoIP providers would be required to contribute to the Universal Service Fund, and how they might be required (if at all) to comply with intercarrier compensation rules — Martin and others hailed Tuesday's ruling as a step forward that could quicken the pace of telecom regulation overhaul, a topic already being considered by lawmakers.

"The FCC did the right thing today," said California Public Utility Commissioner Susan Kennedy, in a statement issued Tuesday. Kennedy, a proponent of light-touch regulation for VoIP, added that regulatory change should follow. "We need to fix universal service in recognition of new technologies like VoIP, not try to fit new technologies into an old regulatory model," her statement said.

Even opponents of Vonage's claims seemed ready to tackle the bigger problems sooner. Robert Nelson, a commissioner with the Michigan Public Service Commission and chairman of the National Association of Regulatory Utility Commissioners (NARUC), issued a statement Tuesday that expressed concern about the potential loss of universal service funds, but also conveyed a desire to work with the FCC and the industry to create a new regulatory framework.

"I was glad to hear every FCC commissioner speak to the desire for additional collaboration on the outstanding issues with the states, and we at NARUC intend to take them up on this offer," said Nelson in a statement. "Additional delay on intercarrier compensation and universal service reform is no longer an option."

Tony Clark, a commissioner with North Dakota's Public Service Commission, said rural states could be seriously affected if telecom reform doesn't happen quickly, given the potential reduction in contributions to the universal service funds that subsidize many rural telecom providers.

"The concern of a lot of state regulators is if they don't get really serious, really fast about reform, this [Tuesday's decision] has a lot of negative implications for services, especially in states like mine," Clark said. "It's a big storm cloud on the horizon."

For the near term, Tuesday's ruling means that VoIP providers and investors can be a bit more aggressive, knowing that for the time being, they have some regulatory protection from states and even towns that might try to impose economic sanctions on their services.

"Our biggest fear was being regulated by the states," said Louis Holder, executive vice president of product development at Vonage. "If that had happened, it would have put us out of business."

Even Vonage's potential competitors said the decision was good for the industry overall.

"SBC is pleased that the FCC has taken a positive step to protect the consumer benefits of this technology from a set of unwieldy state rules that could have sprouted across the country," said James C. Smith, SBC Communications' senior vice president for FCC issues, in a statement issued Tuesday.

Packet 8's Martin said the uncertainty over VoIP jurisdiction had worried investors.

"The decision [Tuesday] might not seem like much, but it clears up a lot of unrest for our investors," Martin said. "I wish we could have had this decision six months ago, but we're better off now than we were before the meeting."

Jonathan Banks, BellSouth's vice president for executive and federal regulatory affairs, said the FCC should continue down the path it started on Tuesday, and include all IP-enabled services under a smaller regulatory umbrella.

"We encourage the commission to complete in short order the work it has started here by establishing a similar regime for all IP-enabled networks and services in its 'IP-enabled' rulemaking proceeding," said Banks in a statement. "Such a decision would go a long way toward eliminating uncertainty and allowing quicker introduction of new and more efficient services."

Several observers agreed that the FCC may have left the harder work to legislators like the Senate commerce committee, whose members are already committed to submitting a telecom reform bill in early 2005.

"On the plus side, they [the FCC] might have stopped the litigation [surrounding states and VoIP]," said a Senate commerce committee staff member, who declined to be identified. "But they left the tougher questions for another day. They didn't answer how the new services are supposed to fit into a wholistic regulatory framework."

Even some of the FCC commissioners were disappointed in the scope of Tuesday's ruling, saying it posed more questions than it answered.

"We need a framework to address intercarrier compensation, state and federal universal service, and the impact on rural America," said commissioner Michael Copps, in a statement. "But all I see coming out of this particular decision is more questions.

"The Commission's constricted approach denies consumers, carriers, investors and state and local officials the clarity they deserve," Copps's statement continued. "These are not just my musings. A growing chorus of voices is urging the Commission to stop its cherry-picking approach to VoIP issues."

North Dakota's Clark, for one, hopes that Tuesday's decision will accelerate the overall reform process.

"There's a school of thought that says if you create the crisis, you create the impetus to get things done," Clark said. "I hope that's the case. But the track record of the commission and Congress for getting things done quickly is not great. And we don't have the luxury of time."

By: DocMemory
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