California May Regulate VOIP

The California Public Utilities Commission this week tentatively concluded that voice over Internet protocol (VOIP) services that connect with the traditional phone network are public utilities and subject to its regulatory authority.

The panel unanimously voted to proceed with an investigation into a regulatory framework for Internet telephony services, according to the order approved on Wednesday.

Executives of VOIP service providers such as Vonage Holdings have warned that regulation could stifle growth of such services and increase costs for customers.

VOIP is booming: The CPUC predicts VOIP could account for as much as 40 percent of intrastate telecom revenues in California by 2008. The technology is used by companies such as Vonage and 8x8 to compete with established carriers, while those carriers at the same time are switching to VOIP technology to carry their voice and other services.

Money Matters

To date, VOIP providers in California have not been covered by the regulations affecting companies that do not use the Internet as a primary component of call delivery. As a result, VOIP providers have not had to make the same contributions to special state funds, pay interconnection charges, or provide access to the emergency number 911.

The CPUC estimates that by 2008, if the rules on these contributions do not change, state programs supported by the contributions will lose between $183 million and $407 million in revenue. The programs include telephone service for low-income and disabled Californians.

Although it preliminarily concluded that some VOIP providers qualify as a public telecommunications service providers under California law, the CPUC will investigate whether VOIP providers should fall under the same regulatory regime as traditional carriers. The commission expects a final decision to be made within 18 months.