Minnesota Judge: VoIP is Unregulated Data

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October 08, 2003 (3:07 PM EDT)

Is VoIP voice or is it data?

It's data, says a Minnesota federal judge who fired a thunderbolt into the roiling IP telephone world Tuesday with a decision that barred the state's regulators from imposing telephone rules on Vonage, a leading provider of phone service over the Internet.

The decision was cheered by most business players in the embryonic VoIP industry and some of them hoped the ruling would influence the FCC. "It's a very good development," said Peter Pitsch, president of the Von Coalition. "The FCC needs to address this issue and come up with a sustainable policy."

The Von Coalition is a Washington-based association of IP vendors advocating that the industry "remain as free of governmental regulation as possible." As for the FCC, it is expected to take up the VoIP regulatory issue later this fall.

The ruling came just as the Minnesota Public Utilities Commission was pressing the New Jersey-based Vonage to pony up fees to support the state's 911 services and to obtain telephone company business licenses to do business as a telephone operator in Minnesota.

Delivering his decision from the bench Tuesday, Judge Michael J. Davis will release the rationale behind the decision on Friday.

It was not immediately clear whether the decision will have impact in other states, because just a handful have addressed the question of whether VoIP should be regulated as a telephone service or left free to operate as an Internet data supplier.

Vonage filed suit shortly after Minnesota claimed jurisdiction over the IP phone provider in August. By chance, as the judge was delivering his decision, Vonage was announcing it had made VoIP service available in another state -- Vermont in this case. Vonage claims it has more than 40,000 VoIP customers.

Just a week ago, California's PUC announced it was going to regulate Vonage and all others in the VoIP market. The Golden State's PUC claims Web phone firms come under the aegis of its state laws so the Minnesota decision won't affect its activity.

Minnesota was the first state to attempt to regulate VoIP.