NY vs. VoIP

The NY State Ruling

Frontier, a telephone company in upstate NY, protested the entry of Vonage into the Rochester marketplace. As the Rochester Democrat and Chronicle wrote:

The state Public Service Commission on Wednesday said Vonage Holdings Corp. can offer a form of local telephone service in New York state. Vonage employs voice-over-Internet protocol, or VOIP service, to connect calls using a Web connection, bypassing parts of the local telephone network.

Frontier, a division of Citizens Communications Co., had protested Vonage entering the Rochester market. The PSC said Vonage can proceed in its request for state approval to sell services.

While the local media reported the ruling as a success for Vonage in that they may now "proceed" to receive state approval to sell telephony services, most others reported this as a blow to the nascent VoIP industry.TMCnet.com put it somewhat differently:

The New York State Public Service Commission has determined that the Vonage Holdings Corporation (Vonage), which offers competitive telephone services to New Yorkers through Voice over Internet Protocol (VoIP) technology, is a telephone corporation as defined by New York State Law and, therefore, must obtain a Certificate of Public Convenience and Necessity (CPCN).

The Wall Street Journal's Mark Wigfield writes that "about half of all states have launched regulatory or legal proceedings of their own." Mark does a good job of reviewing the first two of the important issues...

Why does Government Care

There are four issues at stake when the government considers regulation of telephony --

• Public safety -- regulation insures access and funding for 911 services
  
• Criminal investigation -- the FBI and other law enforcement organization want to ensure that they can tap into phone calls
  
• Taxes -- governments hate to give up access to reliable funding sources
  
• Lobbies -- incumbants resist new technologies that threaten their current business models and use government to slow down competition

On the first three issues, we can expect government to move somewhat cautiously with respect to new industries. But lobbying can make governments move more quickly. And the existing telcos seem to have a lot to fear. UPI's Gene Koprowski begins his article on the topic, "Local phone companies may soon be relics of a bygone era, as quaint as an RCA Victrola phonograph or a Kodak "Brownie" camera."

What the Tech Press Said

The technology press didn't have much to say beyond being outraged and quoting various industry figures. C Net's News.com offerd excerpts from Jeff Pulver's web site who wrote that this ruling "...is a very troubling development." News.Com's Ben Chamy led his story with the outrage expressed by Vonage, "We're disappointed, we're concerned and we're incensed," a Vonage representative said Thursday."

What the Bloggers Said

• Andy Abramson is succinct, "It looks like some states want to write legislation that will slow down the deployment and acceptance of VoIP."
  
• Paul Victor Novarese seems vexed that no one is listening to him -- "Uh, Vonage is a phone company. They sell phone service. You get a phone number. The fact that your call goes "over the intarweb" at some point is irrelevant. If you connect to the PSTN, you're a phone company. I've already been through this several times."
  
• William Hungerford rambles... "So much for VOIP being the low cost way of the future. New York has declared Vonage as a phone company and is subject to regulation. Other states sure to follow, destroying the price margin between VOIP and traditional phone service. I'm so glad I'm an ex New Yorker because of stupid regulations and stupid Hillary Cinton (I didn't mean to type that out loud)