Vonage’s Nebraska USF Win Holds Implications for Fixed VoIP

The problem for carriers, on the other hand, is juggling scads of requirements from multiple states.

“The proliferation of state USF taxation on interconnected VoIP is a troubling trend,” said Angela Simpson, director of government affairs for Covad Communications Group, who also serves as president of the Voice on the Net Coalition.

Complying with state– in addition to federal and even county and municipal – demands creates “a logistical nightmare,” for VoIP providers, Simpson said on a panel at the 2008 COMPTEL PLUS show in February.

That’s one reason why Verizon last year asked the FCC to be the only body to oversee and collect USF. The FCC has yet to act on that request.

Gregg Strumberger, corporate counsel for Level 3 Communications Inc., said Verizon’s strategy would ease operational challenges for his company. “We like Verizon’s idea for the most part,” he said, adding that states should be able to handle matters such as 911 fees.

Indeed, the question of whether states can regulate fixed and nomadic VoIP is clogging courtroom dockets around the country. In Missouri, the PSC claims it should be allowed to regulate Comcast Corp.’s VoIP service because it is fixed. Kansas and New Mexico have adopted rules to make VoIP providers pay into USFs and Tennessee is considering the same. Other states likely will follow suit. Vonage has yet to sue Kansas or New Mexico and if it does, the Nebraska victory “does send an incredibly strong signal that those states would face similar outcomes if the decisions were challenged,” Wilhelm said.

For now, Vonage is basking in its coup.

“We hope this decision will help discourage state public utility commissions from seeking to impose universal service charges on interconnected VoIP providers,” Michael Zema, a public relations associate for Vonage, told xchange. “We applaud the court's decision because consumers today are looking for lower phone bills, not higher, particularly in the current economy."

Meanwhile, at least one Nebraska commissioner is voicing her displeasure with the ruling. “I’m trying to think of words other than ‘great disappointment,” said Boyle, adding that everyone should pay to use the network.

“The FCC should be addressing that. And when you know that the Universal Service Fund is suffering at the state level and a federal level, they should not preempt those parties that are using the service that is voice – regardless of the technology it is still voice and it is illogical to call it anything else,” Boyle said.

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