May 20, 2004 10:36 AM PDT

Vonage vows to fight New York ruling

Net phone service provider Vonage has vowed to battle a recent ruling that classified it as a telephone company and thus subject to some of New York's regulations.

"We're disappointed, we're concerned and we're incensed," a Vonage representative said Thursday.

The ruling, which was made by the New York State Public Service Commission on Wednesday, starts the clock ticking on a 45-day deadline for Vonage to file for a state telephone license.


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The Vonage representative said that "obviously, (New York) didn't get the memo from Minnesota," where a federal judge ruled that state telephone regulations don't apply to Net phone service providers.

The New York State Public Service Commission did not have an immediate comment. In a statement, the commission said it intends to soften the financial blow of the regulations by ensuring only that Vonage's "core public-interest concerns, including public safety and network reliability, are met."

New York's action has refocused attention on whether states can regulate voice over Internet Protocol (VoIP) services. States believe that as more calls flow onto the unregulated Internet, there will be less funding for public programs, based on fees they assess on telephone calls. But state telephone rules, as VoIP providers point out, govern only traditional phone networks, which their calls usually avoid.

California's Public Utility Commission is also on the verge of regulating Net phone providers, a source familiar with the commission's backroom dealings said. But other states, including Pennsylvania, are waiting for word from Washington, D.C., where federal regulators and lawmakers are trying to establish their own jurisdiction over the Net phone industry.

 

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