By Roy Mark

July 22, 2004

WASHINGTON — State regulatory agencies won a significant victory Thursday when the U.S. Senate Commerce Committee voted to preserve state authority to impose access charges and universal service fees on Internet telephony.

The narrow 12-10 vote that crossed party lines came in the form of an amendment by Sen. Byron Dorgan (D-N.D.) to the Regulatory Freedom Act of 2004, a measure originally calling for sole federal jurisdiction over Voice over Internet Protocol (VoIP) services.

“As I read this amendment, it effectively guts the bill by turning back to the state commissions all their regulatory powers having to with existing telephone service,” said Sen. John Sununu (R-N.H.), the author of the legislation.

With Dorgan’s amendment tacked on it and another by Sen. Conrad Burns (R-Mont.) calling for VoIP services to provide emergency 9-1-1 service, the committee voted 13-9 to approve the Regulatory Freedom Act.

“The intention of the bill is to prevent 50 states from regulating, and this [amendment] gives back to the states the power to regulate as they choose,” Sununu said. “This is not a local copper circuit-switched system. We need to get away from that thinking, and this certainly takes us 180 degrees in the opposite direction.”

The legislation now goes to the full Senate for consideration, but a floor vote is not expected before the 108th Congress closes for business in November. A bill similar to Sununu’s original measure has yet to be voted on in the House Energy and Commerce Committee.

Dorgan called VoIP a “promising, exciting, new, breathtaking” technology, but added he was concerned about the economic impact of voice traffic migrating from the public switched telephone network to the Internet.

By converting voice into data packets moving over the Internet, IP-based voice services promise lower costs and additional features to traditional telephone services. Many states, however, are worried that a federal mandate blocking their control over VoIP will cost them millions in tariffs.

“[The migration] from traditional phone services will have a dramatic impact on access fees that support smaller, regional telephone companies,” Dorgan said.

Access fees are the charges by incumbent telephone networks for using their lines to transmit voice traffic and are a lucrative source of taxes for states. Most VoIP providers route calls from leased local telephone lines to a gateway server that converts analog voice into data packets. VoIP providers argue since the traffic is converted into data packets, they are not traditional voice-based telephone companies.

Sununu introduced his bill in April, concerned that forcing VoIP providers to pay access fees and meet different sets of state regulations would crush the emerging technology. In hopes of preserving the original intent of the legislation, Sununu and his staff worked into the early morning hours of Thursday to appease the concerns of Dorgan and other members of the committee.

By the time the committee met to cast the first congressional votes on whether or not the states have jurisdictional powers over VoIP, Sununu introduced a substitute to his original bill limiting exclusive federal authority over VoIP to three years.

Sununu’s compromise measure also gave the states rights to enforce consumer protection laws and left room for law enforcement concerns about the accessibility of VoIP networks to wiretapping.

The majority of the lawmakers on the panel ultimately decided the compromises did not go far enough.

“We’re really trampling on the rights of states to regulate telephone service,” Louisiana Democrat John Breaux said. “This [legislation] is very premature. We’re telling our states to get out of the way.”