VoIP Laws and Legal Issues

One of the first thing the government does when an innovative new service like VoIP comes around, is to figure out how to regulate it.

To date, there has been some confusion, debate, and battle over who gets to issue the regulations. So far, the FCC seems to be in the lead, having declared last November that VoIP provider Vonage is not subject to state public utility regulations. The ruling specifically addressed a petition by Vonage, but applies to the entire industry. This particular regulations battle got started when the state of Minnesota, which regulates telephone companies in the state, wanted to impose regulations over Vonage. Vonage wanted to be pre-empted from Minnesota laws pertaining to phone companies, and the FCC ruled in Vonage's favor.

However, any state or other municipality can still tax VoIP providers and their customers. Already, some municipalities in California have started requesting that VoIP providers start collecting local utility user taxes from customers within their jurisdiction.

Another regulatory issue pertains to 911 emergency services. The FCC requires that VoIP providers who interconnect with the PSTN provide 911 service, which provide a caller's name, number, and address to the emergency operator. VoIP 911 service is not quite the same as the emergency service from the PSTN. One major difference is that VoIP service is mobile, and there's no way for the emergency operator to know with 100 percent certainty that a caller is calling from their home location. VoIP providers are required by the FCC to inform their customers of the limitations inherent in VoIP-based 911 services.

Other regulations in the works include compliance with the Communications Assistance for Law Enforcement Act (CALEA), which requires providers to design their systems so that law enforcement agencies may implement wiretaps.

Some other countries are also starting to look into the possibility of regulating VoIP, and some are expected to be heavy-handed. China is attempting to block VoIP completely. Canada's price regulations require incumbents to meet price guidelines, while startups are exempt; and in high-tech Taiwan, where VoIP is prevalent, regulations are forthcoming.

The taxation scenario is still being hashed out in Congress and by the telcos. While some legislators recommend that VoIP carriers be subject to the same taxation burden as conventional telephone companies, the VoIP carriers themselves are seeking exemption from those taxes, arguing that they are classified as information services, and not telecom carriers. Ultimately, if VoIP carriers are forced to collect taxes from consumers for local and state telecom fees, and extras like the Universal Service Fund, this tax burden will dip into the savings that consumers now enjoy by switching to VoIP.

In general, most analysts are predicting that VoIP will not be burdened by an excessive amount of state or federal regulation. Years ago, before the days of VoIP when the telephone industry was deregulated, the result was better prices, more choices and better services for consumers. Thus far, the signals coming from regulators is that while some regulation is inevitable and necessary, the powers that will be are planning on treading lightly in order to allow the technology, and the brand new VoIP industry as a whole, to flourish.

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