Arizona Eyes VoIP Deregulation, as Vermont, Minnesota Argue for State Authority

Arizona lawmakers are moving a bill to ban state regulation of VoIP and IP-enabled services, after the Vermont Public Utilities Commission decided fixed VoIP is a telecom service under federal law and while the 8th U.S. Circuit Court of Appeals weighs Charter Communications’ challenge of the Minnesota PUC claiming authority. States continue to address VoIP authority in absence of a definitive FCC ruling on whether fixed interconnected VoIP is a telecom service that states may regulate or an information service that states may not regulate.

The Arizona Corporation Commission is “generally neutral” about HB-2106 and is watching progress “to make sure it won’t violate constitutional authority,” an ACC spokeswoman said Tuesday. “Commissioners will also be monitoring to ensure there isn’t any additional, unnecessary regulation added to the bill.” The bill by State Rep. Jeff Weninger (R) -- who last year sponsored wireless small-cells legislation supported by industry -- would prohibit the ACC “from regulating either directly or indirectly, the rates, terms, or service quality standards of IP or VOIP services,” said a bill summary. Two House committees cleared the bill; last week, House majority and minority caucuses each recommended passing the bill.

Arizona could be the 35th state to pass legislation limiting state commission oversight of VoIP and IP-enabled services, said National Regulatory Research Institute Telecommunications Principal Sherry Lichtenberg. Alaska, Montana, New Mexico, North Carolina and Oklahoma chose not to assert jurisdiction, she said. NARUC General Counsel Brad Ramsay is disappointed but not surprised by the Arizona bill: “Large telecom companies have been pushing variations on this type of legislation for years.”

Comcast is reviewing the Feb. 7 Vermont PUC order finding fixed VoIP is a telecom service, a spokeswoman said Tuesday. “Though we are disappointed with the outcome, we look forward to continuing to offer our voice services.” The ruling sets up a second phase at the PUC about how the commission should regulate fixed VoIP. Last week at an FCBA-sponsored NARUC panel, PUC General Counsel George Young predicted the PUC would first receive a petition for reconsideration of its initial ruling (see 1802140022). The Vermont PUC is "preparing to begin Phase II and expects to issue an order to that effect shortly," a spokeswoman said.

The PUC decision disappointed VoIP providers, which disagree with the analysis, said Voice on the Net Coalition Executive Director Glenn Richards in an interview. The coalition doesn’t include cable companies and its members have nomadic VoIP services not subject to state regulation, and the group opposes regulation of VoIP services and varying state approaches, he said. The FCC has no outstanding proceedings in which it could rule on the classification question, but if Comcast challenges the Vermont order, the FCC could file a supportive brief like it did supporting Charter at the 8th Circuit (see 1710300036), Richards said. There, the FCC didn’t say how to classify VoIP but warned of possible bad outcomes from state regulation.

A Comcast petition for reconsideration or appeal is possible, Ramsay said. He predicted a tough fight for the cable company because he said all parties have conceded that interconnected VoIP can be separated into intrastate and interstate traffic, “and ‘in-severability’ has been the bedrock of any successful preemption analysis in this area for years.”

The PUC order’s impact may be limited outside Vermont since it’s one part of a larger proceeding, Lichtenberg said. “The arguments are excellent, however, so it might sway some of the other undecided states.”

The 8th Circuit likely will rule on the Minnesota case before the possible appeal in Vermont gets a briefing schedule, Ramsay said, predicting oral argument in the next few months and a decision in late 2018. At the FCBA panel, a Minnesota PUC commissioner said to expect the arguments in May or June.

Minnesota commissioners disagreed with Charter that the federal net neutrality order supports arguments that states can’t regulate fixed VoIP (see 1802090009). While the order lends support for Charter’s side, it doesn’t specifically cite VoIP, Richards said. By not directly answering the question, it’s like various other FCC orders cited by both sides in furtherance of their arguments, he said. “Everyone's sort of dancing around the edges.”