Industry Slams California's Possible 'Radical Shift' to VoIP Regulation

The California Public Utilities Commission risks litigation if it exerts too much authority over VoIP, warned industry in comments received by the agency Monday. Commissioners voted 5-0 Aug. 26 to open a rulemaking (docket R.22-08-008) on changes to licensing requirements and other obligations for internet-based voice (see 2208250029 and 2208190030). Consumer advocates and small businesses supported state VoIP requirements.

The CPUC is considering VoIP obligations two years after a California prohibition on regulating VoIP, Public Utilities Code Section 710, expired in 2020. A 2019 bill to extend it by 10 years failed (see 1909110016). Replies on the CPUC rulemaking are due Oct. 31.

“By ignoring the large body of federal law upholding federal preemption of nomadic interconnected VoIP, and without any relevant state authority ... this Commission alone wanders down an unsteady regulatory path that will likely result in litigation and provide no discernable benefits to residential, business or governmental users of internet communication services in California,” commented the Voice-on-the-Net Coalition, representing VoIP providers. For the past 18 years, federal courts upheld FCC preemption from the agency’s 2004 Vonage order, the VON Coalition wrote. "The FCC was specifically critical of state entry and certification requirements, which could be time-consuming; require the disclosure of sensitive company information; and ultimately result in denial, preventing entry altogether (and potentially sanctions for those providers that may continue to operate)."

Frontier Communications urged the CPUC to “avoid embarking on a path that is likely to lead to legal disputes and distractions from important policy objectives like infrastructure deployment and network resiliency.” The CPUC’s Aug. 30 order instituting rulemaking (OIR) “relies on predetermined legal conclusions that do not reflect input from interested parties as the basis for a radical shift in the Commission’s posture toward VoIP services,” said Frontier: The proposed new approach would be a "sea change in the scope of the Commission's regulatory authority.”

Consumer groups support California weighing VoIP rules, including a requirement that nomadic interconnected VoIP providers contribute to state USF, commented The Utility Reform Network and Center for Accessible Technology. The CPUC “rightfully recognizes” VoIP carriers “are within the agency’s jurisdiction, observes that those carriers are categorized as telephone corporations, and now considers updating the licensing and registration process and carrier obligations in order to meet the needs of today’s consumers,” said TURN and CforAT. Advocates expect “much further discussion regarding technical, legal, and practical issues regarding the Commission’s oversight of nomadic VoIP providers, [but] California law gives the Commission jurisdiction over those providers.”

Small Business Utility Advocates supported more reporting requirements for VoIP, including detailed workforce and board diversity data. Carriers with at least $25 million in annual revenue should "report detailed data on their women, minority, and disabled veteran business enterprises’ … procurement," said SBUA.

AT&T said the rulemaking incorrectly "reasons that because VoIP service shares some of the features of a 'telephone line' or 'telephone corporation' as defined in" the state's public utilities code, the CPUC may "exercise broad regulatory authority over VoIP service providers as 'public utilities.’” Regardless of how California classifies VoIP, the staff proposal conflicts with the FCC's VoIP regulatory regime, it said. VoIP is an information service not subject to state regulation and an interstate service in the FCC's exclusive jurisdiction, commented AT&T: And the staff plan would impose market entry requirements that violate the dormant Commerce Clause.

The California Cable and Telecommunications Associations questioned the need to change the status quo. "The OIR skips several steps of sound policymaking, including deferring action because VoIP service has not been classified by the [FCC], identifying any existing problems in the voice marketplace, acknowledging key distinctions between and among different types of voice services and providers, quantifying the existing voice competition under the current framework and any attendant benefits, and weighing the costs and benefits of imposing a new licensing and regulatory framework," said CCTA.

“New burdensome regulations in this space are not just unnecessary, they are beyond the reach of the Commission’s jurisdiction,” said USTelecom: The market is competitive and federal law preempts California.

The OIR “overstates the significance” of California’s VoIP regulation ban expiring, said Consolidated Communications. The defunct prohibition had “provided an additional statutory protection against the jurisdictional overreach that the Commission was pursuing in 2011, and which it again seeks now, [but] the recent sunset of that statute does not clear a path for Commission regulation.”

CalTel and other small rural telcos don't provide VoIP, but the “proposal to erect market entry requirements and impose public utility-style regulations on an interstate service has far-reaching ramifications,” they said. “Small LECs have grave concerns about the Commission’s failure to confine its regulatory scope to regulated, intrastate services.”

"Nomadic VoIP providers have never been subject to licensing requirements, formal registration requirements, or obligations to contribute to" California USF, said the Computer and Communications Industry Association (CCIA). CPUC "administrative authority is questionable," said CCIA, but courts affirmed FCC preemption. CCIA agreed with some others in industry suggesting the CPUC return to the previous, informal registration process for nomadic VoIP. “The Commission’s reasoning for discontinuing this method of oversight remains unclear.”