What Does Vermont’s Decision on VoIP Regulation Mean for Customers?

VoIP has made headlines time and again but not always for the right reasons. In recent years, the media has focused on the wrangling between states and cable companies on the topic of VoIP regulation. The debates and court cases have been raging for years, at both the state and federal level.

To Regulate Or Not Regulate?

VoIP technology allows voice calls to travel over the Internet. Traditional phone lines don’t enter the picture, for the most part. Historically, state and federal authorities regulate telephone service. However, they have no authority over data that travels on the Internet. Are VoIP vendors offering phone service or an Internet service?

We’ve seen interesting arguments for both sides of the debate.

State authorities argue vendors provide communication services that serve the same function as traditional phone calls. Since VoIP provides phone service, vendors should comply with the current regulation. Cable companies have protested regulatory efforts by stating VoIP transmits data over the Internet. Hence it should not be classified as telephone services.

The crux of the matter is VoIP technology transcends traditional boundaries. Legislation and regulation have always been to catch up to technological progress. With VoIP fast replacing analog phone services, it is time for the courts to catch up.

Vermont’s Decision on VoIP Regulation

One such case has finally come to a resolution in the state of Vermont. The case goes back to 2007 when Comcast started offering VoIP services. Over the years, Comcast has maintained that state law had no authority to regulate VoIP. Unfortunately for the company, the Vermont Supreme Court ruled against the company.

It also sent the case to the Public Utilities Commission for review. The commission was to resolve the question of regulating VoIP under federal law. Should Vermont treat VoIP on a par with other telecommunication services or not? Earlier this month, the court unanimously declared Vermont has the authority to regulate VoIP services.

Fixed VoIP Versus Nomadic Services

Legally, there is a distinction between fixed VoIP and services like Skype. The latter are classified as nomadic services as users can access them from any location. The courts have long held that states cannot regulate nomadic services.

Fixed VoIP is another matter altogether. When users pick up a phone in their home to make calls over the Internet, it’s called fixed VoIP. With this decision, it is clear Vermont can regulate fixed VoIP as a telecom service. It is a significant verdict that affects states, VoIP vendors, cable companies, and their customers.

What Does This Mean for Customers?

Before we dig into the consequences for customers, let us examine the reasoning behind the decision. The Public Utilities Commission asserts that VoIP service performs the same function as traditional telecommunication services. VoIP offers an identical service, even if the underlying technology is different. It also helps the case that VoIP providers marketed their services as a substitute for traditional landlines.

Cable companies like Comcast and AT&T have presented many arguments against regulation. Chief among them is that it would destroy competitiveness in a growing industry. Vendors posit that regulation will lead to higher prices for customers. Higher prices could potentially lower demand and push smaller vendors out of the market. Regulation could restrict investment in innovation as well.

So, will this decision affect customers negatively? The truth is that this decision is only the first step that will kickstart the process of regulation in Vermont. Now that the courts have decided Vermont has the authority, it is up to the state to decide how it will regulate VoIP. There is no guarantee that Vermont will impose telecom regulation on VoIP vendors. The settlement merely affirms the state’s authority to do so.

Potential Benefits for Customers

If and when Vermont starts regulating VoIP services, customers could benefit. With more households and businesses upgrading to VoIP, it is becoming the de facto standard for voice communication. VoIP is an essential service now, vital to the functioning of society. It is not surprising that courts are coming down in favor of regulation.

In some areas, customers have no option other than VoIP for phone service. Telephone operators have stopped maintaining copper line networks in a few markets due to lack of demand. All this means customers will pretty soon lack an alternative for VoIP services. It is not unheard of for companies to raise prices when customers have no choice. VoIP regulation could theoretically protect customers from spiraling prices and the reappearance of phone contracts.

As of now, the stage is set for state regulation of VoIP services in Vermont. However, similar cases between states and cable companies are pending in federal court. It remains to be seen if those decisions will impact the Vermont resolution or vice versa.