Can States Regulate VOiP? Ask the Eighth Circuit

ST. PAUL, Minn. (CN) — The Eighth Circuit heard arguments Tuesday on whether a national communications services company’s “Spectrum Voice” brand — a Voice over Internet Protocol (VoIP) — is subject to state regulation.

The Minnesota Public Utilities Commission (MPUC) asked the Eighth Circuit panel to reverse the ruling that Charter Advanced Services (MN) LCC is an “information services” company rather than a “telecommunications company.”

Charter Advanced Services filed a civil lawsuit against the MPUC commissioners of in Minneapolis Federal Court in 2015. Charter Advanced claimed that MPUC had overstepped its authority when it tried to impose state statutory and regulatory requirements on traditional telephone services to an interconnected VoIP service, such as Charter Advanced Services’ “Spectrum Voice.”

MPUC issued an order on Sept. 24, 2015, trying to change regulation of VoIP services. Charter Advanced claimed that the order singled out its interconnected VoIP service because it would be the only VoIP service in Minnesota subject to the regulation.

Charter Advanced also argued that such regulation is preempted under the Federal Communications Act.

But MPUC told the court that the FCC allows states to apply public utility regulations to VoIP services provided over “fixed” facilities, and that Spectrum Voice is a “telecommunications service” under the Communications Act.

Inside the courtroom, seating was limited and attorneys stood alongside the wall waiting for their cases to be heard. Counsel on each side had 15 minutes to make their case, though their arguments did not always align with each other.

Minnesota Assistant Attorney General Andrew Tweeten said the case is not about whether Charter Advanced Services is an information services company or a telecommunications company, but whether MPUC is preempted from regulating VoIP telephone services.

Tweeten asked the Eighth Circuit to look into what the “decision makers” in the past have made. He cited MPUC v. FCC (Vonage III), where the FCC and the Eighth Circuit stated that interconnected VoIP services provided with capabilities like Spectrum Voice would no longer meet the requirements for preemption and would be subject to state regulation, the attorney said.

Ninth Circuit Judge James B. Loken offered in a lively manner: “If this is not telecommunications service, it seems to me that the briefs are very are unclear of federal regulations, if it’s not a telecommunication service.”

Charter Advanced attorney Ian Heath Gershengorn, with Jenner & Block, said there would be dramatic consequences from state regulation of VoIP services. Gershengorn said in his brief to the court that Charter Advanced would be less competitive because it would be less nimble to changes in the marketplace. For instance, it would be required to tariff its pricing structures.

Gershengorn said that reversing the district court’s decision would not only extend MPUC’s rules to interconnected VoIP services, but would allow every state to apply its own rules, which would weaken federal policy.

He rebutted the state’s claim that the FCC and Eighth Circuit have already determined that services such as Spectrum Voice are subject to state regulation.

“That is incorrect,” Gershengorn said.

“This court did not decide in the Vonage III case.”

To the contrary, Gershengorn said, the FCC has not decided on proper classification of the VoIP services, and that the “issue is up to the court.”

In the 2003 Vonage case, Vonage, another interconnected VoIP provider, challenged the state’s telephone requirements, and the district court determined that the state utility regulation was preempted because the service was an “information service,” as in this case.

But the FCC ruled for Vonage, saying Minnesota’s regulations would frustrate the FCC’s regulation of the interstate communications marke,t irrespective of how the service is classified, according to Gershengorn’s brief.

Eight Circuit Judges Steven Grasz and Ralph R. Erickson attended.

It is unclear when the Eighth Circuit may rule.

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