**STATEMENT OF**

**COMMISSIONER KATHLEEN Q. ABERNATHY**

> *Re: Vonage Holdings Corporation Petition for Declaratory Ruling
> Concerning an Order of the Minnesota Public Utilities Commission,
> Memorandum Opinion and Order in WC Docket No. 03-211.*

This decision provides much-needed clarity regarding the jurisdictional
status of Vonage's DigitalVoice service and other VoIP services. By
fencing off these services from unnecessary regulation, this Order will
help unleash a torrent of innovation. Indeed, by facilitating the IP
revolution, rather than erecting roadblocks, our action will drive
greater broadband adoption and deployment, and thereby promote economic
development and consumer welfare.

There is no doubt that VoIP services of the type provided by Vonage are
inherently interstate in nature. As the Order describes in detail,
several factors combine to make it impossible to isolate any
intrastate-only component of such services. These factors include the
architecture of packet-switched networks and the enhanced features that
are offered as an integral part of VoIP services. Together, these
attributes necessarily result in the interstate routing of at least some
packets. These services are also marked ― in striking contrast to
circuit-switched communications ― by a complete disconnect between the
subscriber's physical location and the ability to use the service. A
subscriber's physical location is not only unknown in many instances,
but also completely irrelevant. Allowing state commissions to impose
traditional public-utility regulations on these interstate
communications services would frustrate important federal policy
objectives, including the congressional directive to "preserve the
vibrant and competitive free market that presently exists for the
Internet and other interactive computer services, unfettered by Federal
or State regulation."[^1]

Thus, while I do not lightly arrive at any decision to preempt state
regulatory authority, I believe it is imperative for the Commission to
do so here. Allowing the Minnesota utility regulations ― or comparable
state regulations ― to stand would authorize a single state to establish
default national rules for all VoIP providers, given the impossibility
of isolating any intrastate-only component. Equally troubling is the
prospect of subjecting providers of these innovative new services ―
which are being rolled out on a regional, national, and even global
scale ― to a patchwork of *inconsistent* state regulations. In short,
failure to preempt state utility regulations would likely sound the
death knell for many IP-enabled services and would deprive consumers of
the cost savings and exciting features they can deliver.

As necessary as preemption may be, I want to underscore my view that our
assertion of exclusive federal jurisdiction still permits states to play
an important role in facilitating the rollout of IP-enabled services. To
begin with, as the Order makes clear, states will continue to enforce
generally applicable consumer protection laws, such as provisions
barring fraud and deceptive trade practices. Moreover, I have often
emphasized that, even where the FCC alone possesses the ultimate
decisionmaking authority, this Commission and state regulators can and
should collaborate in the development of sound policy ― much as we have
done through our Federal-State Joint Boards and Joint Conferences, the
approval of Section 271 applications, and in other contexts. Indeed, I
am encouraged that an increasing number of state commissioners agree
that "preemption . . . does not preclude collaboration with States on
key issues including public safety, consumer protection and reform of
intercarrier compensation and universal service."[^2] These state
commissioners further note that "clearly establishing the domain in
which the regulatory treatment of IP-enabled services will be determined
will facilitate resolution of these issues in a more streamlined manner
and with less incentive for costly and protracted litigation."[^3]

I also want to acknowledge the concerns expressed by commenters who
argued that the Commission should resolve outstanding questions about
access to E911, the preservation of universal service, and other
important policy matters before addressing this jurisdictional issue.
Ideally, the Commission would have decided the jurisdictional issue in
tandem with the various rulemaking issues. But the decision of several
states to impose utility regulations on VoIP services, and the ensuing
litigation arising from such forays, makes it imperative for the
Commission to establish our exclusive jurisdiction as the first order of
business. This Commission runs significant risks if we remain on the
sidelines and leave it to the courts to grapple with such issues of
national import without the benefit of the expert agency's views.[^4]
Looking ahead, I agree that the Commission should proceed with the
rulemaking on IP-enabled services as expeditiously as possible. We
should adopt rules to the extent necessary to ensure the fulfillment of
our core policy goals, including access to E911, the ability of law
enforcement to conduct lawful surveillance, access for persons with
disabilities, and the preservation of universal service. And we should
provide a thorough and careful analysis of whether IP-enabled services
are information services or telecommunications services, given the
potentially far-reaching implications of that classification.

Finally, by the same token, I sympathize with parties who contend that
the Commission should conclusively resolve the jurisdictional status of
*all* VoIP services, rather than limiting our analysis to a subset of
VoIP. I have endeavored to make our jurisdictional analysis as inclusive
as possible, given the state of the record and the scope of the
Declaratory Ruling Petition. This Order should make clear the
Commission's view that all VoIP services that integrate voice
communications capabilities with enhanced features and entail the
interstate routing of packets ― whether provided by application service
providers, cable operators, LECs, or others ― will not be subject to
state utility regulation.

[^1]: 47 U.S.C. § 230(b)(2).

[^2]: Letter of Gregory Sopkin, Chairman, Colorado Public Utilities
    Commission; Thomas Welch, Chairman, Maine Public Utilities
    Commission; Jack Goldberg, Vice-Chairman, Connecticut Department of
    Public Utility Control; James Connelly, Commissioner, Massachusetts
    Department of Telecommunications & Energy; Charles Davidson,
    Commissioner, Florida Public Service Commission; Susan Kennedy,
    Commissioner, California Public Utilities Commission; and Connie
    Murray, Commissioner, Missouri Public Service Commission, at 6
    (November 2, 2004).

[^3]: *Id.*

[^4]: *Cf. Brand X Internet Service v. FCC*, 345 F.3d 1120 (9th Cir.
    2003), *petition for cert. filed* (Aug. 27, 2004) (No. 04-281).