Judge Keeps Internet Phone Service Unregulated


A federal judge has barred state officials in Minnesota from regulating a company that provides cheap telephone service over the Internet as a traditional telephone company.

A written order explaining the rationale behind the injunction issued Tuesday by U.S. Judge Michael Davis in Minneapolis was expected by Friday.

The Minnesota Public Utilities Commission will now likely stay an order it issued in August that required Vonage of Edison, N.J., to submit an official phone company application with a list of prices and a 911 emergency phone plan, a commission official, Stuart Mitchell, said Wednesday.

The commission plans to discuss the issue at a meeting on Thursday.

"I think once this commission sees the injunction order, they'll be able to review it and decide how they want to proceed," Mitchell said.

Vonage offers what's known as "Voice-over-Internet" service where telephone calls are converted into digital packets and transmitted in much the same way as e-mail and computer data.

The technology enables Vonage and others to save on costs in a variety of ways, including regulatory fees, and therefore sell their phone service far cheaper than traditional phone companies. Vonage, for example, advertises unlimited calls to anywhere within the United States and Canada for $39.99 per month.

Mitchell said the broader effect of the order was that it could allow other companies to operate similarly without PUC regulation in the state.

Vonage officials didn't immediately return a phone call seeking comment on Wednesday.

Although Vonage bills itself as "the broadband phone company" on its Web site, the firm has argued it is actually a data information service because it transports Internet data rather than traditional voice traffic.

The Minnesota Department of Commerce decided to bring the complaint against Vonage to the PUC after seeing Vonage advertising in Minnesota last December.