Federal Judge Tells State to Lay Off Internet Phones

Technology - Reuters Internet Report, by Eric Auchard

New York (Reuters) - A U.S. federal judge rebuffed in strong language a move by Minnesota state regulators to force Vonage, a provider of cheap phone calls via the Internet, to to comply with rules governing phone companies.

In a decision that could stall efforts by other states to regulate Internet communications, Judge Michael Davis of the U.S. District Court of Minnesota ruled that federal law protects information services from regulation and preempts state limits on Voice over Internet Protocol (VoIP) services.

Vonage, which bills itself as "the broadband phone company," enables computer users with high-speed Internet connections to make and receive phone calls worldwide with a touch-tone telephone for a monthly fee of as little as $35.

"State regulation would effectively decimate Congress's mandate that the Internet remain unfettered by regulation. The court therefore grants Vonage's request for injunctive relief," Davis wrote in his decision published on Wednesday.

The decision spelled out the reasoning behind the judge's ruling on Oct. 7 to block an effort by the Minnesota Public Utilities Commission to subject Vonage Holdings Corp. to the same rules that cover phone company service providers. Vonage has signed up about 500 customers with Minnesota addresses.

The Edison, New Jersey-based company was founded by Jeffrey Citron, a Wall Street stock trading entrepreneur. It has signed up 50,000 customers for its services, which rely on boxes supplied by Cisco Systems Inc. to hook phones to the Internet.

October 16, 2003