PUC Gives Up Fight Over VOIP

State regulators have reversed themselves on broadband telephone calling and ceded oversight to the federal government -- a move that critics fear will leave California customers with little recourse for poor or faulty service.

The state Public Utilities Commission voted 3 to 1 behind closed doors late last week to pull out of its appeal of a Federal Communications Commission rule designating so-called voice over Internet protocol as an interstate service beyond state control.

California’s was the first of several state utility commissions to appeal the FCC order, leading to the combining of the cases in the U.S. 9th Circuit Court of Appeals in San Francisco. Its decision to withdraw is likely to cause delays and a move to another circuit.

The largely unregulated VOIP technology sends voice, data and video in packets like e-mail over high-speed, or broadband, lines. In addition to start-ups such as Vonage Holdings Corp., big phone companies use VOIP to power parts of their own networks.

In reversing its decision of five months ago, the PUC also voted to file papers supporting the FCC’s rule.

The federal rule is “at the center of the most important national debate with regard to the telecom industry: How do we treat new technologies?” said PUC member Susan P. Kennedy, who pushed for the votes.

Kennedy, who has advocated different rules and a light touch on new technologies, has opposed giving the states any significant role in regulating broadband phone calls.

Commission President Michael R. Peevey had other reasons to get out of the case.

“That’s a loser issue. VOIP is obviously an interstate service,” he said. “Technology is constantly changing, and we can put our resources to better use.”

But Commissioner Geoffrey F. Brown, who dissented, said the commission was heading the wrong way.

“We are gradually abdicating any control we have in telecom to the FCC,” he said.

Consumer groups contend that regulation is needed more than ever as the changing landscape over the next few years allows phone service to be delivered over such technologies as high-speed wireless networks and power lines.

“This is unbelievable,” said Bob Finkelstein, executive director of the Utility Reform Network in San Francisco. “The trouble is we have activist regulators far keener on representing the industry than the state’s consumers.”

With conventional telephone service eventually changing over to Internet protocol technology, he said, the PUC is “creating a risk that basic phone service in the future won’t be regulated.”

The commissioners’ votes “essentially say they think the commission is irrelevant, which is a tremendous disappointment,” said Janee Briesemeister, telecom policy analyst for Consumers Union, publisher of Consumer Reports magazine.

Support in Congress for the FCC’s position on VOIP reaches across party lines, partly because anyone around the world can offer the service and customers can use it anywhere.

Critics say the rule is one more effort by the Bush administration to preempt states from regulating basic services such as phones and power. States, they maintain, must have the authority to act on consumer complaints about essential services.

Peevey said he would like to create an overall telecom regulatory plan, much as the commission already has done in energy regulation. Such a plan, he said, also would help to foster competition for more ways to deliver high-speed Internet access, a requirement for all broadband phone service. Currently, most consumers have only two choices: a local phone carrier or a cable company.

But he said the window for creating such a plan was short -- “this year or next.” He also acknowledged, though, that there might be little left to regulate by then if more of the nation’s phone service moves to VOIP.