FCC: Local phone companies must connect Net calls

VoIP industry applauds ruling that says local providers can't refuse to carry calls on wholesaler-owned broadband lines.

In a boost to Internet phone providers, federal regulators have ruled that local telephone companies must connect Net-based calls shuttled over broadband lines owned by wholesalers like Sprint Nextel and Verizon Communications.

A 16-page order from the Federal Communications Commission on Thursday effectively overturned decisions by state regulators in South Carolina and Nebraska that had prevented Time Warner Cable from deploying its voice over Internet Protocol service there.

FCC Chairman Kevin Martin said the states had misinterpreted federal telecommunications law.

"Our decision will enhance consumers' choice for phone service by making clear that cable and other VoIP providers must be able to use local phone numbers and be allowed to put calls through to other phone networks," Martin said in a statement Thursday.

Time Warner Cable, the nation's second-largest cable operator, had petitioned the FCC for relief about a year ago.

To deliver its digital voice service, the cable company buys wholesale telecommunications services from MCI WorldCom Network Services (now Verizon Business), Sprint and others. Those wholesalers then seek to negotiate "interconnection agreements" with local carriers so that calls can be routed from the wholesalers' broadband networks to the public switched telephone network. That connection is key for VoIP subscribers who want to communicate with traditional telephone users.

In Nebraska and South Carolina, a number of rural phone companies declined to sign those interconnection agreements. The companies said federal law didn't require them to negotiate such agreements with wholesale phone companies that carried third-party services like VoIP, according to the FCC complaint, and the state regulators agreed.

Time Warner Cable said it had not experienced similar problems in other areas where it operates, such as Illinois, Iowa, New York and Ohio.

In comments filed last April with the FCC, trade associations representing independent phone companies argued that granting Time Warner Cable's position would reinforce an "unequal regulatory structure" (PDF) that they say imposes fewer obligations on VoIP companies than on telephone companies.

The groups urged the FCC to classify VoIP as a telecommunications service once and for all, in part so that it's clear the two services are subject to the same obligations--such as contributing to the Universal Service Fund, which subsidizes rural telephone service.

The FCC declined in its order to make that distinction, saying it was "irrelevant" to the matter at hand. Regulators already decided last June, however, to require interconnected VoIP services--as opposed to those that use peer-to-peer technology--to pay into the fund.

VON Coalition, a VoIP industry group that supported Time Warner Cable's petition, applauded the FCC's decision as "broadly beneficial to the entire VoIP industry."

"The problems that Time Warner faced in South Carolina and Nebraska were not isolated," Jim Kohlenberger, the coalition's executive director, said in an e-mailed statement. "They threatened the competitive availability of VoIP services overall, and they effectively created 'digital divides' between those Americans who can enjoy the full potential of broadband and those who cannot."

A group representing the cable industry also praised the ruling. Kyle McSlarrow, president and CEO of the National Cable and Telecommunications Association, said it would "speed the rollout of digital voice service in many more markets."

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