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Senate to debate Net phone regulations

Hearings on Wednesday could be first step in banning state regulations of the technology.

The U.S. Senate on Wednesday is scheduled to begin hearings on Internet telephone services, in what could be the first step toward banning state governments from regulating the fast-growing technology.

Under discussion during the hearing will be a proposal introduced in April that would flatly ban state regulators from monkeying around with voice-over-Internet Protocol (VoIP) services. The bill, called the VoIP Regulatory Freedom Act, says regulatory authority is "reserved solely to the federal government."

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VoIP calls are placed over the Internet or a corporate IP network. They are generally less expensive because they avoid traditional telephone networks, which are heavily regulated and taxed.

The proposal is aimed at heading off state officials, who are eyeing VoIP companies as potentially lucrative taxing opportunities. Last August, Minnesota required Vonage to apply for a telephone operator's license. Then in February, a California commission voted to assert jurisdiction over any Internet phone call that connects with traditional phone networks. New York took similar steps last month.

"The bill protects consumers by ensuring that this new service won't be taxed at the state level," Sen. John Sununu, R-N.H., said on the Senate floor when introducing the federal bill in April. "Everyone knows the more you tax something, the less you get. If you want to discourage investment, innovation and capital from moving into important new services like this, then raise the taxes and discourage that investment."

The following witnesses are scheduled to testify before the Senate Commerce Committee: Laura Parsky, deputy assistant attorney general at the Department of Justice; James Dempsey from the Center for Democracy and Technology; Jeff Pulver of; Tom Rutledge, chief operating officer of Cablevision Systems; and David Jones, director of emergency services for Spartanburg County, N.C.

The Justice Department and FBI are keenly interested in wiretapping VoIP calls. The Sununu bill says that VoIP companies that provide links to the existing telephone network--a category that would include Vonage, for instance--must provide some "access to necessary information to law enforcement agencies."

But the access requirement, a key concern of the FBI, would not apply to instant-messaging applications or peer-to-peer services like Skype. In March, the FBI submitted a proposal to the Federal Communications Commission urging regulators to grant police sweeping surveillance powers over Internet voice communications, a more expansive plan than the Sununu bill would authorize.