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Vonage beats back New York ruling

Judge rules that the Net phone provider isn't a telecom, despite what New York regulators assert.

The New York State Public Service Commission cannot require Net phone provider Vonage to file for a telephone operator's license, under a temporary injunction issued by a judge Wednesday.

"I guess he did get the memo from Minnesota," a Vonage representative said, referring to a district court judge's issuing of a similar order now under appeal. The representative said Vonage never acted on the New York request, made in May.

U.S. District Court Judge Douglas Eaton's Wednesday decision, which was made during a regularly scheduled hearing, could foreshadow an important regulatory win for the Net phone industry.

He is expected to put his order, and thoughts supporting it, in writing in the next few days. He also scheduled a January hearing to decide whether his ruling should become permanent.

A New York PSC representative was not immediately available for comment. In a May statement announcing its decision, however, the agency had said it expected to apply "only minimal regulations to ensure that it does not interfere with the rapid, widespread deployment of new technologies."

Eaton's ruling comes as state and federal regulators debate their appropriate role over a technology called voice over Internet Protocol (VoIP), which Vonage and others use to offer unlimited local and long-distance calling over broadband Internet connections.

With two state efforts to regulate VoIP now derailed, the balance of power may have shifted to the Federal Communications Commission, which wants a very limited state role and earlier this year issued a preliminary report on Net phone calling but left the details for further study.

"It's very good that New York is listening to the word from Washington," said Jeff Pulver, founder of free Net phone service Free World Dialup.

Groups such as the Multistate Tax Commission fear that as more calls flow onto the unregulated Internet, it could jeopardize billions of dollars in state funding for programs, including universal telephone service, 911 emergency services and the e-rate school technology.

Eaton's decision also highlights growing pressure on rules and definitions that have molded the telephone industry from its formation through an era of decades-long monopoly to the present. Congress and the FCC have drawn a strict division between voice networks and data networks, but with the rise of VoIP, that distinction is collapsing.