Fresh Wave of 2013 State Bills Seeks to Limit PUC VoIP, IP Regulation | Communications Daily

John Hendel

April 1, 2013

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The push to keep states from regulating Internet Protocol-enabled services goes strong in 2013. Legislators in more than half a dozen states introduced such IP bills this year. More than two dozen states had already passed laws before 2013 began, California prominent among them (CD Oct 2 p7). The IP transition’s urgency escalated when AT&T introduced an FCC petition urging transition trials last November, and it’s widely accepted that much voice traffic will shift to VoIP and IP-enabled frameworks in the next decade amid these transforming state roles. Proponents and observers told us these state laws will keep appearing, while NASUCA and AARP fear they’ll create public safety and affordability risks.

States that introduced such bills include Arkansas, Arizona, Colorado, Connecticut, Iowa, Kansas, Nevada, North Dakota and Wyoming. Some bills lost their fire, while others have already become law. Industry coalitions helped craft some of these bills, as national trade groups urge them forward. They tend to exclude states from regulation but often include exceptions for 911 charges and other funding mechanisms.

“We like to keep these things neat,” said Voice on the Net Coalition Executive Director Glenn Richards, referring to the easier passage of bills that address specifically VoIP old VON Coalition comprises 11 companies including AT&T, Cisco, Google, Microsoft, Skype, TMobile, Vonage and Yahoo, and Richards has submitted testimony in and visited many state legislatures considering these bills. He’s pleased with 2013: “We’ve seen a lot of positive developments.”

“This is a clarion call for Congress and the FCC” to reform the Communications Act, the American Legislative Exchange Council’s John Stephenson told us. “It’s showing the federal government a possible way forward on communications law.” Stephenson, director of ALEC’s Communications and Technology Task Force, counts at least 26 jurisdictions that recognized the need for what he calls a “new regulatory framework,” no longer from the Ma Bell era. ALEC has advocated against state utility regulation of IP for years through model legislation, and Stephenson describes himself as an educator of different ALEC members. The 40-year-old council contains industry members, including AT&T, Verizon and

Time Warner Cable, as well as state legislators, who together collaborate on its model bills, all posted online this year. “What I am seeing more of is a recognition among policy makers this needs to happen,” Stephenson said, calling it “clearly a priority for the tech and telecommunications industries.”

Three states have acted decisively. Arkansas passed an emergency communications law March 19 with a provision exempting VoIP service and VoIP providers from Arkansas Public Service Commission regulation. Wyoming’s Legislature passed its bill in February, shepherded through industry and other stakeholder concerns largely by the office of Republican Gov. Matt Mead last year (CD Feb 1 p7). The governor signed the bill, according to Deputy Chief of Staff Tony Young, and it’ll become law July 1. Kansas’s bill awaits a governor’s signature after passing out of the Legislature Tuesday, with only a single no vote total in both legislative bodies. AT&T actively supported such bills, such as in California before and in Wyoming and Kansas. In those states, stakeholder coalitions hashed out bills’ details far in advance of them hitting the legislative floor. “We’ve been seeing a lot more stand-alone bills,” Stephenson said.

“I think there is inevitability,” National Regulatory Research Institute Principal Telecom Researcher Sherry Lichtenberg told us of the national move toward these IP bills. “Maybe this is all a generational change.” NRRI is NARUC’s research arm, and Lichtenberg studies state deregulation effects, with recent results showing few troubles. She suspects more than 30 jurisdictions will restrict IP regulation by the year’s end. “We may not have a whip, but we certainly have the kind of knowledge that might be used to collaborate,” Lichtenberg said, suggesting state regulators might move toward a coordination role.

NASUCA has “a tremendous amount of concern,” Acting Telecom Chair Regina Costa said. Industry has “virtually unlimited resources” and “has done a pretty good job of disguising the impact of these kinds of bills,” she said. She pointed to the role of states in ensuring affordable, reliable communications service, which she feels is best done by public utility commissions. “These bills are not about the Internet,” she said, dismissing the idea that they promote tech investment. AARP warned against Connecticut’s 2013 bill, as in some other states, and in testimony (http://1.usa.gov/YOHFTq) encouraged the state to “explicitly and unambiguously acknowledge that Connecticut now possesses the authority to regulate VoIP.” The association cautioned the new technology is vulnerable, citing “extreme” weather events and suggesting other states passed their IP laws “perhaps before these states had a chance to consider the implications.” The wave of bills came from “aggressive industry lobbying” despite and because of state regulators, such as in New Hampshire and Massachusetts, who had asserted jurisdiction over VoIP, AARP said, noting industry’s “veiled threats of withholding innovation and investment.” Costa noted the bill is “front and center” on her Connecticut NASUCA colleagues’ agendas.

North Dakota is the rare state that dialed back its bill. Senate Bill 2234 calls for a “legislative management study” of VoIP but demands no regulatory changes (http://bit.ly/11nUBWE). But an earlier draft said the state can’t “directly or indirectly regulate the entry, rates, terms, or conditions” of IP or VoIP (http://bit.ly/XsnVon). The bill passed the Senate 47-0 in February, the House 88-5 Wednesday and now returns to the Senate. Industry in North Dakota hadn’t coalesced around that bill as well as in other states like Kansas, where stakeholders were “lock step,” according to Richards: “They just needed more time to think about it,” he said, noting the state’s short legislative season and a perception that the state commission wasn’t going to be “aggressive” in trying to regulate VoIP. He contrasted that with the Kansas Corporation Commission, which asserted authority over interconnected VoIP service in January — a position nullified under the pending Kansas bill (CD Feb 20 p5). In Iowa, the Legislature opted for a study bill as well to await a proceeding of the Iowa Utilities Board, Richards added. State regulators’ views “run the gamut but at the end of the day they are charged with enforcing their states’ laws,” Stephenson said.

New England remains less receptive. Stephenson emphasized New York and Connecticut as holdouts but pointed to New York’s emerging tech economy as a potential impetus for a bill’s passage. “I think that being a priority for the mayor [Michael Bloomberg of New York City] will really change the paradigm,” promoting greater awareness of regulatory costs, he said. Tech-focused Massachusetts adjusted IP regulations, he said. Richards also pointed to Connecticut and New York as holdouts. One of the biggest hurdles in putting together a successful bill tends to be rural phone companies “concerned about creating what they perceive to be an unlevel playing field,” Richards said. There’s also funding issues related to state USF and 911, he added, noting that VON never objects to those provisions as long as state and federal language is consistent.

Consumer concerns are minimal, bill proponents said. States retain a role — not carrier-of-last resort obligations or pricing but a general tax and consumer protection role, Stephenson added. ALEC is examining what IP-world policies should guide disaster recovery, focused on mobile technology and state tax treatment of companies, Stephenson said. “California was it,” Richards said of consumer outcry, pointing to The Utility Reform Network’s concerns voiced as that state passed legislation. “When have the states stepped back and reversed field? No states have done that.” There’s a “minuscule” number of complaints against VoIP providers, Richards warranted as a reason. States can and may reverse the laws if necessary, Costa said, noting they’re in their “infancy” and that the biggest companies like AT&T and

Verizon have not yet moved en masse to IP services.

“The IP transition is under way, and I’d argue it’s much further along on the state level,” Stephenson said. “They are experimenting with these different regulatory frameworks,” often turning to a “light touch” and “market-based” approach.

Richards hopes his job will get “easier” going forward and suggested it will as he’s able to tell legislators, “’Your neighboring states have done this.’” VON and the VoIP community will revisit these issues this fall to consider how circumstances have changed in certain states. This year’s legislative season is now “over the tipping point,” he said.