Vonage Wins Appeal, Too

Court Bars Regulation of Web Phone Service

A federal appeals court upheld a lower court ruling yesterday that prohibits the state of Minnesota from regulating Internet-based phone calling as if it were a traditional telecommunications service.

[…] In a lower court decision in this same case, the Federal District Court of Minnesota ruled in October 2003 that Vonage should be properly defined not as a telecommunications service but as an information service, a designation that would free it from some state regulations.

Last month the Federal Communications Commission issued its own rules on the subject, stating that Internet phone services should not be governed by the same state regulations as traditional telephone companies. The F.C.C. decision left open the possibility that the states could still tax Internet phone businesses.

The Minnesota Public Utilities Commission then asked the appeals court to consider whether the F.C.C. ruling pre-empted the lower court’s decision. But the appeals court wrote in its two-page order issued yesterday that the F.C.C. rules actually supported the district court’s injunction against the commission.

The order gives a slightly different picture, IMHO

The FCC concluded that the interstate and interstate components of Vonage’s service are inseverable, such that it is not possible for MPUC to regulate the intrastate component of the service without impermissibly regulating the interstate component. See id. ¶ 31. We sought supplemental briefing on the impact, if any, of the FCC Order on our disposition of this case. Because we conclude that the FCC Order is binding on this Court and may not be challenged in this litigation, we now affirm the judgment of the district court on the basis of the FCC Order.

The Administrative Orders Review Act (“Hobbs Act”) prescribes the sole conditions under which the courts of appeals have jurisdiction to review the merits of FCC orders. See 28 U.S. C. § 2342(1); 47 U.S.C. § 402(a); see also FCC v. ITT World Communications, 466 U.S. 463, 468-69 (1984). An aggrieved party may invoke Hobbs Act jurisdiction by filing a petition for review of the FCC’s final order in an appropriate court of appeals naming the United States as a party. See 28 U.S.C. § 2342; id. § 2344. No collateral attacks on the FCC Order are permitted. Id. The case before us is not a Hobbs Act petition for review. Therefore, this is not the appropriate forum for MPUC to dispute their merits of the FCC’s filing.

Later: TechDirt notes that California has filed an appeal to the FCC ruling, citing this blog entry. Slashdot discussion: Federal Appeals Court Sides With VoIP Providers

Even later – related: Another sort of argument: Wireless Firms Fight Taxation In Maryland [pdf]

Cingular, T-Mobile, Sprint and Verizon Wireless are challenging the right of Montgomery County and the City of Baltimore to impose local taxes on wireless telephone lines.

In letters filed yesterday with the departments of finance in both jurisdictions, the four companies requested a refund of more than $12 million in taxes. The taxes are imposed on companies, which pass them on to consumers.

[…] The refund request is the first step before the companies can file a court challenge. If the departments of finance deny the requests, the companies have 30 days to bring the matter to tax court. If the departments don’t respond, the companies can go to court after six months, Silverberg said.

The companies cited two reasons for their challenge. First, the county and city can impose sales taxes only on utilities, and cellular phones are not defined as utilities, Silverberg said, adding that only the state can impose taxes on anything else.

Also, the county and city can’t tax activities that occur outside its boundaries, Silverberg said, noting that cell phones can be used outside the county.