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VONAGE HOLDINGS v. N.Y. STATE PUBLIC SERV. COMM.
December 14, 2005.
VONAGE HOLDINGS CORPORATION, Plaintiff,
v.
THE NEW YORK STATE PUBLIC SERVICE COMMISSION, and WILLIAM M. FLYNN, LEONARD A. WEISS, THOMAS J. DUNLEAVY, and NEAL N. GALVIN in their official capacities as the Commissioners of the New York State Public Service Commission and not as individuals, Defendants.
The opinion of the court was delivered by: DOUGLAS EATON, Magistrate Judge
Vonage Holdings Corporation ("Vonage") describes itself as the
"Broadband Phone Company," but alleges that it does not actually
provide telephone service. It uses a new technology called Voice
over Internet Protocol ("VoIP"). Vonage, a New Jersey
corporation, started business in 2002. As of May 27, 2004, Vonage
had over 100,000 customers, and 24,864 of them had a billing
address in New York State and used a telephone number with a New
York area code. They use Vonage to make interstate and intrastate
telephone calls.
In an 18-page order issued on May 21, 2004, the New York State
Public Service Commission ("PSC") determined that Vonage is a
"telephone corporation" as defined by New York Public Service Law
§ 2(17). The PSC rejected Vonage's argument that federal law
entirely preempts state regulation of its service. The PSC order
concluded:
. . . Although the [PSC] has the authority to
regulate telephone services, we also have an interest
in ensuring that such regulation does not needlessly
interfere with the rapid, widespread deployment of
new technologies. Any regulation imposes costs that
may diminish the promise of new technologies. At the
same time, our core public interest concerns,
including most prominently public safety (e.g., 911
emergency services) and network reliability must be
addressed. . . .
As Vonage is a relatively small competitive provider
of local exchange and interexchange services, it
should be subject to, at most, the same limited
regulatory regime to which comparable circuit
switched competitive carriers are currently subject
in New York. However, . . . we will move cautiously,
so as not to hinder its development. Consequently,
the company may seek permanent or temporary waivers
of any of those requirements it deems to be
inappropriate in its circumstances or with which it
is not readily able to comply.
. . . . Further, during the pendency of the
evaluation of Vonage's potential waiver requests, we
will not enforce our rules and regulations with
regard to Vonage's compliance. . . . The [PSC] orders:
1. Vonage must comply with the Public Service Law
obligations of telephone corporations and within 45
days of this Order, Vonage Holding Corporation shall
file an application for a Certificate of Public
Convenience and Necessity and file a tariff.
2. To the extent Vonage chooses to seek waiver of
specific rules and regulations, as discussed in this
Order, it shall file such requests within 45 days of
this Order.
3. This proceeding is continued.
Order Establishing Balanced Regulatory Framework for Vonage
Holdings Corporation, Complaint of Frontier Telephone of
Rochester, Inc., Case No. 03-C-1285 (N.Y. PSC May 21, 2004).
In 2003, faced with a similar order from the Minnesota Public
Utilities Commission, Vonage obtained a preliminary and permanent
injunction from U.S. District Judge Michael J. Davis. Vonage
Holdings Corp. v. Minnesota Public Utilities Com'n,
290 F.Supp.2d 993 (D. Minn. Oct. 16, 2003), post-judgment motions
denied, 2004 WL 114983 (D. Minn. Jan. 14, 2004), affirmed,
394 F.3d 568 (8th Cir. Dec. 22, 2004). I refer the reader to Judge
Davis's opinion for a detailed description of Vonage's service,
and how its technology differs from plain old telephone service
("POTS") and from wireless cellular telephone service. Vonage's
service is being used to make and receive local telephone calls.
About 97% of the calls serviced by Vonage carry the voices
between a Vonage customer and a person using the Public Switched
Telephone Network ("PSTN"). During each such call, Vonage
interfaces with both the Internet and the PSTN.
On June 7, 2004, Vonage filed its complaint in our Court
against the PSC and its four commissioners (collectively, the
"PSC"). Vonage requested me to enter a preliminary injunction and
a permanent injunction against enforcement of the PSC Order. I
received excellent briefs from the parties and from the U.S.
Attorney's Office (for two amici curiae, the United States of
America and the Federal Communications Commission (the "FCC"). I
held oral argument on June 30, 2004.
On July 16, 2004, I issued a Preliminary Injunction Order. I
made six findings, including the following:
1. Vonage has shown that it is likely to succeed on
the merits of its claim that the PSC Order is
preempted by federal law. (Citations omitted).
2. Vonage has demonstrated that the PSC Order will
interfere with interstate commerce. Vonage has
demonstrated that it will suffer irreparable harm
absent injunctive relief. (Citation omitted).
* * *
5. The FCC currently is considering all of the issues
relevant to the merits of this case, in connection
with its IP Rulemaking Notice [released Mar. 10,
2004] and in connection with a Petition by Vonage to
the FCC for a Declaratory Ruling seeking the
preemption of Minnesota's attempt to regulate Vonage.
The FCC's guidance on the issues, via its rulings on
those matters, may aid in final resolution of this matter.
My order's seven decretal paragraphs included the following:
[1st] WHEREFORE, it is hereby ORDERED, that Vonage's
Motion for Preliminary Injunction against the PSC's
exercise of jurisdiction over enforcement of its
Order is GRANTED; and it is further
[2nd] ORDERED, that pursuant to Vonage's stipulation
and during the pendency of this Preliminary
Injunction Order, Vonage will continue to provide the
same emergency 911 calling services currently
available to Vonage customers in New York; and it is
further
* * *
[4th] ORDERED, that during the pendency of the
injunction, Vonage will make reasonable good faith
efforts to participate on a voluntary basis in PSC
industry-wide workshops pertaining to service
reliability of VoIP providers, and shall provide the
PSC with a contact name and number at Vonage for
purposes of voluntarily sharing information with the
PSC in the event of a material telecommunications
network outage occurring within the state of New
York; and it is further
[5th] ORDERED, that during the pendency of the
injunction, Vonage will make reasonable good faith
efforts to participate on a voluntary basis in PSC
industry-wide workshops pertaining to VoIP 911
calling in general. These workshops may address VoIP
911 issues such as:
a. A VoIP provider's attempts to address technical
issues pertaining to IP 911 calling, including, but
not limited to, provision of Automatic Number
Identifcation and Automatic Location Information;
b. sharing by the industry of information with
respect to efforts by the National Emergency Number
Administration to resolve issues pertaining to IP 911
calling;
c. industry-wide technical conferences to discuss
national plans to develop and implement appropriate
technical and operational solutions for the delivery
of IP 911 calls to the appropriate public safety
answering point;
d. discussion of what progress can be made in
establishing certain core principles and a public
policy blueprint for the advancement of IP-based
service offerings for 911, including the development
of interim solutions and possible agreement on
long-term principles for provision of 911 by the IP
industry; and it is further
* * *
On November 12, 2004, Vonage's petition to the FCC was granted
in part and the FCC preempted the order of the Minnesota Public
Utilities Commission. The FCC's 48-paragraph Memorandum Opinion and Order included the following:
42. . . . Although we preempt Minnesota from imposing
its 911 requirements on Vonage as a condition of
entry, this does not mean that Vonage should cease
the efforts it has undertaken to date and we
understand is continuing to take both to develop a
workable public safety solution for its Digital Voice
service and to offer its customers equivalent access
to emergency services.
43. . . . In this proceeding, Vonage has indicated
that it is devoting substantial resources toward the
development of standards and technology necessary to
facilitate some type of 911 service, working
cooperatively with Minnesota agencies and other state
commissions, . . . . We fully expect Vonage to
continue its 911 development efforts. . . .
44. We emphasize that while we have decided the
jurisdictional question for Vonage's Digital Voice
here, we have yet to determine final rules for the
variety of issues discussed in the IP-Enabled
Services [Rulemaking] Proceeding. While we intend to
address the 911 issue as soon as possible, perhaps
even separately, we anticipate addressing other
critical issues such as universal service,
intercarrier compensation, section 251 rights and
obligations, numbering, disability access, and
consumer protection in that proceeding.
45. Furthermore, we acknowledge that a U.S. District
Court in New York has recently ordered Vonage "to
continue to provide the same emergency 911 calling
services currently available to Vonage customers"
within that state and to "make reasonable good faith
efforts to participate on a voluntary basis" in
workshops pertaining to the development of VoIP 911
calling capabilities. [The FCC was quoting from my
2nd and 5th decretal paragraphs in my July 16, 2004
order.] Because Digital Voice is a national service
for which Vonage cannot single out New York
"intrastate" calls (any more than it can Minnesota
"intrastate" calls), as a practical matter, the [New
York] District Court's order reaches Digital Voice
wherever it is used. Thus, we need not be concerned
that as a result of our action today, Vonage will
cease its efforts to continue developing and offering
a public safety capability in Minnesota. The [New
York] District Court order ensures that these efforts
must continue while we work cooperatively with our
state colleagues and industry to determine how best
to address 911/E911-type capabilities for IP-enabled
services in a comprehensive manner in the context of
our IP-Enabled Service [Rulemaking] Proceeding.
On December 20, 2004, Vonage moved to convert my preliminary
injunction into a permanent injunction. Briefing was concluded on
February 25, 2005. Vonage's proposed order would essentially
retain my 1st and 2nd decretal paragraphs from my July 16, 2004
order. But it would eliminate my 4th and 6th decretal paragraphs.
It would also eliminate my 5th decretal paragraph ("participate
on a voluntary basis in PSC industry-wide workshops pertaining to
VoIP 911 calling"). It does add a new clause: "Vonage also will
continue reasonable efforts to conduct an E911 trial in New York
and will coordinate with the NYSPC in that endeavor." But it
would eliminate Vonage's obligation to "make reasonable good
faith efforts to participate on a voluntary basis in PSC
industry-wide workshops" both workshops "pertaining to VoIP 911
calling" and workshops "pertaining to service reliability of VoIP
providers." As noted above, the FCC specifically quoted two passages from
my order, including the one about workshops pertaining to VoIP
911 calling. The FCC said that "[my] order ensures that these
efforts must continue while we [the FCC] work cooperatively with
our state colleagues and industry." Accordingly, I see no good
reason to change my 5th decretal paragraph.
The FCC has commenced a comprehensive rulemaking proceeding,
which will address the 911 issue, but also "other critical issues
such as universal service, intercarrier compensation, section 251
rights and obligations, numbering, disability access, and
consumer protection." In the meantime, I think it is appropriate
to preserve the status quo. Vonage will suffer no irreparable
harm from my 4th and 6th decretal paragraphs. The 4th one merely
says:
[4th] ORDERED, that during the pendency of the
injunction, Vonage will make reasonable good faith
efforts to participate on a voluntary basis in PSC
industry-wide workshops pertaining to service
reliability of VoIP providers, and shall provide the
PSC with a contact name and number at Vonage for
purposes of voluntarily sharing information with the
PSC in the event of a material telecommunications
network outage occurring within the state of New
York;
The 6th one merely says:
[6th] ORDERED that this injunction does not
preclude the PSC from receiving complaints, if any,
from Vonage customers about Vonage's service or
billing, recording such complaints in the Department
of Public Service complaint handling system,
referring such complaints to Vonage and offering to
provide non-binding mediation of disputes if Vonage
cannot resolve the complaint, or recording unresolved
complaints in the PSC's database. Vonage may agree,
if it chooses, to supply the PSC with a contact
person for purposes of handling complaints, and to
advise the PSC of the status or resolution of any
such complaints, but if Vonage does not choose to
provide the PSC with a contact person for purposes of
handling complaints, then the PSC will record all
complaints as unresolved in its database. Vonage will
not, by virtue of its voluntary cooperation with the
PSC during the pendency of the preliminary
injunction, be subject to, or considered to have
conceded the application to it of, any New York laws,
regulations or rules applicable to telephone
corporations. Vonage does not in any way accept PSC
jurisdiction over complaints and is free to accept or
reject PSC offers of mediation and/or to require its
customers to proceed to binding arbitration in
accordance with their service agreements;
As long as my Preliminary Injunction Order remains in effect,
Vonage will suffer no irreparable harm. Accordingly, I deny
Vonage's motion to convert my preliminary injunction into a
permanent injunction. I anticipate that my Preliminary Injunction
Order will remain in effect until the FCC completes its
comprehensive rulemaking proceeding. However, pursuant to my
7th decretal paragraph, either party for good cause shown may
petition the Court for an Order modifying the terms of the
Preliminary Injunction Order.
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