March 23, 2008
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Eighth Circuit Upholds Vonage Preemption
In a unanimous decision, the Eighth Circuit of the U.S. Court of Appeals upheld in its entirety a Federal
Communications Commission (FCC) order preempting state regulation of “nomadic” Voice over Internet
Protocol (VoIP) service similar to Vonage’s DigitalVoice service.1 However, the Court declined to rule on
whether state regulation of “fixed” VoIP service, commonly provided by cable companies and traditional
facilities-based telecommunications providers, is prohibited, holding that this issue was not ripe for judicial
Sutherland Observation – Many state and local taxes and fees are predicated on a provider’s
regulatory status. To the extent that some VoIP service providers are not regulated, they may be
subject to lower tax and fee burdens than regulated VoIP providers.
The Vonage appeal dates back several years and involves multiple parties. On September 11, 2003, the
Minnesota Public Utilities Commission (MPUC) ruled that Vonage’s Dig