Amidst the good news about VoIP, a significant variable remains undefined: its regulatory status. Federal and state authorities have taken positions that have run the gamut from no-touch to heavy handed.

The most recent ruling came last week, when the New York State Public Service Commission declared that Vonage is a telephone company—not an information service—and is thus subject to state regulation and taxes. The ruling muddles a February decision by the Federal Communications Commission, which stated that “pure” VoIP calls—those that take place entirely over the Internet—are immune from government rules and requirements. Friday, May 28 is the deadline for comments on the FCC’s notice for proposed rulemaking.

Though we’re clearly in the early stages, VoIP technology will be implemented by businesses and consumers alike—the advantages are simply too strong to pass up. Businesses are leading this first wave. The market research firm IDC estimates that business usage of VoIP is growing at 71 percent per year, primarily due to the cost savings associated with the technology, according to IDC senior analyst Will Stofega.

Consumers also seem enticed by the technology. Many are signing up through services such as Vonage (which says it is adding customers at a rate of 20,000 per month). Others are getting Internet telephony through packages offered by the major cable or phone carriers—all of which are implementing VoIP services. The transition under way could be massive. “Over the next five to 10 years, all our calls will be over VoIP,” says Jeff Kagan, an independent telecommunications analyst.

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