1. VoIP State Regulatory Update Is “Past Prologue?” Andrew O. Isar President Miller Isar, Inc. 253.851.6700 aisar@millerisar.com

2. Miller Isar, Inc. www.millerisar.com2 VoIP State Regulatory Update Key State VoIP Action  NY – Datanet  MN – Vonage  WA – Local Dial  FCC Vonage Decision State Appeals

3. Miller Isar, Inc. www.millerisar.com3 New York – The DataNet Decision  Frontier 2002 access charge complaint: DataNet owes access for use of Frontier network  DataNet: non-regulated VoIP services not subject to PSC jurisdiction  NY PSC: DataNet services deemed “telecommunications services” subject to access charges. Complaint of Frontier of Rochester Against US DataNet Corporation Concerning Alleged Refusal to Pay Intrastate Carrier Access Charges, New York Public Service Commission, Case 01-C-119 (May 21, 2002)

4. Miller Isar, Inc. www.millerisar.com4 Minnesota – PSC Vonage Holdings Complaint  MN PSC Complaint against Vonage Holdings: Vonage is a telecommunications provider subject to regulation and tariffing under MN statutes; requires 911 plan and payment of 911 fees  Vonage: Service is not a “telecommunications” service subject to PSC jurisdiction; federal preemption  MN PSC Decision: PSC has jurisdiction over Vonage VoIP service under MN law. In the Matter of the Complaint of the Minnesota Department of Commerce Against Vonage Holding Corp Regarding Lack of Authority to Operate in Minnesota, Docket No. P-6214/C-03-108, Order Finding Jurisdiction and Requiring Compliance (September 11, 2003)

5. Miller Isar, Inc. www.millerisar.com5 U.S. District Court District of Minnesota “The Court concludes that Vonage is an information service provider. In its role as an interpreter of legislative intent, the Court applies federal law demonstrating Congress’s desire that information services such as those provided by Vonage must not be regulated by state law enforced by the MPUC. State regulation would effectively decimate Congress’s mandate that the Internet remain unfettered by regulation.” Vonage Holdings Corporation, v. The Minnesota Public Utilities Commission, and Leroy Koppendrayer, Gregory Scott, Phyllis Reha, and R. Marshall Johnson, in their official capacities as the commissioners of the Minnesota Public Utilities Commission and not as individuals, Civil No. 03-5287 (MJD/JGL) Memorandum and Order (October 16, 2003)

6. Miller Isar, Inc. www.millerisar.com6 U.S. Court of Appeals for the Eighth Circuit MN PSC Appeal  Court upheld the District court’s decision: Vonage’s service is a non jurisdictional information service (December 2004).  Concluded that the Court was precluded by federal law from determining the validity of the FCC's November VoIP (Vonage) preemption order in the appeal.

7. Miller Isar, Inc. www.millerisar.com7 Washington-The LocalDial Case  RLEC Access charge complaint remanded from U.S. District Court to WUTC  RLECs: Local Dial owes access for use of RLECs’ network  Local Dial: Dial up VoIP provider; calls do not always touch PSTN Washington Exchange Carriers Association et al. v. Local Dial Corporation, Washington Utilities and Transportation Commission, Docket No. UT-031472 Final Order Granting Summary Motions for Summary Determination, Order No. 8 (June 11, 2004).

8. Miller Isar, Inc. www.millerisar.com8 Washington-The LocalDial Case  WUTC Decision: 1.Local Dial is subject to WUTC jurisdiction; 2.RLEC access charge tariffs apply to LocalDial (and similarly situated companies by implication) when calls hit the PSTN 3.Local Dial should be subject to same level of regulation as other IXCs.  Local Dial ceased doing business – decision never tested

9. Miller Isar, Inc. www.millerisar.com9 FCC (Vonage) Federal Preemption Decision Appeals  CA PUC – Ninth Circuit December 2004  MN PSC – Eighth Circuit January 2005 (followed by NASUCA)  NY PSC – Second Circuit January 2005  Ohio – Sixth Circuit January 2005

10. Miller Isar, Inc. www.millerisar.com10 Bottom Line State Issues  Federal preemption (FCC exceeded jurisdiction in Vonage)  State statutory obligations on regulatory/jurisdiction  Consumer protection:  911 obligations  Consumer access, complaint resolution, rates  Inter-carrier compensation  Universal service