U.S. Court Rules in Favor of Vonage on Regulation

Mar 22, 04:59 PM

Current Headlines: By MOLLY PETERSON, BLOOMBERG NEWS

Vonage Holdings Corp., an unprofitable Internet phone company based in Holmdel, won a court ruling Wednesday that bars U.S. states from regulating its service, thwarting a challenge from telecommunications regulators in Minnesota.

Vonage's service should be regulated by the Federal Communications Commission, an appeals court in St. Louis said in a unanimous decision. The move by the three-judge panel backs a 2004 order from the FCC.

This is at least the third court victory for Vonage over Minnesota, which ruled in 2003 that state requirements for land- line phone companies also should apply to Internet phone providers. The FCC has said that multiple sets of regulations in different states would raise costs for Vonage, which has posted three quarterly losses in a row.

Such potential expenses "are not a trivial thing for a company like Vonage," Stifel Nicolaus & Co. analyst David Kaut said Wednesday in an interview. "They would have to develop lobbying efforts in every state in the country that tried to regulate them."

The ruling affirms the FCC's authority to regulate phone companies "in an equitable, nondiscriminatory and competitively neutral manner," FCC spokesman David Fiske said in an e-mailed statement.

Burl Haar, the executive secretary of the Minnesota Public Utilities Commission, didn't immediately return a telephone call seeking comment.

The court's action "allows Vonage to continue growing our business unfettered by outdated, pre-Internet regulatory structures," Chief Executive Officer Michael Snyder said in a statement.

Vonage plans to boost Snyder's salary 10 percent this year, according to a regulatory filing. Snyder, 54, will get $550,000 a year starting April 1. He earned a $302,000 bonus on top of his $500,000 salary in 2006.

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