Ray's post below spotlights an alarming trend: the application of traditional utility regulation to emerging, competitive services like VoIP. However, at least one state may swim against the current. The Colorado legislature is considering a bill to prohibit state and local taxation of VoIP and state regulation under the "telecommunications" statutes.

VoIP is by definition competitive therefore the old rules shouldn't apply. But state legislators there may also recognize the less obvious but salutary pressure created by tax competition. Will consumer enhancing VoIP providers spend more resources in Colorado or neighboring Nebraska? The policy climate matters. In addition, the Colorado law nods appropriately to FCC jurisdiction on E-911 standards. However, Section 8 of the proposed law suggests that it is necessary for the "immediate preservation of the public peace, health and safety." This clause is pro forma in Centennial State legislation. It preempts the referenda process that otherwise could "recall" and overturn a statute. Nonetheless, it is a stretch.

Word has it that one of the sticking points in the process has been an unclear assessment of how this bill would affect USF funding. Until USF is tackled comprehensively, many state proposals are trapped in limbo.