Last week, California’s telecommunications regulator, the California Public Utilities Commission (“CPUC”), adopted a new regulatory framework for providers of interconnected voice over Internet protocol (“iVoIP”) that marks a significant shift in regulation of a service that has long been lightly regulated both at the state and federal level.  Under the new rules adopted at Thursday’s CPUC meeting, iVoIP providers are now subject to registration and licensing requirements in California, which also will require that these companies notify the CPUC of – and in some cases, seek prior approval for – any transfers of control or assignments of their assets.

The new rules could have significant and far-reaching ramifications for carriers providing iVoIP services in the largest market in the United States.  For example, because the CPUC’s decision now requires at least some form of filing with the regulator before transfer of control of an iVoIP provider may occur, financial or strategic investors focused on the telecommunications space should take note that regulatory requirements may apply to any acquisition or investment in an iVoIP provider with operations in California.  In some circumstances, a transfer of control of a California iVoIP provider or assignment of iVoIP provider assets may require prior approval from the CPUC, a process that tends to be the lengthiest state regulatory approval process for communications transactions that require state review.

Substantively, the CPUC’s order concerns the creation of new utility classifications (and corresponding authorization types) for iVoIP providers, which are subject to different licensing or registration requirements depending on the nature of the iVoIP services they provide.  The following is a summary of the three new utility types and the key requirements for each from the CPUC’s order.…