A bill – strongly supported by the national telecom industry – was signed into law recently by California Gov. Jerry Brown that blocks most state regulations on VoIP communications.

AT&T and Verizon (News - Alert) were among the big companies which supported the bill that restricts what the California Public Utilities Commission (CPUC) can do to direct the VoIP sector in the state. It basically leaves most types of regulation up to federal authorities.

Calif. State Sen. Alex Padilla, (D-Pacoima), who authored the bill, said SB 1161 was “critical to promoting investment in our internet infrastructure.”

“We will foster continued innovation and investment that is creating jobs in California and expanding options for consumers,” he added in a statement. He disagreed with vocal criticism by consumer advocates.

“SB 1161 preserves all federal and state consumer protections for VoIP, which include requirements to offer 911 service and pay 911 fees, make facilities accessible to disabled users, protect customer privacy, notify customers of battery backup power requirements, and report network outages, among others,” he claimed. “The bill also requires the…CPUC to respond to VoIP customer complaints, to provide customers information on all options for resolving them, and to report complaint data to the Legislature and the Federal Communications Commission so they can take appropriate action as the market evolves.”

VoIPReview.org added that telephone poles, wires and equipment facilities can be regulated by the CPUC.

But many consumer advocates were critical of the bill. State regulators, for example, are not reviewing price increases, nor reviewing any changes in quality standards, according to VoIPReview.org. In addition, the new law could lead to complete deregulation of landline services, warned the Utility Reform Network's executive director, Mark Toney.

“The bill cuts a huge swath out of the CPUC’s jurisdiction prospectively, leaving it with no ability to protect consumers in even the most basic ways,” the Utility Reform Network added in a statement made earlier this year. “The Commission could no longer enforce service quality and line maintenance standards.”

“VOIP is becoming the only option for increasing numbers of Californians, and eventually all basic phone service will be provided using VOIP,” Toney added.  “That means all customers, not just current VOIP customers, could lose their rights, and that the CPUC would be helpless to do anything about it.”

“This is a disaster for consumers,” according to statements made earlier this year by the Media Alliance. “Utility deregulation has proven a disaster over and over again, and yet the lobbying goes on.”

But it appears that sponsors of the bill don’t want to see growth in the VoIP sector hampered by regulators. Profits could be at risk. For instance, AT&T (News - Alert) and Verizon saw a 29 percent jump in the number of VoIP customers in six months during 2011, according to Capitol Weekly. There are about 3.5 million interconnected VoIP subscriber lines in California, Capitol Weekly added – using data from the state Senate.

In addition, the California Cable & Telecommunications Association said the new law reaffirms “California's current policy of not regulating Internet-based services.” The bill was sponsored by TechAmerica, TechNet and the Silicon Valley Leadership Group, and was supported by QUALCOMM, Cisco Systems (News - Alert), Microsoft, the wider telecommunication industry, and the California Chamber of Commerce, according to the California Cable & Telecommunications Association.

The bill got national attention – and one critic, TMCnet’s Steve Anderson, claimed that VoIP is “simply incompatible with public regulation. Why? Because of its nature of constant change.”

The rules included in the new law remain in effect until 2020.