The Justice Department (DOJ) is urging the Federal Communications Commission (FCC) to not "minimize" the importance of law enforcement officials to wiretap Voice over IP (VoIP) phone calls.

The DOJ's joint comments with the FBI come a month after the FCC began landmark proceedings to determine what, if any, taxes and regulations should apply to the emerging industry built on VoIP . The inquiry is the agency's first examination of the new, high-stakes telecom market promising lower prices and new services for consumers and businesses.

VoIP technology is a quandary for regulators because the new industry doesn't fit traditional telecom regulatory models. While it clearly provides telephone service, it does so over the virtually regulation-free Internet, both public and private, instead of the heavily taxed and regulated public switched telephone networks (PSTN).

At the Dec. 1 opening hearing on VoIP, FCC commissioners and a wide range of VoIP experts, including some state regulatory officials, agreed that a light touch involving public safety, law enforcement and disability issues should be brought to bear on the nascent industry.

Nevertheless, John C. Malcolm, a deputy assistant attorney in the Criminal Division of the DOJ, argued in his comments that the FCC is obligated by law to "adopt all rules necessary to fulfill the goals of CALEA (Communications Assistance for Law Enforcement Act)," which requires telecommunications carriers to make their systems available for lawful electronic surveillance.

But a number of the fledgling VoIP companies, including Edison, N.J.-based Vonage, contend they are not telecommunications carriers, so they are not subject to CALEA.

VoIP providers route calls from leased local telephone lines to a gateway server that converts analog voice into data packets. From there, the data packet moves over the Internet to its destination, where it goes through another gateway that rolls it over to a local line. VoIP providers contend they are not a telephone company since they don't traffic in voice packets.

"As a matter of policy, CALEA is vital to national security, law enforcement and public safety," the DOJ wrote to the FCC. "Such a critically important statute should not be left to mere voluntary efforts. Furthermore, under a voluntary CALEA compliance scheme, law enforcement would have no enforcement mechanism against those VoIP providers who do not cooperate."

The DOJ said it feared that without "firm Commission guidance," the VoIP industry would "unilaterally impose its own concept of appropriate assistance capabilities, leaving law enforcement shortchanged."

The nine-page statement added, "Terrorists, spies and criminals typically flock to the modes of communication most likely to evade electronic surveillance."

The FCC, which is expected to rule on the issue this year, is pushing an expedited VoIP federal policy as a means of staying ahead of the migration of traditional voice traffic to IP networks and to change the rules originally written to control a single monopoly.

In addition to law enforcement concerns, FCC Commissioner Kathleen Abernathy said an expedited federal policy is necessary because some state public utility commissions are already targeting Internet telephone companies as a source of tax revenue.

In the only court decision so far, a federal court in Minneapolis spiked Minnesota's attempt to regulate and enforce a tax on broadband phone company Vonage, ruling that the SIP-based VoIP firm did not have to register as a telephone company in order to conduct business in Minnesota.

California, Washington, Oregon and Florida are also hammering out similar issues with Internet phone companies.

"(VOIP) seems inherently an interstate service," Abernathy said. "It can not be neatly separated into interstate and intrastate categories."