Andrew, you’re right that the ultimate issue is when Congress will reform the statutory structure. (Though I’d note that doing so could as easily make things worse and more confused!)

I disagree, though, with your contention that incumbents will push Congress to change the law because of the Minnesota decision. Incumbents like to see their competitors regulated, but what really gets them going is when they perceive a direct threat to their core business. Vonage is a gnat to the big telcos, and things like Skype and Free World Dialup are specks of dust. They won’t waste political capital crushing them.

Having unregulated VOIP also helps the incumbents in two ways. It lets them point to “vibrant competition” as an argument for deregulating their own offerings. And it will allow them to offer unregulated VOIP services themselves, when they feel the need to do so.

Remember, the Minnesota decision isn’t binding on other states. The Bells tend to be in a stronger position at the state level (with a few exceptions) than at the federal level. As long as there are numerous regulatory skirmishes over VOIP regulation happening at the state level, with the prospect of the whole issue going through two levels of federal appeals courts before it’s fully resolved, the incumbents won’t be scared of a powerful, unregulated VOIP competitor. They are much more focused on what’s really eating their lunch — wireless, and soon cable.