FCC Treatment of VoIP

1. FCC Treatment of VoIP Russ Hanser Special Counsel to the Chief Competition Policy Division Wireline Competition Bureau Federal Communications Commission December 16, 2004

2. Outline • Legal Framework/Background • Pulver.com • AT&T (brief) • CALEA (brief) • Vonage • IP-Enabled Services NPRM December 16, 2004

3. Legal Framework: 1996 Act Definitions • “Telecommunications”: • “[T]he transmission, between or among points specified by the user, of information of the user’s choosing, without change in the form or content of the information as sent and received.” • “Telecommunications Service”: • “[T]he offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available to the public, regardless of facilities used.” • “Information Service”: • “[T]he offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications.” December 16, 2004

4. Legal Framework: Title I & Title II Regulation • Regulation of “Telecommunications Services” (“Title II”): • Just, reasonable, nondiscriminatory rates and terms • Certification/discontinuance requirements • Contribution to universal service fund • Disability accessibility requirements • Privacy requirements • Consumer protection requirements • Interconnection obligations (some carriers) • Tariffing requirements (some carriers) • (Un)regulation of “Information Services” (“Title I”) December 16, 2004

5. Pulver.com Declaratory Ruling • FWD only facilitates call set-up; traffic is carried by the end user’s ISP over existing BB facilities. • As described in petition, only facilitates calls between members. • Specialized phones, non-NANP numbers. • Offered for free. • Sought ruling that FWD is neither “telecommunications” nor a “telecommunications service.” December 16, 2004

6. Pulver.com Declaratory Ruling • FWD is not telecommunications. • “[T]he heart of ‘telecommunications’ is transmission…. Pulver neither offers nor provides transmission.” • Information FWD provides is “not ‘information of the user’s choosing, without change in the form or content of the information as sent and received.’ Instead, FWD provides new information: whether other FWD members are present; at what IP address a member may be reached; or, in some cases, a voicemail or an email response.” • Use of telecommunications does not mean that Pulver offers or provides telecommunications. December 16, 2004

7. Pulver.com Declaratory Ruling • FWD is not a telecommunications service. • Must offer (not simply use) “telecommunications” to be a telecommunications service. Pulver does not. • Must be offered for a fee to be a telecommunications service. Free World Dialup is free. December 16, 2004

8. Pulver.com Declaratory Ruling • FWD is an information service. • Enables members to acquireinformation regarding online presence of other members. • Stores member information, voicemail messages • Provides passwords and numbers that members utilize. • Processes the SIP invite to initiate a call. • Makes available SIP invite to recipient. • Allows member to retrieve information. • Transforms erroneous address information. December 16, 2004

9. Pulver.com Declaratory Ruling • FWD is subject to federal jurisdiction. • Preeminence of federal authority in the area of the Internet. • Congressional preference for unregulation. • End-to-end analysis inapplicable w/r/t Internet-based services. • Commerce Clause prescribes preeminent federal role over interstate commerce. • No definitive statement regarding role of the states, but “[a]ny state regulations that seek to treat FWD as a telecommunications service or otherwise subject it to public-utility type regulation would almost certainly pose a conflict with our policy of nonregulation.” December 16, 2004

10. AT&T Declaratory Ruling • Under current rules (subject to change in other proceedings), an interexchange service using IP is still subject to the access charge regime if… • Uses ordinary CPE with no enhanced functionality • Calls originate and terminate on PSTN • Service offers no enhanced functionality and message undergoes no net protocol conversion. • Such service is the offering of telecommunications, and thus, when provided for a fee, is “telecommunications service,” subject to access charges under current rules. December 16, 2004

11. Communications Assistance For Law Enforcement (CALEA) • CALEA requires certain service providers to incorporate into their networks, facilities and services certain technical capabilities to assist law enforcement in conducting authorized electronic surveillance. • Law enforcement community is concerned about the extent to which IP-Enabled services, especially VoIP, are subject to CALEA. • Law enforcement agencies have sought clarification, and FCC has begun to review application of CALEA requirements to IP-enabled services. December 16, 2004

12. CALEA Cont’d • FCC has tentatively concluded that CALEA applies to facilities-based providers of any type of broadband Internet access service – including wireline, cable modem, satellite, wireless, and BPL – and to managed or mediated VoIP services. • Key questions: Under CALEA (which employs definitions differing from those in the Communications Act), are VoIP providers “telecommunications carriers,” or do they provide “information services”? Even if VoIP services are “information services” under CALEA, does “replacement for a substantial portion of the local telephone exchange service” language apply? December 16, 2004

13. Vonage Declaratory Ruling • Vonage provides “DigitalVoice,” a VoIP service that: • requires the use of a third-party broadband connection • requires the customer to have a multimedia terminal adapter, IP phone, or computer with peripherals • provides calling, web-based personalization and control, voicemail management, and other features • is accessible from any broadband connection in the world. December 16, 2004

14. Vonage Declaratory Ruling • In 2003, Minnesota PUC exerted jurisdiction over DigitalVoice service, attempted to regulate as telephone service. • Vonage appealed in federal court, sought ruling before FCC. In both cases, sought ruling that DigitalVoice was an information service and that it was jurisdictionally interstate. • Federal District Court agreed with Vonage. PUC appealed. Oral argument before court of appeals was held on November 17th. December 16, 2004

15. Vonage Declaratory Ruling • On November 9, 2004, the FCC preempted the Minnesota Commission’s order in various respects: • Preempted Minnesota’s requirement that Vonage get a certificate. • Preempted Minnesota’s tariffing requirement. • Preempted Minnesota’s 911 requirement only to the extent it operated as a condition to entry (i.e. was tied to the certification process) and noted that Vonage currently provides an interim 911 solution. December 16, 2004

16. Vonage Declaratory Ruling • If DV is a telecommunications service, Vonage would be a nondominant provider, not subject to entry regulations, tariffing, and other requirements of the type set out in the MPUC order. • If information service, MPUC order is inconsistent with federal policy and subject to preemption, b/c cannot separate interstate and intrastate components and federal policy favors nonregulation of information services (note sections 230 and 706). • Multiple state regulatory regimes would also likely violate the Commerce Clause, because of the unavoidable effect that regulation on an intrastate component would have on interstate use or use of the service within other states. • Other types of IP-enabled services that have basic characteristics similar to DigitalVoice, such as those offered by cable companies, are also not subject to traditional state public utility regulation. • States will retain their important role in matters of consumer protection and enforcing laws of general applicability. December 16, 2004

17. In re: IP-Enabled Services • NPRM’s scope is broad; addresses “services” (communications capabilities using IP) as well as “applications” (software-based functionalities using these communications capabilities). • To ensure that any regulations applied are tailored as narrowly as possible, and do not draw into their reach more services than necessary, FCC has sought comment as to whether it would be useful to divide IP-enabled services into discrete categories, and, if so, how it should define these categories. • Should categorization be based on functional equivalence to traditional telephony? Economic substitutability? Interconnection with PSTN/use of NANP numbers? Facilities layer vs. applications layer? Something else? December 16, 2004

18. In re: IP-Enabled Services • Jurisdiction (NPRM predated Vonage Order) • Appropriate Legal/Regulatory Framework: Statutory Classification • For each category identified, are services “telecom services”? “Information services”? • Are existing regulatory interpretations of these terms still relevant? • Impact of judicial decisions (Vonage, Brand X)? December 16, 2004

19. In re: IP-Enabled Services • Appropriate Legal/Regulatory Framework: Statutory Prerogatives • Notes that Congress has provided the Commission with a host of statutory tools that together accord some discretion in structuring an appropriate approach to IP-enabled services. • Ancillary jurisdiction • Forbearance December 16, 2004

20. In re: IP-Enabled Services • Appropriate Legal/Regulatory Framework: Policy Areas • 911/E911 • Disability accessibility • Carrier compensation • Universal service • Consumer protection • Economic common carrier regulation • Law enforcement concerns (wiretapping) are being addressed in separate proceeding. December 16, 2004

21. In re: IP-Enabled Services • Appropriate Legal/Regulatory Framework: Other Concerns • Effect of Title III (wireless) • Effect of Title VI (cable) • Rural considerations • Numbering issues • International issues • Open network architecture • Section 208/enforcement issues December 16, 2004

22. Other Pending VoIP Petitions • SBC: Seeks ruling that IP networks, services and applications utilizing those networks are jurisdictionally interstate and exempt from regulation under Title II. Also seeks forbearance from application of Title II regulation to whatever extent they would otherwise apply. • Level 3: Seeks ruling that Internet-to-PSTN calls and PSTN-to-Internet calls are subject to reciprocal compensation, not access charges. • Inflexion: Seeks ruling exempting “ExtendIP,” which provides “POTS plus more” to underserved markets, from interstate access charges. December 16, 2004