VoIP Regulatory Update
Voice over Internet Protocol (“VoIP”) telephony service continues to draw interest from state regulators, the FCC and incumbent local exchange carriers. At issue is whether VoIP services will be deemed to be telecommunications services subject to the same regulatory treatment as telephone carriers, or information services, which are generally not subject to regulation. If VoIP is classified as a telecommunications service, providers may face new obligations including requirements to provide 911 capability, to participate in universal service funding, to pay telecommunications taxes, to comply with network reliability and service standards, to provide network access to law enforcement agencies, and to pay access charges.
In a prior Update dated April 21, 2003, we addressed the initiation of investigations into these questions by regulators in Ohio, Virginia, and Florida. This Update will summarize recent regulatory developments in other states and at the FCC.
Last week, the Chief of the FCC’s Wireline Bureau stated at a news briefing that the Bureau will initiate a formal proceeding on the regulatory status of VoIP by the end of 2003. The proceeding likely will take the form of a Notice of Proposed Rulemaking to gather information on such matters as how the FCC’s rules should apply to VoIP and whether VoIP should be deemed a telecommunications service or an information service.
The FCC now has before it two petitions seeking clarification of these issues. AT&T is seeking a declaratory ruling that interstate VoIP arrangements in general are exempt from access charges, and VoIP provider pulver.com is seeking a ruling that VoIP is an information service. The FCC has taken no action on either petition.
On Aug. 29, 2003, the Alabama PSC issued an order in which it requested comment on whether VoIP service is a telephone service. Specifically, the Order requests comment on (1) whether VoIP providers are “transportation companies,” and thus subject to the PSC’s jurisdiction under Alabama law; (2) whether providers of intrastate VoIP service are subject to PSC rules applicable to the provision of telephone service, including the filing of tariffs; and (3) whether VoIP providers are responsible for the payment of intrastate access charges. The proceeding is in response to a petition for a declaratory ruling by a group of incumbent LECs. Comments are due by Oct. 31, 2003, and reply comments are due by Dec. 2, 2003.
In December 2002, the California PUC initiated a proceeding to adopt revisions to its existing service quality measures and standards applicable to telecommunications carriers. In its order initiating the rulemaking, the Commission indicated that it may seek to apply its service quality standards to VoIP services, stating:
[w]e have jurisdiction to apply our service quality rules to any intrastate telecommunications service, including any services using Internet Protocol (“IP”) telephony. Anticipating this emerging technology, we intend for the rules we adopt in this proceeding to apply to similar services regardless of the technology used to provide the service.
Initial and reply comments were filed in this proceeding in April and May 2003. The proceeding remains pending before the PUC.
On April 16, 2003, the Colorado PUC opened an investigation into whether VoIP services are subject to the regulatory jurisdiction of the Commission, and if so, how VoIP providers should be regulated. In particular, the PUC appears to be concerned about the furnishing of 911 service by VoIP providers. As part of the investigation, Commission staff requested agreements relating to the provision of 911 customer name and location information services by regulated facilities-based telecom carriers. However, certain entities refused to provide the requested documents because they are subject to confidentiality provisions. Thus, on May 21, 2003, the Commission issued an order compelling the production of these agreements, and the Commission’s investigation appears to be on-going.
In May 2003, the Florida legislature enacted landmark telecom deregulation legislation. See Update dated May 5, 2003. The new law makes clear that VoIP services are not to be subject to traditional, legacy regulation. (It does not, however, exempt VoIP-based long distance services from intrastate access charges. That issue remains within the jurisdiction of the Florida PSC.)
On May 22, 2003, the staff of the Illinois Commerce Commission (“ICC”) conducted a workshop to discuss alternative regulatory treatment of VoIP services. The workshop addressed the following topics: (1) jurisdiction of the ICC; (2) certification and tariff issues; (3) service standards and 911 services; and (4) consumer protection standards. The ICC has taken no further public action following the workshop.
In an Order issued on September 11, 2003, the Minnesota Public Utilities Commission (“PUC”) ruled that Vonage Holding Corp., a well-known VoIP provider, is “offering a two-way communication that is functionally no different that any other telephone service … and is clearly subject to regulation by the Commission.” The proceeding was in response to a complaint against Vonage brought by the Minnesota Department of Commerce. The PUC ordered Vonage to “fully comply with all Minnesota Statutes and Rules relating to the offering of telephone service.” Thus, Vonage is required to obtain a certificate to provide service from the PUC, file tariffs, and submit a plan to provide 911 service. The PUC also ordered Vonage to remit unpaid 911 fees to the Minnesota state government. Vonage was ordered to comply with the Commission’s order by Oct. 11, 2003.
On May 1, 2003, the Pennsylvania PUC issued an order initiating an investigation into VoIP. The PUC’s order posed a series of question about VoIP service, including (1) the definition of VoIP service; (2) the nature of providers’ VoIP offerings in Pennsylvania; (3) PUC jurisdiction to regulate VoIP service and the extent of that jurisdiction; and (4) FCC jurisdiction over VoIP service. Thirteen parties filed comments and eleven parties filed reply comments in the proceeding.
On Sept. 4, 2003, the U.S. District Court for the Western District of Washington remanded a case involving payment of access charges by a VoIP provider to the Washington Utilities and Transportation Commission (“WUTC”). The case, Washington Exchange Carrier Ass’n v. LocalDial Corp. (Case No. CV03-5012 RBL) was brought against VoIP provider LocalDial Corp. by incumbent LECs who claimed that LocalDial’s activities require it to pay access charges for originating and terminating intrastate long distance telephone calls. Pursuant to the primary jurisdiction doctrine, and citing the WUTC’s “specialized competence” as an expert agency, the district court referred the matter to the WUTC to determine whether the plaintiffs’ access tariffs apply to VoIP intrastate telephone calls made by LocalDial’s customers. The Court further noted that the WUTC is “uniquely qualified” to address policy questions of whether VoIP providers should be regulated, and if so, to what extent.
On Sept. 11, 2003, the Wisconsin Public Service Commission (“PSC”) sent a letter to VoIP providers 8x8, Inc., Vonage, and Delta 3 seeking information on the specific services being offered by those entities in Wisconsin. The PSC’s letter to 8x8 states:
[o]n August 7, 2003, the [PSC] became aware that 8x8, Inc. (8x8) was offering intrastate telecommunications services in Wisconsin. Pursuant to company issued press releases, 8x8 launched [VoIP] local phone services in Wisconsin in November 2002. Please note that without certification in Wisconsin, 8x8 legally cannot provide resold intrastate services in Wisconsin. In addition, any customer bills for intrastate services provided are void and not collectible.
8x8 interpreted the PSC’s letter as essentially a “cease and desist” letter and issued a press release to that effect. However, PSC staff stated in response to the press release that the Commission is investigating VoIP services because of provider claims that they are offering “broadband telephone” services, which may be subject to state regulation, but that the Commission has not made a final determination about the regulatory status of VoIP services. The VoIP providers were given 30 days to respond to the Commission.
If you have any questions about these proceedings, or any other issues related to the regulation of VoIP providers, please contact us.