FCC Releases IP-Enabled Services NPRM
Last Wednesday, March 10, 2004, the FCC released its long-awaited notice of proposed rulemaking to examine issues related to “IP-enabled services”—the newly coined phrase the FCC uses to describe voice services and applications that make use of Internet Protocol. While styled a notice of proposed rulemaking (“NPRM”), the Commission makes few if any conclusive statements regarding proposed rules to apply to IP-enabled services. Rather, the NPRM provides an outline of the legal and regulatory issues, and poses a series of questions for commenters to address.
In order to stimulate discussion regarding the proper means of distinguishing among IP-enabled services, the FCC provided a list of functional and economic factors that it may use to divide these services into categories for different regulatory treatment. The factors listed by the FCC are: the extent to which a service is functionally equivalent to traditional telephone services; the extent to which the service is a substitute for traditional telephone services; whether the service interconnects with the traditional telephone network (the public switched telephone network or “PSTN”) and uses North American Number Plan resources; whether the service uses peer-to-peer technology or whether it uses a centralized server; and whether any regulatory obligation should distinguish among the underlying transmission facility, the communications protocols used to transmit the information and the applications used by the end user to send and
The NPRM mainly focuses, however, on one type of IP-enabled service, voice over Internet protocol (“VoIP”). The growing popularity of VoIP puts pressure on state and federal regulators to determine whether VoIP providers and services are to remain unregulated or whether they should be subject to some form of regulation, and whether any such regulation should be based on (i) the traditional common carrier regime created for monopoly providers of traditional telephone services, (ii) the largely unregulated information service rules or (iii) some new regulatory scheme under the FCC’s ancillary Title I powers. The FCC took particular note of the role of cable in rolling out VoIP services, and asked whether it could use its ancillary jurisdiction to apply Title II-like obligations on cable operators.
Last month the FCC ruled that pulver.com’s Free World Dialup VoIP service is an unregulated, jurisdictionally interstate “information service.” See FCC Releases pulver.com VoIP Declaratory Ruling, Update (Feb. 19, 2004). This decision was based on specific technical characteristics of the Free World Dialup (“FWD”) service, which offers membership in a directory look-up service that permits users to look up which other FWD users are online in order to initiate contact without providing transmission functionality.
Now the FCC seeks comment on the classification and treatment of other VoIP services, which range from services like Vonage that “piggy back” on broadband services provided by other companies, to traditional telecom providers that are transitioning their circuit-switched networks to IP-based solutions, to wireless providers providing multimedia services over their networks using Internet Protocol. These other services pose more difficult questions for the FCC than services like FWD, since most tend to offer access to the PSTN. Traditional telephone companies sending voice traffic over the PSTN have certain regulatory obligations, such as paying into the universal service fund that supports telephone service for low-income persons and people living in areas that are expensive to serve. Other requirements for traditional telephony providers include intercarrier compensation, 911/E911, consumer protection and privacy rules and access for persons with disabilities. The FCC asks which, if any, of these traditional requirements should apply to VoIP providers. (Another important issue is the application of the Communications Assistance for Law Enforcement Act, or “CALEA,” to VoIP providers, but the FCC will be addressing that in a separate proceeding.)
The FCC noted that in addressing these issues it “would start from the premise that IP-enabled services are minimally regulated.” It noted that the increasing demand for IP-enabled services and VoIP services in particular, will encourage consumers to demand more broadband connections and thereby support the FCC’s goal of encouraging the widespread deployment of advanced communications services. It stated that it will rely wherever possible on competition and apply “discrete regulatory requirements only where such requirements are necessary to fulfill important policy objectives.”
An issue of great interest to essentially all segments of the industry is intercarrier compensation for VoIP. Generally, intercarrier compensation is either relatively low “reciprocal compensation” or relatively high “access charges.” VoIP providers typically prefer to have the lower reciprocal compensation rates apply to VoIP traffic being sent to the PSTN; carriers, especially incumbent carriers, often seek to apply the higher access charge rates. The FCC did not propose that either one would necessarily apply, but it did tentatively conclude that any service provider sending traffic to the PSTN should be subject to “similar” compensation obligations. That situation, however, does not exist today, since, as just noted, there are two different compensation regimes that apply in different situations. This suggests that the FCC will want to coordinate this aspect of the regulatory regime applicable to VoIP with its ongoing efforts to try to establish a unified intercarrier compensation system.
The due date for comments and reply comments is expected to be set in the coming weeks. If you would like to discuss the potential impact of the NPRM on your operations, or submitting comments in this proceeding, please do not hesitate to contact us.