From PLI’s Course Handbook
Cable Television Law 2009: Competition in Video, Internet
& Telephony
#18101
21
ISSUES FOR CABLE-PROVIDED
VOICE SERVICES
Brian A. Rankin
Comcast Cable Communications, LLC
Issues for Cable-Provided Voice Services
Brian A. Rankin
Vice President, Deputy General Counsel
Chief Telephony Counsel
Comcast Cable Communications, LLC
November 7, 2008
2
Biography of Brian A. Rankin
Brian A. Rankin is Vice President, Deputy General
Counsel and Chief Telephony Counsel for Comcast Cable
Communications, LLC. Based in Comcast’s Philadelphia
headquarters, he is lead counsel for all legal and regulatory matters
effecting Comcast’s voice business. In addition to being the
country’s leading provider of entertainment, information and
communications products and services, Comcast is the largest
competitive provider of residential voice services.
Prior to joining Comcast, Rankin served in senior legal
positions for XO Communications, Aerial Communications and
MCI Communications. He is licensed to practice law in
Pennsylvania and Illinois, and is a member of the Federal
Communications Bar Association and the American Bar
Association.
Rankin received his J.D. from DePaul University, where
he received the American Jurisprudence Award for Trial
Advocacy, an M.B.A. from the University of Alabama (with
Honors) and a B.S. from Illinois State University.
3
Issues for Cable-Provided Voice Services
With their recent broad based entry into voice services,
cable companies have caused an earthquake in the traditional voice
and telecommunications markets. Cable companies are today
some of the most successful providers of voice services, rivaling
the Regional Bell Operating Companies (“RBOCs”) and providing
innovative Internet Protocol-based services.
These new services have raised several legal and
regulatory issues concerning the proper role of federal and state
regulation. This overview will take a broad look at the success of
Voice over Internet Protocol (“VoIP”) services, review the legal
and regulatory landscape, and analyze FCC orders and proceedings
on E911, CALEA, pole attachments, retention marketing and other
orders applicable to cable VoIP providers.
VoIP Success Story
The advent of cable companies’ provision of VoIP
services has produced market success that is unparalleled in the
industry. Although cable VoIP offerings are only a few years old,
today only the three RBOCs (i.e., Verizon, AT&T, and Qwest)
have more residential subscribers than Comcast, and Time Warner
Cable is fast moving to overtake Embarq to become the fifth
largest provider of residential voice services.1 During the year
between the conclusion of the second quarter of 2007 and the
conclusion of the second quarter of 2008, cable companies added
approximately 4.5 million new voice subscribers while the RBOCs
lost 6.3 million residential phone lines.2
1
If approved, the proposed CenturyTel-Embarq merger would alter the
ranking of these providers.
2
According to the Leichtman Research Group Inc., Quarterly ProviderSide Tracking Report, Third Quarter 2008, subscriber counts are as
follows: AT&T: 29.3M phone lines, Verizon: 19.2M phone lines,
Qwest: 6.3M phone lines, Comcast; 5.6M subscribers, Embarq: 4M
phone lines and Time Warner Cable: 3.3M subscribers. In its thirdquarter 2008 financial disclosures, Comcast announced that it gained an
additional 480,000 voice customers and now serves approximately 6.1
million voice customers as of September 30, 2008.
4
With the success of cable VoIP services has come
questions regarding the appropriate regulatory treatment for these
services at the federal and state levels. Also, the inevitable
competitive roadblocks that RBOCs and other incumbent local
exchange carriers have attempted to place in the way of cable VoIP
providers have posed challenges. These issues are playing out in
Federal Communications Commission (“FCC”) and state public
utility commission proceedings, and in litigation. Some issues
have been resolved, but fundamental decisions remain to be made.
The outcome of these debates will shape the regulatory landscape
for cable VoIP services.
What is VoIP?
VoIP is a general term for a family of technologies for
delivering voice communications over the Internet or other packetswitched networks. VoIP technologies have been utilized for 20
years or more, and more recently, the term “VoIP” has become
associated with services provided to end users to place and receive
calls, typically over broadband connections. A VoIP call can be
placed directly from a computer or a traditional phone handset
connected to special customer premise equipment (as is the case
with cable VoIP). If a call is made to a phone number associated
with a traditional telephone service, the signal is converted from
internet protocol (“IP”) to a telephone signal before it reaches its
destination.
While VoIP contains the term “internet protocol,” that
does not mean that all VoIP calls traverse the public internet. In
fact, cable VoIP calls typically do not traverse the internet but
instead are carried over the cable VoIP provider’s managed
network. While there are some VoIP services that do not
interconnect with the public switched telephone network (“PSTN”)
(such as computer to computer services), cable VoIP services and
“over-the-top” providers whose services traverse the public
internet, such as Vonage, do interconnect with the PSTN and other
providers.
The FCC has defined the latter as “interconnected VoIP.”
In order to qualify as interconnected VoIP, the service must meet
the following criteria: (1) the service enables real-time, two-way
voice communications; (2) the service requires a broadband
5
connection from the user’s location; (3) the service requires IPcompatible CPE; and (4) the service offering permits users
generally to receive calls that originate on the PSTN and to
terminate calls to the PSTN.3 Both cable VoIP and over-the-top
VoIP providers such as Vonage satisfy the definition of
interconnected VoIP.
PSTN Interconnection
Interconnected VoIP services interconnect with the PSTN
so that calls can be delivered to and received from the traditional
phone network and other voice providers, and so that many other
activities needed for the provision of voice service, such as E911
and local number portability, can be provided. Although millions
of U.S. consumers receive interconnected VoIP service, a number
of important legal and regulatory issues remain unsettled,
including the carrier interconnection rights necessary to provide
interconnected VoIP service.
Section 251 of the Communications Act of 1934, as
amended (the “Act”), sets forth the local interconnection rights of
competing carriers and the obligations of incumbent local
exchange carriers. While cable VoIP providers need to obtain
interconnection under Section 251, interconnection under that
section is available only to “telecommunications carriers” as
defined by Section 3(44) of the Act.4 The FCC has not yet
classified VoIP as either a telecommunications service or an
information service (discussed more fully infra). Therefore, in
order to interconnect with the PSTN, a cable VoIP provider must
use a competitive local exchange carrier (“CLEC”) to function as
its interconnection services provider.
To achieve interconnection, some cable VoIP providers
use an unaffiliated third party CLEC, such as Sprint, while others
use a corporate affiliate that has qualified as a CLEC. Still others
have the corporate entity that is the end-user service provider
qualify as a CLEC, and then provide the interconnected VoIP
3
See generally IP-Enabled Services, First Report and Order and Notice
of Proposed Rulemaking, 20 FCC Rcd. 10245, ¶ 24 (2005) (“VoIP 911
Order”) (definition codified at 47 CFR § 9.3).
4
47 U.S.C 153(44).
6
service as a regulated telecommunications service.5 Whatever
structure is adopted, only the CLEC telecommunications carrier is
entitled to interconnection to exchange telecommunications traffic.
Interconnection brings not only the physical connection to
the PSTN, but also other important functions needed for the
provision of voice service. These functions include direct and
indirect interconnection,6 local number portability,7 reciprocal
compensation8 and just, reasonable and non-discriminatory rates
(i.e., cost-based).9 Because cable VoIP providers own their own
facilities to the end user premises, they have no need for the “last
mile” incumbent local exchange carrier unbundled network
elements10 that many CLECs born following passage of the Act
use to reach their customers.
Role of Regulation
While cable and other interconnected VoIP services have
been available for several years, the FCC has yet to establish the
regulatory classification of VoIP, nor has it laid out the regulatory
“rules of the road” that apply to the provision of VoIP services.
Ultimately, classification will have a major impact on the extent
and type of regulation that applies to cable VoIP.
Under the Act, a service can either be classified as a
telecommunications service (such as traditional telephone
service)11 or an information service (such as internet access).12
Either classification raises numerous implications, such as the
level of federal and state regulation that will apply to the service,
5
Each state public utility commission issues a certificate to entities
qualifying as CLECs within the state. Such certification is a practical
prerequisite to being eligible for interconnection under Section 251 of the
Act.
6
47 U.S.C. § 251(a)(1).
7
Id. § 251(b)(2).
8
Id. § 251(b)(5).
9
Id. § 251(c)(2)(D).
10
Id. § 251(c)(3).
11
47 U.S.C. § 153(20).
12
Id. § 153(46).
7
applicable intercarrier compensation rates and charges, and the
pole attachment rates that cable companies pay to pole owners.
Information services are typically exempt from state and federal
common carrier regulation. However, a telecommunications
service classification could lead to a greater degree of regulation
applied to VoIP services, particularly if these services are subject
to state public utility commission regulation.
Federal Regulation
To determine, among other things, the appropriate
classification of VoIP services, the FCC initiated the IP-Enabled
Services NPRM in March 2004.13 In this proceeding, the FCC
recognized that VoIP was changing voice technology and the way
in which customers would use their services, stating that:
Increasingly, these customers will
speak with each other using VoIP based
services instead of circuit-switched
telephony and view content over
streaming Internet media instead of
broadcast or cable platforms. By doing
so, they will change, fundamentally,
their use of these applications and
services – consumers will become
increasingly empowered to customize the
services they use, and will choose
these services from an unprecedented
range of service providers and
platforms.14
In the four and one-half years that have passed since the FCC
initiated the IP-Enabled Services docket, the FCC has not
determined the regulatory classification of VoIP. The FCC has,
however, addressed a number of issues, including imposing the
following requirements on interconnected VoIP:
13
IP-Enabled Services, Notice of Proposed Rulemaking, 19 FCC Rcd.
4863 (2004) (“IP-Enabled Services NPRM”).
14
Id. ¶ 1.
8
(1) the requirement to provide E911 capable service and
customer notice of service limitations, such as service
availability during power outages;15
(2) compliance with the Communications Assistance for Law
Enforcement Act (“CALEA”);16
(3) payments to the federal Universal Service Fund;17
(4) compliance with Customer Proprietary Network
Information regulations to protect customer records,
particularly call detail records;18
(5) Telecommunications Relay Service/Access for Persons
with Disabilities requirements to ensure that
interconnected VoIP providers provide services to the
hearing impaired and disabled;19 and
(6) compliance with Local Number Portability requirements
for the porting of telephone numbers to competitors.20
These additional regulatory burdens are the consequence of the
general recognition that consumers have reasonable expectations
that services and features they are accustomed to receiving from
traditional telephone services will be available with interconnected
15
See VoIP 911 Order.
See Communications Assistance for Law Enforcement Act and
Broadband Access and Services, First Report and Order and Further
Notice of Proposed Rulemaking, 20 FCC Rcd. 14989 (2005).
17
See Universal Service Contribution Methodology, Report and Order
and Notice of Proposed Rulemaking, 21 FCC Rcd. 7518 (2006).
18
See Implementation of the Telecommunications Act of 1996:
Telecommunications Carriers’ Use of Customer Proprietary Network
Information and Other Customer Information; IP-Enabled Services,
Report and Order and Further Notice of Proposed Rulemaking, 22 FCC
Rcd. 6927 (2007).
19
See IP-Enabled Services; Implementation of Sections 255 and
251(a)(2) of the Communications Act of 1934, as Enacted by the
Telecommunications Act of 1996: Access to Telecommunications Service,
Telecommunications Equipment and Customer Premises Equipment by
Persons with Disabilities; Telecommunications Relay Services and
Speech-to-Speech Services for Individuals With Hearing and Speech
Disabilities, Report and Order, 22 FCC Rcd. 11275 (2007).
20
See Telephone Number Requirements for IP-Enable Service Providers;
Report and Order, Declaratory Ruling, Order on Remand, and Notice of
Proposed Rulemaking, 43 CR 1, FCC 07-188 (rel. Nov. 8, 2007) (“LNP
Order”).
16
9
VoIP services. The FCC imposed these requirements without
reaching a decision on classification decision. It did so through its
ancillary jurisdiction under Title I of the Act.
While the FCC has imposed the foregoing regulatory
obligations on interconnected VoIP services, it has also recognized
certain rights, including certain interconnection rights for
underlying carriers serving interconnected VoIP providers and21
number portability.22
Time Warner Declaratory Ruling
In the Time Warner Cable Declaratory Ruling in 2007,23
the FCC’s Wireline Competition Bureau issued the most
significant order on the rights of interconnected VoIP to date.
Time Warner Cable petitioned the FCC for relief after the South
Carolina and Nebraska state utility commissions determined that
incumbent LECs were not obligated to enter into interconnection
agreements with competitive service providers to the extent that
such competitors operate as wholesale service providers (Time
Warner Cable used MCI and Sprint as its wholesale CLECs for
interconnection to the PSTN) because, among other things, they
were not “telecommunications carriers” for the purposes of Section
251.24 Time Warner Cable asked the FCC to grant a declaratory
ruling reaffirming that telecommunications carriers are entitled to
obtain interconnection with incumbent LECs to provide wholesale
telecommunications services to other service providers and that
interconnection rights under Section 251 are not based on the
identity of the wholesale carrier’s customer.25
In what has been the most important order thus far in
ensuring access to interconnection rights for interconnected VoIP
21
47 U.S.C. § 251(a).
Id. § 251(b)(2).
23
Time Warner Cable Request for Declaratory Ruling that Competitive
Local Exchange Carriers May Obtain Interconnection Under Section 251
of the Communications Act of 1934, as Amended, to Provide Wholesale
Telecommunications Services to VoIP Providers, Memorandum Opinion
and Order, 22 FCC Rcd. 3513 (2007).
24
Id. ¶ 3.
25
Id. ¶ 4.
22
10
services, the Wireline Bureau held in Time Warner Cable’s favor,
finding that the Act does not differentiate between the provision of
telecommunications services on a wholesale or retail basis for the
purposes of sections 251(a) and confirmed that providers of
wholesale telecommunications services enjoy the same rights as
any “telecommunications carrier” under those provisions of the
Act. Finding that this outcome “is consistent with and will
advance the Commission’s goals in promoting facilities-based
competition as well as broadband deployment,”26 the FCC clarified
that CLECs offering wholesale services have Section 251
interconnection rights that can be used on behalf of interconnected
VoIP providers.
The Time Warner Cable Declaratory Ruling further
explained that the ultimate classification of VoIP service is not
relevant to the interconnection rights of the wholesale CLEC,
finding that “the regulatory classification of the service provided to
the ultimate end user has no bearing on the wholesale provider’s
rights as a telecommunications carrier to interconnect under
section 251.”27 Therefore, the ultimate classification of VoIP
services should not impact interconnected VoIP providers’ ability
to obtain PSTN interconnection through wholesale CLECs.
Local Number Portability
The FCC also has ordered that customers of
interconnected VoIP providers should receive the benefits of local
number portability.28 Local number portability is a critical element
to voice competition because it allows the customer to keep his or
her phone number when changing providers. Section 251(a)(2) of
the Act establishes the duty of telecommunications carriers to
provide local number portability.
In securing this right for interconnected VoIP service, the
FCC recognized that interconnected VoIP providers may use
wholesale CLECs as “numbering partners” for porting phone
numbers because interconnected VoIP providers are not
telecommunications carriers entitled to local number portability in
26
Id. ¶ 13.
Id. ¶ 15.
28
LNP Order ¶ 17.
27
11
and of themselves.29 This not only allows interconnected VoIP
providers to offer local number portability but also eliminates any
question as to whether numbers should be ported when a wholesale
CLEC submits a port request on behalf of an interconnected VoIP
provider.
State Regulation
The role of state regulation of VoIP service has been an
issue of controversy since the advent of the service on a broad
basis. A few state public utility commissions (“PUCs”) have taken
the position that interconnected VoIP should be subject to their
state’s telecommunications laws and retail regulations, while
others have either opted against regulation by state statute or have
taken a wait and see approach, awaiting an FCC classification
order prior to acting.
While the level of regulation varies with each state, state
regulation typically means that an interconnected VoIP provider
will be subject to the state statutes and public utility regulations
applicable to telecommunications carriers, such as billing
requirements,30 customer service requirements,31 tariff filings,32
and reporting obligations.33 Some cable VoIP providers have
voluntarily submitted to state PUC regulation and thus operate
their VoIP offerings as CLECs.34 Where the cable VoIP provider
voluntarily submits to regulation or is ordered to do so by a state
29
Id. ¶ 20.
See, e.g., Tex. Rule § 26.27; Fla. Rule § 25-4.110; In the Matter, On
the Commission’s Own Motion, to Establish Billing Standards for Basic
Residential Telecommunications Service, Case No. U-11043 (Mich. PSC
June 18, 1996).
31
See, e.g., 20 Va. Admin. Code § 427 et seq.; 4 Code of Colorado Reg.
732-2000 et seq.; Ore. Rev. Stat. § 759.450-455;
32
See, e.g., Rev. Code Wash. § 80.36.100; N.C. Rule § R-9-4; Neb. PSC
Rule 002.21.
33
See, e.g., 83 Ill. Admin. Code § 210.10; Missouri Rev. Stat. § 392.210;
Pa. Code § 64.201.
34
For example, Cox, Charter and Bresnan all establish their cable VoIP
providers as CLECs whereas Bright House, Comcast and Time Warner
Cable offer their cable VoIP services via entities that are not certificated
by state PUCs and are unregulated at the state level.
30
12
PUC, such regulation brings additional costs and burdens to the
cable VoIP provider that it otherwise would not incur.
A few states have taken an assertive approach to regulating
interconnected VoIP. In 2003, the Minnesota PUC issued an order
subjecting Vonage’s VoIP service to regulation.35 Vonage offers a
“nomadic” service, one in which the customer’s phone number is
not geographically tied to its physical location (i.e. the customer
can use his Vonage service in Philadelphia but be assigned a
telephone number geographically identified with Boston) and is
transmitted via the public internet to the PSTN, allowing the
service to be originated from any location with an internet
connection.
Vonage challenged the Minnesota order and in the Vonage
Declaratory Ruling, the FCC prohibited state PUC regulation of
nomadic VoIP services of the kind offered by Vonage. The FCC
found that the nomadic nature of the service made it of
indeterminate jurisdiction because the service provider does not
necessarily know the geographic location of the caller or the called
party, and therefore interstate.36 As an interstate service, Vonage
is subject to FCC jurisdiction but not state PUC jurisdiction. The
Vonage Declaratory Ruling further stated that “to the extent other
entities, such as cable companies, provide VoIP services, we
would preempt state regulation to an extent comparable to what we
have done in this Order.”37 The Eighth Circuit Court of Appeals
subsequently upheld the FCC’s ruling.
Notwithstanding the Vonage Declaratory Ruling, other
state PUCs, such as Missouri and Wisconsin, issued similar orders
subjecting cable VoIP service to state PUC jurisdiction, finding
cable VoIP to be “telecommunications” under applicable state
35
In the Matter of Complaint of the Minnesota Department of Commerce
Against Vonage Holding Corp. Regarding Lack of Authority to Operate
in Minnesota, Docket No. P-6214/C-03-108, Order Finding Jurisdiction
and Requiring Compliance (issued Sept. 11, 2003).
36
In re Vonage Holdings Corp., 19 FCC. Rcd. 22404, ¶ 14 (2004).
37
Id. ¶ 32.
13
statutes.38 Vermont and Maine have ongoing proceedings
reviewing the regulatory status of VoIP service as well.39
More states, however, have determined that VoIP service
should not be subject to state PUC regulation by enacting statutes
prohibiting such regulation. To date, ten states (including
Missouri) and the District of Columbia have enacted such laws.40
It is important to note that while many cable VoIP
providers are opposed to state PUC regulation of VoIP service,
they do support the continued role of state PUCs in enforcing
Section 251 and 252 interconnection rights (discussed supra).
38
See Staff of the Public Service Commission of the State of Missouri v.
Comcast IP Phone, LLC, Report and Order, Case No. TC-2007-0111
(Nov. 1, 2007). Comcast had challenged the Missouri Public Service
Commission’s order in United States District Court when the state
enacted a law prohibiting the MPSC from regulating VoIP service, thus
rendering Comcast’s suit as moot. See also Application of Time Warner
Cable Information Services (Wisconsin), LLC to Expand Certification as
an Alternative Telecommunications Utility, Final Decision, Docket No.
5911-NC-101 (May 9, 2008). After the Wisconsin PUC’s Final Order,
Time Warner filed a Petition for Declaratory Ruling on Oct. 24, 2008,
seeking an order from the Wisconsin PSC that its Digital Phone VoIP
service is not subject to state regulation, and characterized the PSC’s
discussion of VoIP in its Final Order as not central to the issues raised in
that proceeding. See Petition of Time Warner Cable Information Services
(Wisconsin), LLC for Declaratory Ruling that its Digital Phone Service is
Subject to Exclusive Federal Jurisdiction, (filed Oct. 24, 2008); see also
Petition of AT&T Wisconsin for Declaratory Ruling, Docket No. 6720DR-101 (filed Aug. 5, 2008).
39
See Vermont Public Service Board Investigation into regulation of
Voice over Internet Protocol(“VoIP”)services, Order Opening
Investigation and Notice of Prehearing Conference, Docket No. 7316
(May 16, 2007); and Maine Public Utilities Commission, Investigation
into Whether Providers of Time Warner “Digital Phone” Service and
Comcast “Digital Voice” Service Must Obtain Certificate of Public
Convenience and Necessity to Offer Telephone Service, Docket No. 2008421 (Oct. 21, 2008).
40
Currently, the states with statutes prohibiting state PUC regulation of
VoIP services are Delaware, District of Columbia, Florida, Georgia,
Indiana, Kentucky, Maryland, Missouri, New Jersey, Pennsylvania and
Virginia.
14
This role was vested in the states by Congress, and as earlier
described, interconnection rights are critical to competition.
Therefore, state PUCs will continue to play an important role for
cable VoIP providers, whether or not cable VoIP services are
subject to their jurisdiction.
E911 and CALEA
It is helpful to look at two discrete issues in order to
understand how the application of telecommunications regulations
on interconnected VoIP services by the FCC has evolved. The
FCC’s orders applying E911 service and CALEA obligations on
interconnected VoIP are instructive.
E911 Order
In 2005, the FCC recognized that “the American
public has developed certain expectations
with respect to the availability of 911 and
E911 emergency services via certain classes
of communications devices,” and imposed the
obligation to provide E911 service and certain customer notice
requirements on interconnected VoIP providers.41 Because
interconnected VoIP is a voice service that consumers will use in
an emergency, it was not surprising that the FCC (and state and
local officials) would want to ensure that it provides the needed
functionality to allow for properly routed and transmitted
emergency calling.42
While refraining from classifying interconnected VoIP as
either a telecommunications or information service, the FCC
applied E911 obligations, finding that “the record clearly indicates
“that consumers expect that VoIP services that are interconnected
41
VoIP 911 Order ¶ 6.
There are two types of 911 service: Basic 911, in which 911 calls are
transmitted to a single geographically appropriate public safety access
point (“PSAP”) and E911, in which 911 calls are transmitted to a
geographically appropriate PSAP, and provides the PSAP with the
caller’s call back number, referred to as Automatic Numbering
Information (ANI) and location information, a capability referred to as
Automatic Location Identification (ALI). Id. ¶¶ 12, 13.
42
15
with the PSTN will function in some ways like a ‘regular
telephone’ service.”43 The FCC thus made E911 service a
“condition of providing service” for interconnected VoIP
providers,44 and required that:
(1)
911 calls must be transmitted to the Public Service
Answering Point (“PSAP”) along with the caller’s telephone
number and “registered location” (defined as the location at
which the service will first be utilized);
(2)
The customer’s “registered location” must be obtained and
the customer provided a method for updating it;
(3)
Every subscriber must be advised “in plain language”
when E911 is not available or limited. This includes moving the
CPE, non-native telephone number, loss of electrical power, etc.;
(4)
An affirmative customer acknowledgement of receiving
and understanding the limitations must be obtained; and
(5)
The customer must be provided warning stickers if E911
may be limited or is not available.45
These requirements not only recognize that consumers expect
emergency calling services to be available from interconnected
VoIP, they also address an issue that traditional telephone service
does not have; namely, that the customer premise equipment
required for interconnected VoIP does not operate during a power
outage unless it has a battery back-up. Even when a battery backup is present (which is not required by the FCC), the battery
typically has a limited amount of availability, in some cases up to
eight hours, depending on how much the customer uses his or her
interconnected VoIP service for calling during the power outage.
While the FCC required interconnected VoIP providers to
provide E911, it did not initially mandate that incumbent LECs or
PSAPs provide interconnected VoIP providers access to the
capabilities needed to properly transmit E911 calls. For example,
the incumbent LEC typically has a selective router switching
functionality in its tandem switches that are used by all providers
to route a 911 or an E911 call to the appropriate PSAP.
43
Id. ¶ 23.
47 C.F.R. § 9.5(b)(1).
45
Id.
44
16
Recognizing this gap, during the summer of 2008, the federal New
and Emerging Technologies 911 Improvement Act was enacted to
grant VoIP providers a right of access to the capabilities needed for
providing 911 and E911, including interconnection, to provide 911
and E911 service on the same rates, terms, and conditions that are
provided to a provider of commercial mobile service.46
CALEA
In response to a joint petition submitted by the Department
of Justice, the Federal Bureau of Investigation and the Drug
Enforcement Agency, the FCC issued an order subjecting
interconnected VoIP services to the requirements of CALEA
(“CALEA Order”).47 CALEA is intended to preserve the ability of
law enforcement agencies to conduct electronic surveillance by
requiring telecommunications carriers and equipment
manufacturers to modify and design their equipment, facilities, and
services to ensure that they have the necessary surveillance
capabilities.48 As with E911, it was not surprising that these
requirements would be applied to interconnected VoIP.
The FCC concluded that CALEA applies to interconnected
VoIP service providers (and broadband Internet access providers)
under the “Substantial Replacement Provision” (“SRP”) of
CALEA.49 The SRP requires the FCC to deem certain service
providers to be telecommunications carriers for CALEA purposes
even when those providers are not telecommunications carriers
under the Communications Act of 1934.50
46
New and Emerging Technologies Act of 2008, Pub .L. No. 110-283,
122 Stat. 2620 (2008) (to be codified in scattered sections of 47 U.S.C.)
(“NET 911 Act”). The NET 911 Act also obligates “IP-enabled voice
service provider to provide 9-1-1 service and enhanced 9-1-1 service to
its subscribers in accordance with the requirements of the Federal
Communications Commission…” NET 911 Act, Sec. 6 (47 U.S.C.
61a5a-1(a)).
47
Communications Assistance for Law Enforcement Act and Broadband
Access and Services, First Report and Order and Further Notice of
Proposed Rulemaking, 20 FCC Rcd. 14989 (2005) (“CALEA Order”).
48
Id. ¶ 4.
49
47 U.S.C. § 102(8)(B)(ii).
50
CALEA Order ¶ 10.
17
For purposes of CALEA, the FCC found interconnected
VoIP to be telecommunications because interconnected VoIP
satisfies the three components of the SRP. First, the SRP requires
that an entity be “engaged in providing wire or electronic
communication switching or transmission service.”51 The FCC
found that interconnected VoIP providers, whether via their own or
another entity’s facilities, use a router to accomplish what amounts
to “switching.”52
Second, the SRP requires that the service provided be “a
replacement for a substantial portion of the local telephone
exchange service.”53 The FCC found that interconnected VoIP
satisfies this prong “because it replaces the legacy POTS service
functionality of traditional local exchange service.”54
Finally, under the third prong of the SRP test, the
Commission is required to find that “‘it is in the public interest to
deem . . . a person or entity to be a telecommunications carrier for
purposes of [CALEA]’ once that entity has met the first and
second components of the SRP.”55 The FCC found the SRP
satisfied by promoting competition, encouraging the development
of new technologies, and protecting public safety and national
security.56
As can be seen from the FCC’s CALEA Order,
interconnected VoIP may be distinct from traditional telephone
service, but it is nevertheless a voice service and, therefore,
relevant obligations will apply whether or not interconnected VoIP
is ultimately classified as a telecommunications service. The
unanswered question is whether additional telecommunications
obligations will be imposed.
51
Id. ¶ 11.
Id. ¶ 41.
53
Id. ¶ 12.
54
Id. ¶ 42.
55
Id. ¶ 14.
56
Id. ¶ 43.
52
18
Pole Attachments
It is common for cable companies and telecommunications
carriers to attach their plant to the poles of electric utilities. While
that may be understood, the multi-million dollar question is: what
rate applies? Section 224 of the Act governs pole attachments, and
in 2007, the FCC opened a rulemaking to consider
comprehensively the appropriate changes, if any, to its
implementation of Section 224.57
As background, the FCC regulates pole attachments except
where the state exerts regulatory authority. Eighteen states and the
District of Columbia regulate pole attachments, so any FCC
decision will not affect the rates as approved by those states.58
Section 224 of the Act establishes two separate provisions
governing maximum pole attachment rates. Section 224(d)
establishes one rate for cable companies “solely to provide cable
service” and Section 224(e) establishes another rate for
telecommunications carriers. The FCC has ruled that cable
providers offering information services are required to pay only the
cable pole attachment rate.59 Section 224(b)(1) of the Act requires
rates to be “just and reasonable” under a cost-based rate formula.
Under a Section 224 regime, application of the statute has lead to
telecommunications carriers paying a higher per attachment rate
than cable companies.
In its Pole Attachment NPRM, the FCC tentatively
concluded “that all attachments used for broadband Internet access
service should be subject to a single rate, regardless of the platform
over which those services are provided, and that that rate … should
57
Implementation of Section 224 of the Act; Amendment of the
Commission’s Rules and Policies Governing Pole Attachments, Notice of
Proposed Rulemaking, FCC 07-187, ¶ 2 (rel. Nov. 20, 2007) (“Pole
Attachment NPRM”).
58
Id. ¶ 4.
59
In the Matter of Implementation of Section 703(E) of the
Telecommunications Act of 1996, Report and Order, 13 FCC Rcd 6777,
¶32 (February 6, 1998); see also Amendment of Commission’s Rules and
Policies Governing Pole Attachments, Consolidated Partial Order on
Reconsideration, 16 FCC Rcd 12103, ¶ 67 (2001).
19
be greater than the current cable rate, yet no greater than the
telecommunications rate.”60 While it is questionable whether this
tentative conclusion is consistent with Section 224’s requirements,
if it is accepted, cable companies will pay more and
telecommunications carriers will pay less.
More specifically, because the Pole Attachment NPRM
only addresses broadband Internet access, broadband Internet
access service rates for cable will increase while the rate paid by
telecommunications carriers will decrease to one unified rate. As a
result, the pole attachment rate paid by cable companies for
interconnected VoIP will rise because there effectively will be one
rate, amounting to a higher rate for cable companies.
As of the publication date of this article, the FCC has not
issued an order pursuant to its Pole Attachment NPRM and the
matter has not been scheduled for a vote by the Commissioners.
Retention Marketing
As competition between cable VoIP and RBOCs has
intensified and RBOC line losses have accelerated, the pressure on
RBOCs to counter their cable competitors has increased. In
response to this pressure, during the summer of 2007, Verizon
launched a “retention marketing” campaign aimed at customers
who had chosen to move their service to a cable VoIP provider but
whose telephone number had not yet been ported.61
In the Retention Marketing Order,62 the FCC found that
after winning a customer from Verizon, the cable VoIP provider
60
Id. ¶ 3.
Retention marketing is distinct from another type of marketing known
as “winback” marketing. Retention marketing occurs during the number
porting interval after the winning provider has submitted the losing
provider the customer port request, but before the port is completed and
the losing provider has canceled service. Winback marketing takes place
following the cancellation of service and is based on the fact that the
losing provider has canceled service.
62
Bright House Networks, LLC v. Verizon California, Inc., Memorandum
Opinion and Order, 23 FCC Rcd. 10704 (2008) (“Retention Marketing
Order”).
61
20
submitted to Verizon a Local Service Request (“LSR”), which
served as a request to port the customer’s telephone number to the
cable VoIP provider and to cancel the customer’s Verizon service.
The cable VoIP provider must provide the LSR to the losing
provider, in this case Verizon, for the port to occur. The LSR
therefore informed Verizon that, at a particular date and time, the
customer’s telephone number would be ported
to the cable VoIP provider.63
Upon receiving the LSRs, Verizon performed the internal
steps needed to port the telephone numbers and cancel the
customers’ service, but it also included the LSRs in a lead list of
customers to be contacted by Verizon.64 Verizon then contacted
the customers who were porting their telephone numbers by
express mail and/or automated telephone message to encourage
them to remain with Verizon, offering incentives such as price
discounts and American Express reward cards.65
Bright House, Comcast and Time Warner Cable brought a
complaint to the FCC stating that Verizon’s retention marketing
program violated Section 222(b) of the Act because Verizon was
using carrier proprietary information for marketing purposes rather
than for only executing the port.66 Section 222(b) states “[a]
telecommunications carrier that receives or
obtains proprietary information from another
carrier for purposes of providing any
telecommunications service shall use such
information only for such purpose, and shall
63
Id. ¶ 5.
Id. ¶ 7. To generate the lead list, Verizon would begin with the
universe for whom they had disconnect orders and then cull the lead list
to eliminate all customers who were not switching their service and
porting their numbers to facilities based providers such as cable VoIP
providers.
65
Id. ¶ 8.
66
Id. ¶ 10 n.35. The complaint also alleged violations of Sections 201
and 222(a) of the Act but the FCC did not address them because the cable
VoIP providers prevailed on their Section 222(b) claim and no further
relief was needed. Id. ¶ 2.
64
21
not use such information for its own
marketing efforts.”67
In concluding that the information
contained in LSRs was protected under
Section 222(b), the FCC rejected Verizon’s
arguments based on the following key
observations:
(1) Verizon maintained that the
information that the cable VoIP
providers submit to Verizon in an LSR
is actually Verizon’s information, not
another carrier’s, namely the
information that the customer’s service
was to be cancelled. The FCC found
this argument to distort the nature of
the information contained in the LSRs
because while the LSR does contain
information that Verizon needs to
disconnect a customer, it also contains
additional, highly sensitive
competitive information that is
independent of the mechanics of
disconnection by disclosing in advance
that a competing carrier has convinced
a particular Verizon customer to switch
to the competing carrier’s voice
service on a particular date. This is
the information that is proprietary.68
(2) Verizon also argued that the
carrier-change information in the LSR
is the customer’s information, and the
cable VoIP provider is merely conveying
that information as the customer’s
agent. While the FCC found it true
that a Verizon retail customer had the
67
68
47 U.S.C. § 222(b).
Retention Marketing Order ¶ 15.
22
right to contact Verizon directly to
indicate that he or she intends to
switch to a cable VoIP provider’s voice
service, that had already recognized by
the FCC. The FCC therefore held that
if a customer makes such a contact, the
carrier-change information conveyed by
the customer to Verizon is not
“proprietary” within the meaning of
section 222(b) and may be used to
engage in retention marketing. But in
the absence of such a direct customer
contact, however, the carrier-change
information conveyed in carrier-tocarrier communications remains
proprietary.
(3) Verizon additionally contended
that the LSRs do not convey proprietary
information “from another carrier”
within the meaning of section 222(b),
because the cable VoIP providers who
brought the complaint were not
“telecommunications carriers.”69
Verizon’s argument was essentially an
assertion that the record lacked
evidence that the Comcast and Bright
House CLECs engage in “offering”
telecommunications “directly to the
public, or to such classes of users at
to be effectively available directly to
the public….” by failing to “hold
themselves out” to the public regarding
the telecommunications they provide to
their affiliates.70 Based on the
particular facts in this record
regarding the telecommunications
provided by Comcast and Bright House to
69
70
Id. ¶ 17.
Id. ¶ 38.
23
their affiliated cable VoIP providers,
the FCC concluded that Comcast and
Bright House demonstrated that their
CLECs are telecommunications carriers
for purposes of Section 222(b) and
provide telecommunications services” to
Comcast and Bright House within the
meaning of section 222(b).71
Based on this analysis, the FCC
prevented Verizon’s use of carrier change
information in marketing customers who are
in the process of porting their telephone.
It marked a significant victory in
preserving competitive markets for cable
VoIP providers and for all providers of
competitive voice services.72
Conclusion
Cable VoIP is making a dramatic impact in the voice
services market. As it disrupts traditional voice markets and
telecommunications providers, federal and state regulators will
continue to grapple with the appropriate classification and level of
regulation that should apply. In recognition of legitimate
consumer expectations from a voice service, the FCC has applied
numerous telecommunications regulations upon interconnected
VoIP. The industry should expect the regulatory environment to
remain dynamic.
71
Id. ¶ 41.
Verizon has appealed the FCC’s order to the United States Court of
Appeals for the District of Columbia. See Verizon California, Inc., et al.,
v. Federal Communications Commission, No. 08-1234 (D.C. Cir. June
27, 2008).
72
24