Issues for Cable-Provided VoIP Services Copyright  © 2006, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. PLI New Yor...
Options for Cable-Provided VoIP Company IP Backbone PSTN HFC Headend/CO Gateway End-to-end control of QoS, Provisioning, P...
Cable-Provided VoIP Services under the Current Legal and Regulatory Framework <ul><li>Definitions dictate regulatory statu...
Application of the Historical Definitions Approach Remains Murky for VoIP <ul><li>Interstate IP-Enabled </li></ul><ul><ul>...
Cable-Provided VoIP under the Current Legal and Regulatory Framework <ul><li>In 1998, the FCC reviews application of defin...
2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? <ul><li>FCC finds Free World Dialup (FWD) to be ...
2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d) <ul><li>FCC finds AT&T’s “phone-to-phon...
2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d) <ul><li>FCC finds Vonage’s service is i...
2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d) <ul><ul><li>Ruling does not address app...
2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d) <ul><li>Interconnected VoIP service pro...
2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d) <ul><ul><li>No exemption from liability...
2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d) <ul><li>Requirements </li></ul><ul><ul>...
2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d) <ul><li>CALEA applies to facilities bas...
2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d) <ul><li>“Substantial Replacement” for a...
2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d) <ul><li>Wireline Broadband Internet acc...
Pending Review:  Continuing Uncertainty for VoIP Service Providers <ul><li>E911 Further NPRM </li></ul><ul><ul><li>Techniq...
Pending Review:  Continuing Uncertainty for VoIP Service Providers (cont’d) <ul><li>CALEA Outstanding NPRM Issues </li></u...
Pending Review:  Continuing Uncertainty for VoIP Service Providers (cont’d) <ul><li>Intercarrier compensation NPRM and FNP...
Pending Review:  Continuing Uncertainty for VoIP Service Providers (cont’d) <ul><li>SBC petition </li></ul><ul><ul><li>See...
Pending Review:  Continuing Uncertainty for VoIP Service Providers (cont’d) <ul><li>Grande petition </li></ul><ul><ul><li>...
Pending Review:  Continuing Uncertainty for VoIP Service Providers (cont’d) <ul><li>FCC adopts NPRM to address legal and r...
Pending Review:  Continuing Uncertainty for VoIP Service Providers (cont’d) <ul><li>Contributions to USF based on intersta...
Pending Review:  Continuing Uncertainty for VoIP Service Providers (cont’d) <ul><li>Taxes - Level of taxation generally de...
Pending Review:  Continuing Uncertainty for VoIP Service Providers (cont’d) <ul><li>Federal and State Surcharges </li></ul...
Focus for 2006/2007 <ul><li>Follow the money </li></ul><ul><ul><li>Access charges </li></ul></ul><ul><ul><li>USF </li></ul...
<ul><li>Chérie R. Kiser </li></ul><ul><li>Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. </li></ul><ul><li>701 Pennsy...
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  1. 1. Issues for Cable-Provided VoIP Services Copyright © 2006, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. PLI New York February 9, 2006 By Chérie R. Kiser
  2. 2. Options for Cable-Provided VoIP Company IP Backbone PSTN HFC Headend/CO Gateway End-to-end control of QoS, Provisioning, PSTN Interconnect, Back-Office, Operational Support Gateway Backbone SPRINT/MCI HFC Headend/CO Control customer, Provisioning Integration, Back-Office, Operational Support, Outsource: PSTN interconnect Headend Backbone PSTN HFC DSL Third Party Resale Gateway No MSO control over the customer ‘last mile’, QoS
  3. 3. Cable-Provided VoIP Services under the Current Legal and Regulatory Framework <ul><li>Definitions dictate regulatory status and classification of providers and services </li></ul><ul><ul><li>“Telecommunications” - an entity offering a simple, transparent transmission path, without the capability of providing enhanced functionality, offers telecommunications </li></ul></ul><ul><ul><li>“Telecommunications Service” - offering telecommunications for a fee directly to the public or to such classes of users as to be effectively available directly to the public, regardless of the facilities used </li></ul></ul><ul><ul><li>“Information Services” - the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing or making available information via telecommunications </li></ul></ul>
  4. 4. Application of the Historical Definitions Approach Remains Murky for VoIP <ul><li>Interstate IP-Enabled </li></ul><ul><ul><li>Broadband connection from user’s location </li></ul></ul><ul><ul><li>A need for IP-compatible CPE </li></ul></ul><ul><ul><li>A service offering that includes a suite of integrated capabilities and features, able to be invoked sequentially or simultaneously, that allows customers to manage personal communications dynamically (“enhanced functionality”) </li></ul></ul><ul><li>Interconnected VoIP Service </li></ul><ul><ul><li>Enables real-time, two-way voice communications; </li></ul></ul><ul><ul><li>Requires a broadband connection from the user’s location; </li></ul></ul><ul><ul><li>Requires IP-compatible CPE; and </li></ul></ul><ul><ul><li>Offering permits users generally to receive calls that originate on the PSTN and terminate calls to PSTN </li></ul></ul>
  5. 5. Cable-Provided VoIP under the Current Legal and Regulatory Framework <ul><li>In 1998, the FCC reviews application of definitions to VoIP </li></ul><ul><ul><li>FCC stops short of finding that IP telephony is a telecom service </li></ul></ul><ul><ul><ul><li>Offers tentative definition for phone-to-phone IP telephony </li></ul></ul></ul><ul><li>2002 Cable Modem Ruling </li></ul><ul><ul><li>FCC rules properly classified as interstate information service </li></ul></ul><ul><ul><li>FCC defines cable modem service as a service that uses cable system facilities to provide residential subscribers with high-speed Internet access, as well as many applications or functions that can be used with high-speed Internet access </li></ul></ul><ul><ul><li>Supreme Court upholds FCC decision </li></ul></ul>
  6. 6. 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? <ul><li>FCC finds Free World Dialup (FWD) to be an interstate information service </li></ul><ul><ul><li>Concludes FWD is neither telecommunications nor a telecommunications service as those terms are defined by the Act </li></ul></ul><ul><ul><li>Relying on pre-1996 Act precedent and post 1996 provisions 230(b)(2) and 706, FCC confirms long-standing policy of non-regulation under which Internet-based services remain free from unnecessary and harmful regulation at both the federal and state levels </li></ul></ul><ul><ul><li>Finds traditional end-to-end analysis </li></ul></ul><ul><ul><li>inapplicable in context of FWD </li></ul></ul>February 2004 - Pulver Decision
  7. 7. 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d) <ul><li>FCC finds AT&T’s “phone-to-phone” VoIP service to be a telecommunications service subject to access charges </li></ul><ul><li>AT&T’s service: </li></ul><ul><ul><li>Uses ordinary CPE with no enhanced functionality </li></ul></ul><ul><ul><li>Originates and terminates on the PSTN </li></ul></ul><ul><ul><li>Undergoes no net protocol conversion and provides no enhanced functionality to end users due to provider’s use of IP technology </li></ul></ul><ul><li>FCC finds end users do not receive service differently than traditional long distance service </li></ul>April 2004 - AT&T Petition for Declaratory Ruling Order
  8. 8. 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d) <ul><li>FCC finds Vonage’s service is interstate and preempts the Minnesota PUC’s entry requirements </li></ul><ul><ul><li>Ruling does not address information/telecom distinction </li></ul></ul><ul><ul><li>Ruling extends to other IP-enabled services that have the same basic characteristics as Vonage’s service: (1) a requirement for a broadband connection from the user’s location; (2) a need for IP-compatible CPE; and (3) a service offering that includes a suite of integrated capabilities and features </li></ul></ul>November 2004 - Vonage Order
  9. 9. 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d) <ul><ul><li>Ruling does not address applicability of Minnesota’s general laws governing entities conducting business in the state (such as taxation, fraud, general commercial dealings, marketing, advertising, and other business practices) </li></ul></ul><ul><ul><li>Ruling reiterates that applying the end-to-end analysis to Internet-based services is difficult, if not impossible </li></ul></ul><ul><ul><li>Sections 706 and 230 key components of review of policies for IP-enabled services </li></ul></ul><ul><li>Order appealed by state regulatory commissions </li></ul>November 2004 - Vonage Order
  10. 10. 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d) <ul><li>Interconnected VoIP service providers must provide E911 to subscribers by November 28, 2005 </li></ul><ul><ul><li>Consumers expect interconnected VoIP services will function like a “regular telephone” </li></ul></ul><ul><ul><li>Does not apply to IP-based services such as IM or Internet gaming </li></ul></ul><ul><ul><li>Obligation to promote “safety of life and property” and facilitate “a seamless, ubiquitous and reliable end-to-end infrastructure” for public safety </li></ul></ul><ul><ul><li>FCC has jurisdiction under 4(i) and 251(e)(3) of Act; 911 is not purely intrastate </li></ul></ul><ul><ul><li>No funding obligations imposed </li></ul></ul>June 2005 - E911 VoIP Order
  11. 11. 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d) <ul><ul><li>No exemption from liability similar to that experienced by common carriers </li></ul></ul><ul><ul><li>Appeal pending before U.S. Court of Appeals for DC </li></ul></ul><ul><ul><li>Refrains from requiring discontinuance of existing subscribers, but requires discontinuance of marketing and accepting new customers anywhere provider is not capable of transmitting E911 calls to appropriate PSAP </li></ul></ul><ul><ul><li>Waivers pending </li></ul></ul><ul><ul><li>Legislation </li></ul></ul>June 2005 - E911 VoIP Order
  12. 12. 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d) <ul><li>Requirements </li></ul><ul><ul><li>Notification </li></ul></ul><ul><ul><li>Affirmative acknowledgment </li></ul></ul><ul><ul><li>Warning stickers or appropriate labels </li></ul></ul><ul><ul><li>Reporting </li></ul></ul><ul><ul><li>Must transmit 911 calls, ANI and customer registered location for each call to PSAP, designated statewide default answering point, or appropriate local emergency authority that serves caller’s registered location </li></ul></ul><ul><ul><li>Subscribers must be able to update registered location at will and in timely manner </li></ul></ul>June 2005 - E911 VoIP Order
  13. 13. 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d) <ul><li>CALEA applies to facilities based Broadband Internet access providers and providers of interconnected VoIP service </li></ul><ul><li>Telecommunications carriers under CALEA, but not under definition of “Telecommunications Services” under Communications Act </li></ul>August 2005 - CALEA Broadband Order
  14. 14. 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d) <ul><li>“Substantial Replacement” for any part of the PSTN if: </li></ul><ul><ul><li>Providing wire or electronic communication switching or transmission service; </li></ul></ul><ul><ul><li>Service is a replacement for a substantial portion of local telephone service = any significant part of the functionality previously provided by the PSTN; and </li></ul></ul><ul><ul><li>FCC must find “it is in public interest to deem . . . a person or entity to be a telecommunications carrier for purposes of </li></ul></ul><ul><ul><li>[CALEA].” </li></ul></ul><ul><li>18 months to comply </li></ul><ul><li>Federal court challenge </li></ul>August 2005 - CALEA Broadband Order
  15. 15. 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d) <ul><li>Wireline Broadband Internet access service provided over a provider’s own facilities is an information service </li></ul><ul><li>A single integrated service inextricably combines the offering of powerful computer capabilities with telecommunications </li></ul><ul><li>Owner of facilities irrelevant; “end product” delivered to user matters </li></ul><ul><li>Access and Computer Inquiry obligations eliminated </li></ul><ul><li>USF obligations continue to apply for 270 day period or until FCC adopts a new contribution rule </li></ul>September 2005 - Wireline Broadband Report and Order
  16. 16. Pending Review: Continuing Uncertainty for VoIP Service Providers <ul><li>E911 Further NPRM </li></ul><ul><ul><li>Techniques for automatic identification of geographic location of VoIP service users </li></ul></ul><ul><ul><li>Whether to extend obligation to all IP-based voice service providers regardless of broadband connection </li></ul></ul><ul><ul><li>Application to wireless VoIP service </li></ul></ul><ul><ul><li>Role of states and whether to address states’ ability to collect all fees </li></ul></ul><ul><ul><li>Whether to adopt any consumer privacy protections </li></ul></ul>
  17. 17. Pending Review: Continuing Uncertainty for VoIP Service Providers (cont’d) <ul><li>CALEA Outstanding NPRM Issues </li></ul><ul><ul><li>Use of industry standards as safe harbors </li></ul></ul><ul><ul><li>Use of trusted third parties </li></ul></ul><ul><ul><li>Implementation timelines and the extension/waiver process </li></ul></ul><ul><ul><li>Allocation of costs for CALEA implementation </li></ul></ul><ul><ul><li>Enforcement of CALEA </li></ul></ul><ul><li>CALEA FNPRM </li></ul><ul><ul><li>Are there any types of “managed” VoIP services not included in definition of interconnected VoIP that should be included? </li></ul></ul><ul><ul><li>Should there be an exemption for small and rural broadband providers or educational or research institutions? </li></ul></ul>
  18. 18. Pending Review: Continuing Uncertainty for VoIP Service Providers (cont’d) <ul><li>Intercarrier compensation NPRM and FNPRM </li></ul><ul><ul><li>Carriers should move to a unified regime for all intercarrier compensation payments </li></ul></ul><ul><li>ISP remand order </li></ul><ul><ul><li>251(b) 5 </li></ul></ul><ul><ul><li>251(g) </li></ul></ul><ul><ul><li>Calls to ISPs consist of multiple communications and these communications often are interstate or international so entire call jurisdictionally interstate </li></ul></ul><ul><ul><li>Neither the path of communication nor the location of any intermediate switching point is relevant to the jurisdictional analysis </li></ul></ul>Intercarrier Compensation
  19. 19. Pending Review: Continuing Uncertainty for VoIP Service Providers (cont’d) <ul><li>SBC petition </li></ul><ul><ul><li>Seeking declaratory ruling wholesale transmission provider using IP technology to transport long distance calls are liable for access charges </li></ul></ul><ul><li>VarTec petition </li></ul><ul><ul><li>It is not required to pay access charges when ESPs deliver calls directly to SBC or other LECs for termination </li></ul></ul>Intercarrier Compensation
  20. 20. Pending Review: Continuing Uncertainty for VoIP Service Providers (cont’d) <ul><li>Grande petition </li></ul><ul><ul><li>Seeks ruling that LECs receiving certifications that traffic is originated in IP format can rely on certification to treat as reciprocal compensation traffic and terminate over local interconnection trunks </li></ul></ul><ul><li>Frontier petition </li></ul><ul><ul><li>Seeks ruling that entities that transport IP traffic must pay access charges </li></ul></ul>Intercarrier Compensation
  21. 21. Pending Review: Continuing Uncertainty for VoIP Service Providers (cont’d) <ul><li>FCC adopts NPRM to address legal and regulatory framework for IP-based services, including VoIP services </li></ul><ul><ul><li>Seeks to categorize different IP-based services </li></ul></ul><ul><ul><ul><li>Consumer perception </li></ul></ul></ul><ul><ul><ul><li>Interconnection with PSTN </li></ul></ul></ul><ul><ul><li>Asks how each category should be classified </li></ul></ul><ul><ul><li>Asks what, if any, regulations should apply to each category </li></ul></ul><ul><li>In conjunction with NPRM, FCC conducts “Solutions Summits” on public policy issues: CALEA, 911, disability access </li></ul>February 2004 - IP-Enabled NPRM
  22. 22. Pending Review: Continuing Uncertainty for VoIP Service Providers (cont’d) <ul><li>Contributions to USF based on interstate and international telecommunications services </li></ul><ul><ul><li>FCC imposes USF obligations on wireline broadband providers for 270 days or until it issues a decision (Wireline Broadband Order) </li></ul></ul><ul><ul><li>FCC notes “accelerating development of new technologies like ‘voice over Internet’ increases the strain on regulatory distinctions” (USF Recovery NPRM) </li></ul></ul><ul><ul><li>FCC reviewing application of USF obligations to VoIP service providers (IP-Enabled Services NPRM) </li></ul></ul>Universal Service
  23. 23. Pending Review: Continuing Uncertainty for VoIP Service Providers (cont’d) <ul><li>Taxes - Level of taxation generally depends on classification of service under tax law </li></ul><ul><ul><li>Federal Excise Tax </li></ul></ul><ul><ul><ul><li>Fortis </li></ul></ul></ul><ul><ul><ul><li>National Railroad Passenger Corp </li></ul></ul></ul><ul><ul><ul><li>Reese Brothers </li></ul></ul></ul><ul><ul><ul><li>Honeywell International </li></ul></ul></ul><ul><ul><ul><li>America Online </li></ul></ul></ul><ul><ul><ul><li>Office Max </li></ul></ul></ul><ul><ul><ul><li>American Bankers </li></ul></ul></ul><ul><ul><li>Internet Tax Freedom Act </li></ul></ul><ul><ul><li>Gross receipts taxes </li></ul></ul><ul><ul><li>Sales and use taxes </li></ul></ul>Taxes, Fees, and Surcharges
  24. 24. Pending Review: Continuing Uncertainty for VoIP Service Providers (cont’d) <ul><li>Federal and State Surcharges </li></ul><ul><ul><li>NANPA, TRS, regulatory fees </li></ul></ul><ul><ul><li>LNP: BellSouth petition </li></ul></ul><ul><ul><li>911 fees - state legislation </li></ul></ul>Taxes, Fees, and Surcharges
  25. 25. Focus for 2006/2007 <ul><li>Follow the money </li></ul><ul><ul><li>Access charges </li></ul></ul><ul><ul><li>USF </li></ul></ul><ul><ul><li>Taxes - FET </li></ul></ul><ul><ul><li>Surcharges - 911 </li></ul></ul><ul><li>Federal/state jurisdictional tensions </li></ul><ul><ul><li>Consumer protection - privacy, E911 </li></ul></ul><ul><ul><li>Security </li></ul></ul>
  26. 26. <ul><li>Chérie R. Kiser </li></ul><ul><li>Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. </li></ul><ul><li>701 Pennsylvania Avenue, NW </li></ul><ul><li>Suite 900 </li></ul><ul><li>Washington, DC 20004 </li></ul><ul><li>Phone: 202-434-7325 </li></ul><ul><li>Cell: 202-329-6796 </li></ul><ul><li>E-mail: [email_address] </li></ul><ul><li>Web site: www.mintz.com </li></ul>

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