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    • 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
    • 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
    • Cable-Provided VoIP Services under the Current Legal and Regulatory Framework
      • Definitions dictate regulatory status and classification of providers and services
        • “Telecommunications” - an entity offering a simple, transparent transmission path, without the capability of providing enhanced functionality, offers telecommunications
        • “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
        • “Information Services” - the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing or making available information via telecommunications
    • Application of the Historical Definitions Approach Remains Murky for VoIP
      • Interstate IP-Enabled
        • Broadband connection from user’s location
        • A need for IP-compatible CPE
        • 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”)
      • Interconnected VoIP Service
        • Enables real-time, two-way voice communications;
        • Requires a broadband connection from the user’s location;
        • Requires IP-compatible CPE; and
        • Offering permits users generally to receive calls that originate on the PSTN and terminate calls to PSTN
    • Cable-Provided VoIP under the Current Legal and Regulatory Framework
      • In 1998, the FCC reviews application of definitions to VoIP
        • FCC stops short of finding that IP telephony is a telecom service
          • Offers tentative definition for phone-to-phone IP telephony
      • 2002 Cable Modem Ruling
        • FCC rules properly classified as interstate information service
        • 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
        • Supreme Court upholds FCC decision
    • 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They?
      • FCC finds Free World Dialup (FWD) to be an interstate information service
        • Concludes FWD is neither telecommunications nor a telecommunications service as those terms are defined by the Act
        • 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
        • Finds traditional end-to-end analysis
        • inapplicable in context of FWD
      February 2004 - Pulver Decision
    • 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d)
      • FCC finds AT&T’s “phone-to-phone” VoIP service to be a telecommunications service subject to access charges
      • AT&T’s service:
        • Uses ordinary CPE with no enhanced functionality
        • Originates and terminates on the PSTN
        • Undergoes no net protocol conversion and provides no enhanced functionality to end users due to provider’s use of IP technology
      • FCC finds end users do not receive service differently than traditional long distance service
      April 2004 - AT&T Petition for Declaratory Ruling Order
    • 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d)
      • FCC finds Vonage’s service is interstate and preempts the Minnesota PUC’s entry requirements
        • Ruling does not address information/telecom distinction
        • 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
      November 2004 - Vonage Order
    • 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d)
        • 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)
        • Ruling reiterates that applying the end-to-end analysis to Internet-based services is difficult, if not impossible
        • Sections 706 and 230 key components of review of policies for IP-enabled services
      • Order appealed by state regulatory commissions
      November 2004 - Vonage Order
    • 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d)
      • Interconnected VoIP service providers must provide E911 to subscribers by November 28, 2005
        • Consumers expect interconnected VoIP services will function like a “regular telephone”
        • Does not apply to IP-based services such as IM or Internet gaming
        • Obligation to promote “safety of life and property” and facilitate “a seamless, ubiquitous and reliable end-to-end infrastructure” for public safety
        • FCC has jurisdiction under 4(i) and 251(e)(3) of Act; 911 is not purely intrastate
        • No funding obligations imposed
      June 2005 - E911 VoIP Order
    • 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d)
        • No exemption from liability similar to that experienced by common carriers
        • Appeal pending before U.S. Court of Appeals for DC
        • 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
        • Waivers pending
        • Legislation
      June 2005 - E911 VoIP Order
    • 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d)
      • Requirements
        • Notification
        • Affirmative acknowledgment
        • Warning stickers or appropriate labels
        • Reporting
        • 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
        • Subscribers must be able to update registered location at will and in timely manner
      June 2005 - E911 VoIP Order
    • 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d)
      • CALEA applies to facilities based Broadband Internet access providers and providers of interconnected VoIP service
      • Telecommunications carriers under CALEA, but not under definition of “Telecommunications Services” under Communications Act
      August 2005 - CALEA Broadband Order
    • 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d)
      • “Substantial Replacement” for any part of the PSTN if:
        • Providing wire or electronic communication switching or transmission service;
        • Service is a replacement for a substantial portion of local telephone service = any significant part of the functionality previously provided by the PSTN; and
        • FCC must find “it is in public interest to deem . . . a person or entity to be a telecommunications carrier for purposes of
        • [CALEA].”
      • 18 months to comply
      • Federal court challenge
      August 2005 - CALEA Broadband Order
    • 2004/2005 FCC Rulings Provide Greater Regulatory Certainty -- Or Do They? (cont’d)
      • Wireline Broadband Internet access service provided over a provider’s own facilities is an information service
      • A single integrated service inextricably combines the offering of powerful computer capabilities with telecommunications
      • Owner of facilities irrelevant; “end product” delivered to user matters
      • Access and Computer Inquiry obligations eliminated
      • USF obligations continue to apply for 270 day period or until FCC adopts a new contribution rule
      September 2005 - Wireline Broadband Report and Order
    • Pending Review: Continuing Uncertainty for VoIP Service Providers
      • E911 Further NPRM
        • Techniques for automatic identification of geographic location of VoIP service users
        • Whether to extend obligation to all IP-based voice service providers regardless of broadband connection
        • Application to wireless VoIP service
        • Role of states and whether to address states’ ability to collect all fees
        • Whether to adopt any consumer privacy protections
    • Pending Review: Continuing Uncertainty for VoIP Service Providers (cont’d)
      • CALEA Outstanding NPRM Issues
        • Use of industry standards as safe harbors
        • Use of trusted third parties
        • Implementation timelines and the extension/waiver process
        • Allocation of costs for CALEA implementation
        • Enforcement of CALEA
      • CALEA FNPRM
        • Are there any types of “managed” VoIP services not included in definition of interconnected VoIP that should be included?
        • Should there be an exemption for small and rural broadband providers or educational or research institutions?
    • Pending Review: Continuing Uncertainty for VoIP Service Providers (cont’d)
      • Intercarrier compensation NPRM and FNPRM
        • Carriers should move to a unified regime for all intercarrier compensation payments
      • ISP remand order
        • 251(b) 5
        • 251(g)
        • Calls to ISPs consist of multiple communications and these communications often are interstate or international so entire call jurisdictionally interstate
        • Neither the path of communication nor the location of any intermediate switching point is relevant to the jurisdictional analysis
      Intercarrier Compensation
    • Pending Review: Continuing Uncertainty for VoIP Service Providers (cont’d)
      • SBC petition
        • Seeking declaratory ruling wholesale transmission provider using IP technology to transport long distance calls are liable for access charges
      • VarTec petition
        • It is not required to pay access charges when ESPs deliver calls directly to SBC or other LECs for termination
      Intercarrier Compensation
    • Pending Review: Continuing Uncertainty for VoIP Service Providers (cont’d)
      • Grande petition
        • 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
      • Frontier petition
        • Seeks ruling that entities that transport IP traffic must pay access charges
      Intercarrier Compensation
    • Pending Review: Continuing Uncertainty for VoIP Service Providers (cont’d)
      • FCC adopts NPRM to address legal and regulatory framework for IP-based services, including VoIP services
        • Seeks to categorize different IP-based services
          • Consumer perception
          • Interconnection with PSTN
        • Asks how each category should be classified
        • Asks what, if any, regulations should apply to each category
      • In conjunction with NPRM, FCC conducts “Solutions Summits” on public policy issues: CALEA, 911, disability access
      February 2004 - IP-Enabled NPRM
    • Pending Review: Continuing Uncertainty for VoIP Service Providers (cont’d)
      • Contributions to USF based on interstate and international telecommunications services
        • FCC imposes USF obligations on wireline broadband providers for 270 days or until it issues a decision (Wireline Broadband Order)
        • FCC notes “accelerating development of new technologies like ‘voice over Internet’ increases the strain on regulatory distinctions” (USF Recovery NPRM)
        • FCC reviewing application of USF obligations to VoIP service providers (IP-Enabled Services NPRM)
      Universal Service
    • Pending Review: Continuing Uncertainty for VoIP Service Providers (cont’d)
      • Taxes - Level of taxation generally depends on classification of service under tax law
        • Federal Excise Tax
          • Fortis
          • National Railroad Passenger Corp
          • Reese Brothers
          • Honeywell International
          • America Online
          • Office Max
          • American Bankers
        • Internet Tax Freedom Act
        • Gross receipts taxes
        • Sales and use taxes
      Taxes, Fees, and Surcharges
    • Pending Review: Continuing Uncertainty for VoIP Service Providers (cont’d)
      • Federal and State Surcharges
        • NANPA, TRS, regulatory fees
        • LNP: BellSouth petition
        • 911 fees - state legislation
      Taxes, Fees, and Surcharges
    • Focus for 2006/2007
      • Follow the money
        • Access charges
        • USF
        • Taxes - FET
        • Surcharges - 911
      • Federal/state jurisdictional tensions
        • Consumer protection - privacy, E911
        • Security
      • Chérie R. Kiser
      • Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
      • 701 Pennsylvania Avenue, NW
      • Suite 900
      • Washington, DC 20004
      • Phone: 202-434-7325
      • Cell: 202-329-6796
      • E-mail: [email_address]
      • Web site: www.mintz.com