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  • 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. 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. 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
  • 4. 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
  • 5. 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
  • 6. 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
  • 7. 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
  • 8. 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
  • 9. 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
  • 10. 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
  • 11. 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
  • 12. 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
  • 13. 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
  • 14. 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
  • 15. 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
  • 16. 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
  • 17. 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?
  • 18. 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
  • 19. 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
  • 20. 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
  • 21. 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
  • 22. 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
  • 23. 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
  • 24. 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
  • 25. Focus for 2006/2007
    • Follow the money
      • Access charges
      • USF
      • Taxes - FET
      • Surcharges - 911
    • Federal/state jurisdictional tensions
      • Consumer protection - privacy, E911
      • Security
  • 26.
    • 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