FCC IP Transition Trials Raise Regulatory Challenges for States

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By Paul Barbagallo  


As the Federal Communications Commission prepares to oversee the transition of the nation's telephone networks to internet protocol technology, some state regulators are growing nervous about their ability to regulate what has been an essential public utility--phone service.

In lengthy comment letters filed with the FCC this week, state regulatory commissions in Massachusetts, Michigan, and Nebraska, among others, voiced strong concern that one of their primary tasks under the Communications Act of 1934, as amended--to ensure the interconnection between one phone network and another--could now be preempted.

Part of their uncertainty stems from the fact that the FCC has never classified VoIP (or voice-over-internet protocol) service. If the agency were to determine that VoIP service is a “telecommunications” service within the meaning of the Communications Act, then Sections 251 and 252 of the statute, which set forth interconnection obligations of “telecommunications carriers,” would likely apply. But if the commission were to decide that VoIP is an “information” service, just like broadband data service, then providers of VoIP could be free of regulation.

“The current lack of clarity as to the requirements of VoIP providers relative to consumers and other carriers continues to undermine consumer protections and encourage carriers to find loopholes to undercut their competitors,” wrote Shana Knutson, general counsel for the Nebraska Public Service Commission, in a July 8 letter to the commission. “Consumers must be informed as to the different level of protections, services, or potential reliability issues, in order to make informed decisions.”

Knutson's and others' comments came in response to a May public notice seeking comment on whether the FCC should allow phone companies to conduct limited, targeted trials in which voice services would be delivered entirely over fiber-optic, wireless, or internet protocol-based networks--rather than over traditional copper-wire networks.

Big carriers like AT&T Inc. and Verizon Communications Inc. have been pushing the commission to allow them to phase out their century-old networks of copper wires that wind their way through the country--and some of the “legacy” services offered over them--and start offering their customers fiber, wireless, and IP-based equivalents.

But the issue of interconnection has become a rallying cause for state regulatory commissions, many of which want the agency to continue to impose the same interconnection and arbitration obligations on AT&T and Verizon, even while they build newer, all-IP, networks.

AT&T and Verizon, conversely, prefer that the FCC refrain from regulating any interconnection between IP networks. As written, Section 251(a) requires only telecommunications carriers to interconnect directly or indirectly with “other telecommunications carriers.” The companies contend that providers of VoIP and other IP-enabled services are not telecommunications carriers, which means that Section 251(a) is inapplicable where both the calling and the called parties are communicating via VoIP or similar IP services. Similarly, Section 251(c) does not apply to IP-to-IP interconnection because information service providers have no interconnection rights under Subsection (c)(2), they contend.

However, some state commissions, like the Michigan Public Service Commission, believe that Sections 251 and 252 could apply “regardless of the technology used to interconnect carriers' networks.”

“Review and approval of these agreements by the state commissions would allow the states to more closely follow the process of the proposed trials … and provide neutral assistance for any issues or disputes arising with regard to these agreements,” wrote Anne Uitvlugt, assistant attorney general in the Public Service Division at the Michigan Public Service Commission, in a filing dated July 8. “Additionally, extension of these obligations under sections 251/252 for voice traffic would allow state commissions to arbitrate any disputes occurring during the process of negotiation.”

State Laws Pose Complications

In some states, lawmakers have advanced bills to block action by commissions to regulate VoIP services.

In Michigan, for example, the state legislature amended the state Telecommunications Act in 2011 to exclude interconnected VoIP from the list of services the Michigan Public Service Commission has authority over.

The PSC's Uitvlugt explained that even so, under the Michigan Telecommunications Act, any modification will not affect “the authority of a provider or the commission to act pursuant to or enforce [sections 251 and 252 of the Communications Act], any lawful and applicable tariff, or any state law, regulation, or order related to wholesale rights and obligations, including the rights and obligations of local exchange carriers to interconnect and exchange voice traffic.”

But for years, the issue has been one of concern for state commissions, some of which have actually tried to classify VoIP themselves against fierce lobbying from AT&T and Verizon.

Last September, California Gov. Jerry Brown (D) signed a bill to defer regulation of VoIP and IP-enabled services to the federal government unless expressly delegated to the state.

Other states are still mulling their options. The Massachusetts Department of Telecommunications and Cable is currently reviewing an IP interconnection agreement to determine whether it constitutes a “section 251 agreement” subject to the requirements of Section 252 of the Communications Act.

“The FCC should ensure the IP interconnection trials do not interfere with the department or any other state commission's ability to conduct such a proceeding, but rather should collect data and other information from such proceedings,” Geoffrey Why, the Massachusetts agency's commissioner, wrote in a filing dated July 5.

The New Jersey Division of Rate Counsel similarly raised concern that the FCC is proposing to conduct the trials outside the scope of Sections 251 and 252, asking phone companies to “negotiate in good faith without a backstop of regulations or specific parameters.”

“Simply because VoIP is a new technology does not alter the uneven 'negotiating' power of carriers,” Stefanie Brand, the division's director, wrote. “In order to facilitate diverse supply and multiple competitors, the FCC should apply the section 251/252 requirements to VoIP interconnection. Further, the FCC could vastly simplify regulatory uncertainty by finally classifying VoIP as a telecommunications service that it clearly is.”

The initial comments in response to the FCC's public notice were due July 8; replies are due Aug. 7.

For the filings, visit http://apps.fcc.gov/ecfs/proceeding/view?name=13-5.

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