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Cybertelecom Federal Internet Law & Policy An Educational Project |
Notes: FCC Jurisdiction
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Notes: FCC Jurisdiction |
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- FCC - FCC Jurisdiction - - Ancillary Jurisdiction - Personal Jurisdiction - Admin Procedure Act |
Statutory Jurisdiction
"An agency construction of a statute cannot survive judicial review if a contested regulation reflects an action that exceeds the agency’s authority. It does not matter whether the unlawful action arises because the disputed regulation defies the plain language of a statute or because the agency’s construction is utterly unreasonable and thus impermissible. [Aid Ass’n for Lutherans v. United States Postal Serv., 321 F.3d 1166 (D.C. Cir. 2003)]
47 U.S.C. s 151: "For the purpose of regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all the people of the United States, without discrimination on the basis of race, color, religion, national origin, or sex, a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges, for the purpose of the national defense, for the purpose of promoting safety of life and property through the use of wire and radio communications, and for the purpose of securing a more effective execution of this policy by centralizing authority heretofore granted by law to several agencies and by granting additional authority with respect to interstate and foreign commerce in wire and radio communication, there is created a commission to be known as the "Federal Communications Commission", which shall be constituted as hereinafter provided, and which shall execute and enforce the provisions of this chapter."
La. Pub. Serv. Comm’n v. FCC, 476 U.S. 355, 374 (1986) The FCC, like other federal agencies, “literally has no power to act . . . unless and until Congress confers power upon it.”
Through the Communications Act of 1934, ch. 652, 48 Stat. 1064, as amended over the decades, 47 U.S.C. § 151 et seq., Congress has given the Commission express and expansive authority to regulate common carrier services, including landline telephony, id. § 201 et seq. (Title II of the Act); radio transmissions, including broadcast television, radio, and cellular telephony, id. § 301 et seq. (Title III); and "cable services," including cable television, id. § 521 et seq. (Title VI). -- Comcast v FCC, No. 08-1291, Slip. p 5 (DC Cir. April 6, 2010)
It is axiomatic that administrative agencies may issue regulations only pursuant to authority delegated to them by Congress. - ALA v. FCC, No. 04-1037, slip at 2 (DC Cir. May 6, 2005)
"The Communications Act of 1934 was “implemented for the purpose of consolidating federal authority over communications in a single agency to assure ‘an adequate communication system for this country.’” Motion Picture Ass’n of Am., Inc. v. FCC, 309 F.3d 796, 804 (D.C. Cir. 2002) (quoting S. REP. NO. 73-781, at 3 (1934)). Title I of the Act creates the Commission “[f]or the purpose of regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all the people of the United States . . . a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges.” 47 U.S.C. § 151. Title I further provides that the Commission “shall execute and enforce the provisions” of the Act, id., and states that the Act’s provisions “shall apply to all interstate and foreign communication by wire or radio,” id. § 152(a). "
"The FCC may act either pursuant to express statutory authority to promulgate regulations addressing a variety of designated issues involving communications, see, e.g., 47 U.S.C. § 303(f) (granting the Commission authority to prevent interference among radio and television broadcast stations), or pursuant to ancillary jurisdiction, see, e.g., 47 U.S.C. § 154(i) (“[t]he Commission may perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this chapter, as may be necessary in the execution of its functions”)." - ALA v. FCC, No. 04-1037, slip at 5 (DC Cir. May 6, 2005)
Michigan v. EPA, 268 F.3d 1075, 1081 (D.C. Cir. 2001). The Commission “has no constitutional or common law existence or authority, but only those authorities conferred upon it by Congress.”
17. It is clear, and needs no elaboration or lengthy discussion here, that the Communications Act of 1934 confers comprehensive powers upon the Commission to regulate the rendition for hire of interstate and foreign communications services by wire and radio and all persons engaged in such services. Congress in 1934 acted in a field that was demonstrably both new and dynamic, and it therefore gave the Commission a comprehensive mandate, with not niggardly but expansive powers. (U.S. v. Southwestern Cable Company, 392 U.S. 157, 173 (1968)). Communications by wire or radio is broadly defined in the Act to mean:
... (The) transmission of writing, signs, signals, pictures, and sounds of all kinds... between the points of origin and reception of such transmission, including all instrumentalities, facilities, apparatus, and services (among other things, the receipt, forwarding, and delivery of communications) incidental to such transmission. (47 U.S.C. s 153(a)(b).)
As the court pointed out in the Philadelphia Broadcasting Case:
Congress in passing the Communications Act of 1934 could not, of course, anticipate the variety and nature of methods of communication by wire or radio that would come into existence in the decades to come. In such a situation, the expert agency entrusted with administration of a dynamic industry is entitled to latitude in coping with new developments in that industry. (Philadelphia Television Broadcasting Company v. FCC, 359 F.2d 282, 284 (D.C. Cir. 1966.)
18. Thus, the Commission was given the power to exercise regulatory jurisdiction over communications facilities and services not in existence, or even anticipated, at the time the Communications Act of 1934 was enacted. On the other hand, we are not required to assert and exercise such jurisdiction merely because we might construe the activity as one which could be encompassed within the intent of the Communications Act of 1934. Instead, as the court in Philadelphia (supra) noted, as the expert agency we are 'entitled to latitude in coping with new developments' in the dynamic field of communications. Consequently, we are 'entitled to some leeway in choosing which jurisdictional base and which regulatory tools will be most effective in advancing the Congressional objective' -- the protection of the public interest. (Philadelphia, supra).
--In The Matter Of Regulatory And Policy Problems Presented By The Interdependence Of Computer And Communication Services And Facilities, Docket No. 16979, Tentative Decision, 28 FCC 291 (April 3, 1970)Interstate Telecommunications
- The Federal Communications Commission has exclusive jurisdiction over interstate telecommunications and over information services. When the FCC exercises interstate jurisdiction, it preempts state jurisdiction.
- Notable Internet examples:
- In 1980 Computer II rules that Enhanced Service Providers (such as Internet) were interstate and therefore outside state jurisdiction. This prevented states from licensing ISPs as communications services and prevented intrastate access fees imposed on Internet and computer services.
- VoIP services generally have been held to be interstate. Note that VoIP falls outside state jurisdiction either because (a) it is an enhanced service or (b) because it is an interstate telecom service. See Vonange v. Mn.
- States have jurisdiction over intrastate jurisdiction.
- At the start of the 20th Century, when these laws were being written and jurisdiction assigned, most telephone traffic was intrastate. Very little was long distance / interstate. That has evolved over the years. Today, with the advent of mobile telephone service and number porting, it can be extremely difficult to separate intrastate and interstate traffic - meaning the traffic is "mixed" and therefore interstate.
16. In the absence of a specific statutory provision regarding jurisdiction over services like DigitalVoice, we begin with section 2 of the Act.50 In 1934, Congress set up a dual regulatory regime for communications services.51 In section 2(a) of the Act, Congress has given the Commission exclusive jurisdiction over “all interstate and foreign communication” and “all persons engaged . . . in such communication.”52 Section 2(b) of the Act reserves to the states jurisdiction “with respect to intrastate communication service . . . of any carrier.”53
50See Bell Atl. Tel. Cos. v. FCC, 131 F.3d 1044 (D.C. Cir. 1997).
51See generally 47 U.S.C. § 152.
5247 U.S.C. § 152(a). Congress defined “interstate communication” as “communication or transmission . . . from any State, Territory, or possession of the United States. . . to any other State, Territory, or possession of the United States . . . but shall not . . . include wire or radio communication between points in the same State . . . through any place outside thereof, if such communication is regulated by a State commission.” 47 U.S.C. § 153(22).
5347 U.S.C. § 152(b). “[I]ntrastate communications” is not separately defined in the Act except to the extent it is described in the definition of “interstate communication” as a “wire or radio communication between points in the same State.” 47 U.S.C. § 153(22) (emphasis added). We note that section 2(b) reserves to the states only matters connected with “carriers,” which means “common carriers” or “telecommunications carriers” under sections 3(10) and 3(44) of the Act. 47 U.S.C. § 153(10), (44). Here, we do not determine whether Vonage is a “carrier”; however, our analysis with respect to section 2(b) assumes that it is. This assumption for purposes of this Order, however, in no way prejudges how the Commission may ultimately classify DigitalVoice.
Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an Order of the Minnesota Public Utilities Commission, WC Docket No. 03-211, Memorandum Opinion and Order (FCC Nov. 12, 2004 )
Analysis Interstate
Note: This analysis is relevant as to the jurisdiction of telecom services. If the service is an information service, then the Interstate analysis is not necessary; Information services fall under federal jurisdiction and would not fall under the jurisdiction of a state PUC.
17. In applying section 2 to specific services and facilities, the Commission has traditionally applied its so-called “end-to-end analysis” based on the physical end points of the communication.54 Under this analysis, the Commission considers the “continuous path of communications,” beginning with the end point at the inception of a communication to the end point at its completion, and has rejected attempts to divide communications at any intermediate points.55 Using an end-to-end approach, when the end points of a carrier’s service are within the boundaries of a single state the service is deemed a purely intrastate service, subject to state jurisdiction for determining appropriate regulations to govern such service.56 When a service’s end points are in different states or between a state and a point outside the United States , the service is deemed a purely interstate service subject to the Commission’s exclusive jurisdiction.57 Services that are capable of communications both between intrastate end points and between interstate end points are deemed to be “mixed-use” or “jurisdictionally mixed” services.58 Mixed-use services are generally subject to dual federal/state jurisdiction, except where it is impossible or impractical to separate the service’s intrastate from interstate components and the state regulation of the intrastate component interferes with valid federal rules or policies.59 In such circumstances, the Commission may exercise its authority to preempt inconsistent state regulations that thwart federal objectives, treating jurisdictionally mixed services as interstate with respect to the preempted regulations.60
54See, e.g.,Bell Atl. Tel. Cos. v. FCC, 206 F.3d 1, 3 (D.C. Cir. 2000); see infra para. 24 (addressing difficulties with an end-to-end approach for services involving the Internet).
55See, e.g.,Pulver, 19 FCC Rcd at 3320-21, para. 21.
56See 47 U.S.C. § 152(b)(1).
57 See 47 U.S.C. § 153(22).
58 See, e.g., MTS and WATS Market Structure Amendment of Part 67 of the Commission’s Rules and Establishment of a Joint Board , CC Docket Nos. 78-72, 80-286, Memorandum Opinion and Order on Reconsideration and Order Inviting Comments , 1 FCC Rcd 1287 (1987); Petition for Emergency Relief and Declaratory Ruling Filed by the BellSouth Corporation, Memorandum Opinion and Order, 7 FCC Rcd 1619, 1620, para. 7 (1992) (BellSouth MemoryCall); Southwestern Bell Tel. Co. v. FCC, 153 F.3d 523, 543 (8th Cir. 1998).
59SeeLouisiana Pub. Serv. Comm’n v. FCC, 476 U.S. 355, 368 (1986) (finding a basis for Commission preemption where compliance with both federal and state law is in effect physically impossible) (citing Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132 (1963)); BellSouth MemoryCall, 7 FCC Rcd at 1622-23, paras. 18-19.
60Indeed, the Eighth Circuit has recently noted the Commission’s authority to preempt in the area of jurisdictionally mixed special access services. SeeQwest Corp. v. Minnesota Pub. Utils. Comm’n, 380 F.3d 367, 374 (8th Cir. 2004) (finding that, with respect to special access services, the Commission “certainly has the wherewithal to preempt state regulation in this area if it so desires”) (emphasis added).
Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an Order of the Minnesota Public Utilities Commission, WC Docket No. 03-211, Memorandum Opinion and Order (FCC Nov. 12, 2004)
Analysis End to End
Compare Internet End-to-End Design
"In the GTE DSL Order, we found that the jurisdictional nature of communications traditionally is determined by the end points of the communication and not points of intermediate switching or exchanges between carriers. ---In Re GTE Telephone Operators GTOC Tariff No. 1 GTE Transmittal No. 1148, Memorandum Opinion And Order, CC Docket No. 98-79 ¶ 3 (February 26, 1999).
10. As many incumbent LECs properly note,[25] the Commission traditionally has determined the jurisdictional nature of communications by the end points of the communication and consistently has rejected attempts to divide communications at any intermediate points of switching or exchanges between carriers. In BellSouth MemoryCall, for example, the Commission considered the jurisdictional nature of traffic that consisted of an incoming interstate transmission (call) to the switch serving a voice mail subscriber and an intrastate transmission of that message from that switch to the voice mail apparatus.[26] The Commission determined that the entire transmission constituted one interstate call, because "there is a continuous path of communications across state lines between the caller and the voice mail service."[27] The Commission's jurisdictional determination did not turn on the common carrier status of either the provider or the services at issue;[28] BellSouth MemoryCall is not, therefore, distinguishable on the grounds that ISPs are not common carriers.
11. Similarly, in Teleconnect, the Bureau examined whether a call using Teleconnect's "All-Call America" (ACA) service, a nationwide 800 travel service that uses AT&T's Megacom 800 service, is a single, end-to-end call.[29] Generally, an ACA call is initiated by an end user from a common line open end; the call is routed through a LEC to an AT&T Megacom line, and is then transferred from AT&T to Teleconnect by another LEC.[30] At that point, Teleconnect routes the call through the LEC to the end user being called.[31] The Bureau rejected the argument that the (ACA) 800 call used to connect to an interexchange carrier's (IXC) switch was a separate and distinct call from the call that was placed from that switch.[32] The Commission affirmed, noting that "both court and Commission decisions have considered the end-to-end nature of the communications more significant than the facilities used to complete such communications. According to these precedents, we regulate an interstate wire communications under the Communications Act from its inception to its completion."[33] The Commission concluded that "an interstate communication does not end at an intermediate switch. . . . The interstate communication itself extends from the inception of a call to its completion, regardless of any intermediate facilities."[34] In addition, in Southwestern Bell Telephone Company, the Commission rejected the argument that "a credit card call should be treated for jurisdictional purposes as two calls: one from the card user to the interexchange carrier's switch, and another from the switch to the called party" and concluded that "switching at the credit card switch is an intermediate step in a single end-to-end communication."[35]
[fn25] See, e.g., Ameritech Comments at 13; BellSouth Reply at 4-6; SBC Reply at 5; USTA Comments at 5-6.
[fn26] Petition for Emergency Relief and Declaratory Ruling Filed by BellSouth Corporation, 7 FCC Rcd 1619 (1992) (BellSouth MemoryCall).
[fn27] Id. at 1620.
[fn28] Id. at 1621-22. Indeed, the Commission expressly noted that, although BellSouth's "voice mail service is an enhanced service, that fact does not limit our authority to preempt." Id. at 1622 n.44.
[fn29] Teleconnect Co. v. Bell Telephone Co. of Penn., E-88-83, 10 FCC Rcd 1626 (1995) (Teleconnect), aff'd sub nom. Southwestern Bell Tel. Co. v. FCC, 116 F.3d 593 (D.C. Cir. 1997).
[fn30] Id. at 1627.
[fn31] Id. at 1627-28.
[fn32] Id. at 1626.
[fn33] Id. at 1629 (citing NARUC v. FCC, 746 F.2d 1492, 1498 (D.C. Cir. 1984) (concluding that a physically intrastate in-WATS line, used to terminate an end-to-end interstate communication, is an interstate facility subject to Commission regulation)). See also United States v. AT&T, 57 F. Supp. 451, 454 (S.D.N.Y. 1944) (the Act contemplates the regulation of interstate wire communication from its inception to its completion), aff'd sub nom. Hotel Astor v. United States, 325 U.S. 837 (1945); New York Telephone Co., 76 FCC 2d 349, 352-53 (1980) (physically intrastate foreign exchange facilities used to carry interconnected interstate traffic are subject to federal jurisdiction).
[fn34] Teleconnect, 10 FCC Rcd at 1629.
[fn35] In the Matter of Southwestern Bell Tel. Co., CC Docket No. 88-180, Order Designating Issues for Investigation, 3 FCC Rcd 2339, 2341 (1988) (Southwestern Bell Tel. Co.).
--In Re Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, Inter-Carrier Compensation for ISP-Bound Traffic, CC Docket No. 96-98, CC Docket No. 99-68, Declaratory Ruling (February 26, 1999)
17. As many commenters note, the Commission traditionally has determined the jurisdictional nature of communications by the end points of the communication and consistently has rejected attempts to divide communications at any intermediate points of switching or exchanges between carriers. In BellSouth MemoryCall, for example, the Commission considered the jurisdictional nature of traffic that consisted of an incoming interstate transmission (call) to the switch serving a voice mail subscriber and an intrastate transmission of that message from that switch to the voice mail apparatus. The Commission determined that the entire transmission constituted one interstate call, because "there is a continuous path of communications across state lines between the caller and the voice mail service."
18. Similarly, in Teleconnect, the Bureau examined whether a call using Teleconnect's "All-Call America" (ACA) service, a nationwide 800 travel service that uses AT&T's Megacom 800 service, is a single, end-to-end call. Generally, an ACA call is initiated by an end user from a common line open end; the call is routed through a LEC to an AT&T Megacom line, and is then transferred from AT&T to Teleconnect by another LEC. At that point, Teleconnect routes the call through the LEC to the end user being called. The Bureau rejected the argument that the (ACA) 800 call used to connect to an interexchange carrier's (IXC's) switch was a separate and distinct call from the call that was placed from that switch. The Commission affirmed, noting that "both court and Commission decisions have considered the end-to-end nature of the communications more significant than the facilities used to complete such communications. According to these precedents, we regulate an interstate wire communication under the Communications Act from its inception to its completion." The Commission concluded that "an interstate communication does not end at an intermediate switch. . . . The interstate communication itself extends from the inception of a call to its completion, regardless of any intermediate facilities." In addition, in Southwestern Bell Telephone Company, the Commission rejected the argument that "a credit card call should be treated for jurisdictional purposes as two calls: one from the card user to the interexchange carrier's switch, and another from the switch to the called party" and concluded that "switching at the credit card switch is an intermediate step in a single end-to-end communication."
19. Consistent with these precedents, we conclude that the communications at issue here do not terminate at the ISP's local server, as some competitive LECs and ISPs contend, but continue to the ultimate destination or destinations, very often at a distant Internet website accessed by the end user. The fact that the facilities and apparatus used for GTE's ADSL service offering may be located within a single state does not affect our jurisdiction. As the Commission stated in BellSouth Memory Call, "this Commission has jurisdiction over, and regulates charges for, the local network when it is used in conjunction with the origination and termination of interstate calls." Indeed, in the vast majority of cases, the facilities that incumbent LECs use to provide interstate access are located entirely within one state.
-- In Re GTE Telephone Operators GTOC Tariff No. 1 GTE Transmittal No. 1148, Memorandum Opinion And Order, CC Docket No. 98-79 (October 30, 1999), recon. denied (February 26, 1999).
End to End Analysis :: Internet
NOTE: Internet applications and services have been ruled to be enhanced services / information services. Enhanced services have been found to be interstate and outside the jurisdiction of state telecom authority. Thus, if a service is found to be an enhanced service, it is therefore interstate, and therefore jurisdiction falls on the FCC and not the states.
In Re Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, Inter-Carrier Compensation for ISP-Bound Traffic, CC Docket No. 96-98, CC Docket No. 99-68, Declaratory Ruling ¶ 13 (February 26, 1999)
5. Although the Commission has recognized that enhanced service providers (ESPs), including ISPs, use interstate access services,[9] since 1983 it has exempted ESPs from the payment of certain interstate access charges.[10]
[fn9]See, e.g., MTS and WATS Market Structure, CC Docket No. 78-72, Memorandum Opinion and Order, 97 FCC 2d 682, 711 (1983) (MTS/WATS Market Structure Order) ("[a]mong the variety of users of access service are . . . enhanced service providers"); Amendments of Part 69 of the Commission's Rules Relating to Enhanced Service Providers, CC Docket No. 87-215, Order, 3 FCC Rcd 2631 (1988) (ESP Exemption Order) (referring to "certain classes of exchange access users, including enhanced service providers"); Amendments of Part 69 of the Commission's Rules Relating to Enhanced Service Providers, CC Docket No. 87-215, Order, 2 FCC Rcd 4305, 4306 (1987) (ESPs, "like facilities-based interexchange carriers and resellers, use the local network to provide interstate services"); Access Charge Reform Order, 12 FCC Rcd at 16131-32 (information service providers "may use incumbent LEC facilities to originate and terminate interstate calls").
[fn10] The exemption was adopted at the inception of the interstate access charge regime to protect certain users of access services, such as ESPs, that had been paying the generally much lower business service rates from the rate shock that would result from immediate imposition of carrier access charges. See MTS/WATS Market Structure Order, 97 FCC 2d at 715.
7. In general, an originating LEC end user's call to an ISP served by another LEC is carried (1) by the originating LEC from the end user to the point of interconnection (POI) with the LEC serving the ISP; (2) by the LEC serving the ISP from the LEC-LEC POI to the ISP's local server; and (3) from the ISP's local server to a computer that the originating LEC end user desires to reach via the Internet. If these calls terminate at the ISP's local server (where another (packet-switched) "call" begins), as many CLECs contend, then they are intrastate calls, and LECs serving ISPs are entitled to reciprocal compensation for the "transport and termination" of this traffic. If, however, these calls do not terminate locally, incumbent LECs argue, then LECs serving ISPs are not entitled to reciprocal compensation under section 251(b)(5).
12. Consistent with these precedents,[36] we conclude, as explained further below, that the communications at issue here do not terminate at the ISP's local server, as CLECs and ISPs contend,[37] but continue to the ultimate destination or destinations, specifically at a Internet website that is often located in another state.[38]
[fn36] Although the cited cases involve interexchange carriers rather than ISPs, and the Commission has observed that "it is not clear that ISPs use the public switched network in a manner analogous to IXCs," Access Charge Reform Order, 12 FCC Rcd at 16133, the Commission's observation does not affect the jurisdictional analysis.
[fn37] See, e.g., ACSI Comments at 5; Adelphia, et al., Comments at 12-13; ALTS Letter at 6-7; Cox Comments at 5.
[fn38] This conclusion is fully consistent with BellSouth MemoryCall. Although MCI WorldCom relies on BellSouth MemoryCall to support its argument that the ISP is the relevant endpoint for purposes of the jurisdictional analysis (see Letter from Richard S. Whitt, Director -- Federal Affairs/Counsel, MCI WorldCom, Inc., to Magalie R. Salas, Secretary, FCC (October 2, 1998)), there, as here, the Commission analyzed the communication from its inception to the "transmission's ultimate destination." BellSouth Memory Call, 7 FCC Rcd at 1621.
13. We disagree with those commenters that argue that, for jurisdictional purposes, ISP-bound traffic must be separated into two components: an intrastate telecommunications service, provided in this instance by one or more LECs, and an interstate information service, provided by the ISP.[42] As discussed above, the Commission analyzes the totality of the communication when determining the jurisdictional nature of a communication.[43]
[fn42] See, e.g., RCN Comments at 6; TCG Comments at 4-5; WorldCom Comments at 8-9.
[fn43] See United States v. AT&T, 57 F. Supp. 451, 453-55 (S.D.N.Y. 1944), aff'd, 325 U.S. 837 (1945).
18. The jurisdictional analysis is less straightforward for the packet-switched network environment of the Internet.[68] An Internet communication does not necessarily have a point of "termination" in the traditional sense. An Internet user typically communicates with more than one destination point during a single Internet call, or "session," and may do so either sequentially or simultaneously. In a single Internet communication, an Internet user may, for example, access websites that reside on servers in various states or foreign countries, communicate directly with another Internet user, or chat on-line with a group of Internet users located in the same local exchange or in another country.[69] Further complicating the matter of identifying the geographical destinations of Internet traffic is that the contents of popular websites increasingly are being stored in multiple servers throughout the Internet, based on "caching" or website "mirroring" techniques.[70] ...Having concluded that the jurisdictional nature of ISP-bound traffic is determined by the nature of the end-to-end transmission between an end user and the Internet, we now must determine whether that transmission constitutes interstate telecommunications.
[fn68] See, e.g., Kevin Werbach, Digital Tornado: The Internet and Telecommunications Policy, OPP Working Paper No. 29, at 45 (Mar. 1997) (Digital Tornado).
[fn69] See, e.g., Digital Tornado at 45. See also Adelphia, et al., Reply at 11 n.21.
[fn70] See, e.g., MCI WorldCom Ex Parte at 7.
"In the GTE DSL Order, we found that the jurisdictional nature of communications traditionally is determined by the end points of the communication and not points of intermediate switching or exchanges between carriers.[4] We rejected the argument that, for jurisdictional purposes, an end-to-end ADSL communication must be separated into two components: an intrastate telecommunications service, provided in this instance by GTE, and an interstate information service, provided by the ISP.[5] We emphasized that the Commission's decision to treat ISPs as end users for access charge purposes does not affect the nature of the end-to-end communication or the Commission's jurisdiction over such traffic.[6] Accordingly, we concluded that ISP traffic must be analyzed as a continuous transmission from the end user to a distant Internet website."
[4] GTE DSL Order at && 17-19.
[5] GTE DSL Order at & 20.
[6] GTE DSL Order at & 21.
---In Re GTE Telephone Operators GTOC Tariff No. 1 GTE Transmittal No. 1148, Memorandum Opinion And Order, CC Docket No. 98-79 ¶ 3 (February 26, 1999).
Reciprocal Compensation :: Interstate but treated local
Switched network telephone calls to Internet service providers are inherently interstate, which is the decision most consistent with our prior creation of an ESP exemption from interstate access charges -- and with the interstate and international nature of the Internet. But to say this is not to overrule, undermine, or prevent state commission decisions that construe interconnection agreements to require reciprocal compensation for ISP-bound traffic. It was, and remains, reasonable for the states (and federal district courts) to so rule, given our prior decisions -- and the practices of the ILECs themselves -- to treat this traffic as local.
-- In Re Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, Inter-Carrier Compensation for ISP-Bound Traffic, CC Docket No. 96-98, CC Docket No. 99-68, Declaratory Ruling, Sep Statement of Commissioner Ness (February 26, 1999)
As we stated previously, the Commission currently has no rule addressing the specific issue of inter-carrier compensation for ISP-bound traffic. In the absence of a federal rule, state commissions that have had to fulfill their statutory obligation under section 252 to resolve interconnection disputes between incumbent LECs and CLECs have had no choice but to establish an inter-carrier compensation mechanism and to decide whether and under what circumstances to require the payment of reciprocal compensation. Although reciprocal compensation is mandated under section 251(b)(5) only for the transport and termination of local traffic, neither the statute nor our rules prohibit a state commission from concluding in an arbitration that reciprocal compensation is appropriate in certain instances not addressed by section 251(b)(5), so long as there is no conflict with governing federal law. A state commission's decision to impose reciprocal compensation obligations in an arbitration proceeding -- or a subsequent state commission decision that those obligations encompass ISP-bound traffic -- does not conflict with any Commission rule regarding ISP-bound traffic. By the same token, in the absence of governing federal law, state commissions also are free not to require the payment of reciprocal compensation for this traffic and to adopt another compensation mechanism.
27. State commissions considering what effect, if any, this Declaratory Ruling has on their decisions as to whether reciprocal compensation provisions of interconnection agreements apply to ISP-bound traffic might conclude, depending on the bases of those decisions, that it is not necessary to re-visit those determinations. We recognize that our conclusion that ISP-bound traffic is largely interstate might cause some state commissions to re-examine their conclusion that reciprocal compensation is due to the extent that those conclusions are based on a finding that this traffic terminates at an ISP server, but nothing in this Declaratory Ruling precludes state commissions from determining, pursuant to contractual principles or other legal or equitable considerations, that reciprocal compensation is an appropriate interim inter-carrier compensation rule pending completion of the rulemaking we initiate below.
-- In Re Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, Inter-Carrier Compensation for ISP-Bound Traffic, CC Docket No. 96-98, CC Docket No. 99-68, Declaratory Ruling ¶ 26 (February 26, 1999)
The Commission has no rule governing inter-carrier compensation for ISP-bound traffic. -- --In Re Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, Inter-Carrier Compensation for ISP-Bound Traffic, CC Docket No. 96-98, CC Docket No. 99-68, Declaratory Ruling ¶ 9 (February 26, 1999)
In order to determine what compensation is due when two carriers collaborate to deliver a call to an ISP, we must determine as a threshold matter whether this is interstate or intrastate traffic. Generally speaking, when a call is completed by two (or more) interconnecting carriers, the carriers are compensated for carrying that traffic through either reciprocal compensation or access charges. When two carriers jointly provide interstate access (e.g., by delivering a call to an interexchange carrier (IXC)), the carriers will share access revenues received from the interstate service provider. Conversely, when two carriers collaborate to complete a local call, the originating carrier is compensated by its end user and the terminating carrier is entitled to reciprocal compensation pursuant to section 251(b)(5) of the Act. Until now, however, it has been unclear whether or how the access charge regime or reciprocal compensation applies when two interconnecting carriers deliver traffic to an ISP. As explained above, under the ESP exemption, LECs may not impose access charges on ISPs; therefore, there are no access revenues for interconnecting carriers to share. Moreover, the Commission has directed states to treat ISP traffic as if it were local, by permitting ISPs to purchase their PSTN links through local business tariffs. As a result, and because the Commission had not addressed inter-carrier compensation under these circumstances, parties negotiating interconnection agreements and the state commissions charged with interpreting them were left to determine as a matter of first impression how interconnecting carriers should be compensated for delivering traffic to ISPs, leading to the present dispute.-- --In Re Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, Inter-Carrier Compensation for ISP-Bound Traffic, CC Docket No. 96-98, CC Docket No. 99-68, Declaratory Ruling ¶ 7 (February 26, 1999)
End to End Analysis :: DSL
"In this Order, we conclude our investigation of a new access offering filed by GTE that GTE calls its DSL Solutions-ADSL Service ("ADSL service"). We find that this offering, which permits Internet Service Providers (ISPs) to provide their end user customers with high-speed access to the Internet, is an interstate service and is properly tariffed at the federal level." -- In Re GTE Telephone Operators GTOC Tariff No. 1 GTE Transmittal No. 1148, Memorandum Opinion And Order, CC Docket No. 98-79 ¶ 20 (October 30, 1998), recon. denied (February 26, 1999).
"We reiterate, however, that in some circumstances, ADSL services may be appropriately tariffed as intrastate services.[22] For example, GTE may tariff an ADSL service with the states so that those customers whose Internet use is 10 percent or less interstate may purchase the service out of state tariffs and those customers whose Internet use is more than 10 percent interstate may purchase the service out of the federal tariff."
[22] GTE DSL Order at & 27.
-- In Re GTE Telephone Operators GTOC Tariff No. 1 GTE Transmittal No. 1148, Memorandum Opinion And Order, CC Docket No. 98-79 ¶ 8 (February 26, 1999).
Mixed in Nature
"Taking the factors out of order, the primary issue in this appeal is the district court's application of the third Dataphase factor, i.e., probability of success on the merits. The district court concluded the FCC had preempted all state regulation of nomadic interconnected VoIP service providers under § 152(b)'s impossibility exception. Under the impossibility exception, the FCC may preempt all state regulation of services which would otherwise be subject to dual control if it is impossible or impractical to separate the service's interstate and intrastate components, and the state regulation interferes with valid federal rules or policies. See Minn. Pub. Utils. Comm'n, 483 F.3d at 576. The district court found no evidence showing Vonage's nomadic interconnected VoIP services could be separated into interstate and intrastate components. Further, relying on Minn. Pub. Utils. Comm'n, the district court concluded the Vonage Preemption Order categorically preempted all state attempts to impose regulations on nomadic interconnected VoIP services.
"The NPSC argues the Vonage Preemption Order only preempts "traditional telephone company" regulations, and in applying it to the NUSF the district court interpreted it too broadly. It contends the scope of the order must be limited to the type of regulation Minnesota was seeking to impose, i.e., provision of 911 services. According to the NPSC, the type of regulation at issue in Minn. Pub. Utils. Comm'n, acted as a barrier to entry into the market and clearly conflicted with federal regulations prohibiting states from imposing entry conditions. Conversely, it contends the NUSF is the state counterpart to a complimentary federal regulation - Nebraska seeks to collect a fee on intrastate service while the FCC regulation only reaches interstate service.
"Vonage contends the language of the Vonage Preemption Order clearly states the FCC intended to preempt all state regulation of nomadic interconnected VoIP service providers. It concedes the FCC could implement a universal service fund surcharge on both interstate and intrastate VoIP traffic, but argues only the FCC has the authority to impose such an obligation. Further, it contends the potential for conflict and overlap between various states attempting to implement similar regulations will thwart federal objectives.
"The Vonage Preemption Order provides:
In this [Order], we preempt an order of the Minnesota Public Utilities Commission . . . applying its traditional "telephone company" regulations to Vonage's DigitalVoice service, which provides voice over Internet protocol (VoIP) service and other communications capabilities. We conclude that DigitalVoice cannot be separated into interstate and intrastate communications for compliance with Minnesota's requirements without negating valid federal policies and rules. In so doing, we add to the regulatory certainty we began building with other orders adopted this year regarding VoIP . . . by making clear that this Commission, not the state commissions, has the responsibility and obligation to decide whether certain regulations apply to DigitalVoice and other IP-enabled services having the same capabilities. For such services, comparable regulations of other states must likewise yield to important federal objectives.
"19 FCC Rcd at 22404-05 (emphasis added).
"In Minn. Pub. Utils. Comm'n, we interpreted the Vonage Preemption order, holding: "The impossibility exception, if applicable, is dispositive of . . . whether the FCC has authority to preempt state regulation of VoIP services." 483 F.3d at 578. We concluded, as did the FCC, that VoIP services cannot be separated into interstate and intrastate usage. Id. at 578-79. We find nothing in the NPSC's arguments here to alter our earlier conclusion. Because Vonage's nomadic interconnected VoIP service cannot be separated into interstate and intrastate usage, the impossibility exception is determinative.
"The impossibility exception further requires a finding the state regulation interferes with valid federal rules or policies. The NPSC argues the NUSF does not interfere with the USF because it only applies to the percentage of usage not encompassed within the FCC's safe harbor provision, i.e., 35.1 percent. Thus, according to the NPSC, the NUSF is consonant with federal regulations.
"The district court's rejection of the NPSC's argument was not an abuse of discretion. The Preemption Order states:
In [preempting Minnesota's regulation] . . ., we add to the regulatory certainty we began building with other orders adopted this year regarding VoIP . . . by making clear that this Commission, not the state commissions, has the responsibility and obligation to decide whether certain regulations apply to DigitalVoice and other IP-enabled services having the same capabilities.
(Emphasis added).
A reasonable interpretation of this language is the FCC has determined, given the impossibility of distinguishing between interstate and intrastate nomadic interconnected VoIP usage, it must have sole regulatory control. Thus, while a universal service fund surcharge could be assessed for intrastate VoIP services, the FCC has made clear it, and not state commissions, has the responsibility to decide if such regulations will be applied.
Additionally, the NPSC's arguments fail to address the conflict which would arise if states adopted conflicting methods or proxies for determining which VoIP customers are subject to their respective universal service fund surcharges. As noted, a customer's billing address need not correspond to the area code affixed to the customer's telephone number. For example, a customer with a Nebraska billing address may be issued a telephone number with a Missouri area code. Under the NUSF, 35.1 percent of the customer's nomadic interconnected VoIP usage will be subject to a surcharge because Nebraska has chosen billing address as a proxy for where the usage occurred. Assume Missouri also adopts a universal service fund surcharge but chooses area code as its proxy for where usage occurs. The customer will be subject to duplicative surcharges in Nebraska and Missouri. This potential for conflict between state regulations militates in favor of finding preemption.
- Vonage v Nebraska PSC, No. 08-1764, Slip at 6 - 9 (8th Cir. May 1, 2009)
Third, Vonage claims that the impossibility doctrine and the FCC's mixed use rule preempt state regulation of VoIP services such as those provided by Vonage. The impossibility doctrine holds that state jurisdiction over intrastate communications is preserved unless it is impossible to separate the interstate and intrastate aspects of a service, and state regulation would negate the FCC’s lawful exercise of its authority over interstate communications.28 The FCC has the burden of showing that its rules preempt only state rules that actually interfere with its goals.29 It has made no such declaration. Moreover, Vonage's claim that it is technically impossible to separate intrastate and interstate regulation of its services is incorrect. The company's "Unlimited Local Plan"30 allows customers unlimited local and regional calling and up to 500 minutes of long distance calls. By implementing this plan, the company has shown that it can distinguish local calls from long distance calls. Consequently, it is not impossible to separate intrastate and interstate calls.
The FCC's mixed use rule also does not apply to Vonage. The FCC established the mixed use rule as a way to establish the appropriate jurisdiction over special access lines where it was impractical to determine the jurisdictional status of the traffic.31 It was not used by the FCC for any purpose other than allocating special access jurisdiction32 and, therefore, is inapposite to Vonage's service.
-- Complaint of Frontier Telephone of Rochester, Inc. Against Vonage Holdings Corporation Concerning Provision of Local Exchange and InterExchange Telephone Service in New York State in Violation of the Public Service Law, CASE 03-C-1285, Order Establishing Balanced Regulatory Framework for Vonage Holding Corporation, p. 11-15 (May 21, 2004)
18. Thus, our threshold determination must be whether DigitalVoice is purely intrastate (subject only to state jurisdiction) or jurisdictionally mixed (subject also to federal jurisdiction). The nature of DigitalVoice precludes any suggestion that the service could be characterized as a purely intrastate service.61 As Vonage has indicated, it has over 275,000 subscribers located throughout the United States, each with the ability to communicate with anyone in the world from anywhere in the world.62 While DigitalVoice clearly enables intrastate communications, it also enables interstate communications. It is therefore a jurisdictionally mixed service,63 and this Commission has exclusive jurisdiction under the Act to determine the policies and rules, if any, that govern the interstate aspect of DigitalVoice service.6461We need not address in this Order the case of purely intrastate service, which is not the service we have before us in this petition.
62See Vonage Oct. 1 Ex Parte Letter at 2 (explaining that its subscribers have billing addresses in each of the 50 states, the District of Columbia and throughout Canada, that its subscribers regularly use the service from countries outside North America, including “Argentina, Australia . . . and the United Kingdom,” and that customers have used the service “from virtually every inhabitable continent in the world”).
63We analyze DigitalVoice for purposes of preemption as a jurisdictionally mixed service due to its recognized capability to enable communications to occur not only between different states but within a particular state. This notwithstanding, it is possible that the Commission may find, in the context of the IP-Enabled Services Proceeding, that this type of service simply has no intrastate component.
64SeeLouisiana Pub. Serv. Comm'n, 476 U.S. at 360 (explaining how the Act would seem to divide the world of domestic telephone service into two hemispheres – one comprised of interstate service, over which the Commission has “plenary authority”); see also Ivy Broad. Co. v. American Tel. & Tel. Co., 391 F.2d 486, 490 (2d Cir. 1968) (“The Supreme Court has held that the establishment of this broad scheme for the regulation of interstate service by communications carriers indicates an intent on the part of Congress to occupy the field to the exclusion of state law.”).
Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an Order of the Minnesota Public Utilities Commission, WC Docket No. 03-211, Memorandum Opinion and Order (FCC Nov. 12, 2004 )
After reviewing the record, we conclude that, although some Internet traffic is intrastate, a substantial portion of Internet traffic involves accessing interstate or foreign websites.[71]
[fn71] See, e.g., Adelphia, et al., Comments at 22; Letter from Edward D. Young, Senior Vice President & Deputy General Counsel for Bell Atlantic, and Thomas J. Tauke, Senior Vice President -- Government Relations for Bell Atlantic, to Hon. William E. Kennard, Chairman, FCC (July 1, 1998) at Att. 2; Compuserve Comments at 4; Letter from B. Jeannie Fry, Director of Federal Regulatory Affairs, SBC Communications, Inc., to Magalie R. Salas, Secretary, FCC (May 13, 1998) Att. at 7; WorldCom Reply at 8-9.
--In Re Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, Inter-Carrier Compensation for ISP-Bound Traffic, CC Docket No. 96-98, CC Docket No. 99-68, Declaratory Ruling ¶ 18 (February 26, 1999)
22. Having concluded that the jurisdictional treatment of GTE's ADSL service offering is determined by the nature of the end-to-end transmission between an end user and the Internet website accessed by the end user, we now must decide whether that transmission does in fact constitute an interstate telecommunication. Generally, a call that originates and terminates in a single state is jurisdictionally intrastate, and a call that originates in one state and terminates in a different state (or country) is jurisdictionally interstate. An Internet communication does not necessarily have a point of "termination" in the traditional sense. In a single Internet communication, an Internet user may, for example, access websites that reside on servers in various state or foreign countries, communicate directly with another Internet user, or chat on-line with a group of Internet users located in the same local exchange or in another country, and may do so either sequentially or simultaneously. Accordingly, we recognize that some of the ISP traffic carried by GTE's ADSL service may be destined for intrastate or even local Internet websites or databases.
23. GTE argues that its ADSL service is properly tariffed at the federal level on the ground that it similar to existing special access services that are subject to federal regulation under the mixed-use facilities rule because more than ten percent of the traffic is interstate. The mixed-use facilities rule was introduced in a 1989 proceeding involving the re-examination of the separations treatment of "mixed-use" special access lines. Specifically, in the MTS/WATS Market Structure Order, the Commission adopted the Joint Board's recommendation that "mixed-use" special access lines (i.e., lines carrying both intrastate and interstate traffic) are subject to the Commission's jurisdiction where it is not possible to separate the uses of the special access lines by jurisdiction. The Commission found that special access lines carrying more than de minimis amounts of interstate traffic to private line systems should be assigned to the interstate jurisdiction. Interstate traffic is deemed de minimis when it amounts to ten percent or less of the total traffic on a special access line.
24. GTE contends that its ADSL service is similar to special access lines currently subject to federal regulation under the mixed-use facilities rule, and, thus, its ADSL service should be similarly regulated at the federal level. Section 69.2 of the Commission's rules defines "access service" as including "services and facilities provided for the origination or termination of any interstate or foreign telecommunication." There are two categories of access service: switched and special. Switched access services share the local switch to route originating and terminating interstate toll calls. Special access services, by contrast, generally provide a dedicated path between an end user and an IXC's point of presence. The special access category includes a wide variety of facilities and services, such as wideband data, video, and program audio services.
25. We agree that GTE's ADSL service is a special access service, thus warranting federal regulation under the "ten percent" rule. Like the point-to-point private line service high volume telephony customers purchase for direct access to IXCs' networks, GTE's ADSL service provides end users with a direct access to their selected ISPs, over a connection that is dedicated to ISP access. This dedicated access enables end users to avoid the problems associated with circuit-switched, dial-up access, such as long holding times and inability to connect to the Internet due to network congestion. The ADSL service also is similar to traditional private line services in that both services may carry interstate and intrastate traffic, and both services provide direct access from an end user to a service provider's (ISP or IXC) point of presence.
-- In Re GTE Telephone Operators GTOC Tariff No. 1 GTE Transmittal No. 1148, Memorandum Opinion And Order, CC Docket No. 98-79 (October 30, 1999), recon. denied (February 26, 1999) (footnotes omitted).
GeoLocation
With traditional circuit-switched telephone communications, the end-to-end geographic locations of landline-to-landline telephone communications are known, and the interstate or intrastate nature of the calls is readily determinable. VoIP-to-VoIP communications originate and terminate at IP addresses and are tied to no identifiable geographic location. In VoIP-to-landline or landline-to-VoIP communications, known as "interconnected VoIP service," the geographic location of the landline part of the call can be determined, but the geographic location of the VoIP part of the call can be anywhere the VoIP customer obtains broadband access to the Internet. Thus, the interstate or intrastate nature of VoIP-to-VoIP and interconnected VoIP service cannot be determined by reference to the customer's billing address. Similarly, determining the interstate or intrastate nature of VoIP service cannot be accomplished by reference to the VoIP user's telephone number, because a customer living in one area code may be assigned a telephone number from a different area code." Vonage v Nebraska PSC, No. 08-1764, slip at 3 (8th Cir. May 1, 2009)
VoIP communications also differ from traditional circuit-switched telephone communications in another significant way. The end-to-end geographic locations of traditional landline-to-landline telephone communications are readily known, so it is easy to determine whether a particular phone call is intrastate or interstate in nature. Conversely, VoIP-to-VoIP communications originate and terminate at IP addresses which exist in cyberspace, but are tied to no identifiable geographic location. For example, a VoIP customer residing in Minnesota but visiting New York could connect a laptop computer to a broadband internet connection and communicate with a nextdoor neighbor via computer back in Minnesota, while the next day the same "caller" could be in Los Angeles and talk to the same friend who now happens to be in Los Angeles as well. The Internet would recognize both communications as taking place between the same two IP addresses, but when considering the geographic locations of the caller and recipient, the first call would be interstate while the second intrastate in nature.
Similarly, in VoIP-to-landline or landline-to-VoIP communications, known as "interconnected VoIP service,"2 the geographic location of the landline part of the call can be determined, but the geographic location of the VoIP part of the call could be anywhere in the universe the VoIP customer obtains broadband access to the Internet, not necessarily confined to the geographic location associated with the customer's billing address or assigned telephone number. Furthermore, using the North American Numbering Plan (NANP) (i.e., the system of using a three-digit area code followed by a seven-digit number) or a VoIP customer's billing address as "proxies" for the originating or terminating points of interconnected VoIP communications causes some interstate calls to appear to be intrastate in nature and vice versa. In the example used above, if we assume both the caller and recipient had Minnesota billing addresses and NANP numbers with Minnesota area codes, both communications would appear to be intrastate Minnesota calls if the billing addresses or NANP numbers were used as proxies for the originating and terminating points of the communications, even though the first was an interstate call between New York and Minnesota and the second an intrastate California call.
The use of such proxies as substitutes for the actual originating and terminating points of VoIP communications is further complicated by the fact VoIP customers can choose NANP numbers with area codes different from those associated with their billing addresses. Again referring to the example used above, assume the VoIP customer residing in Minnesota chose a NANP number with an Arizona area code. In such a case, the interstate communication between New York and Minnesota would appear to be a Minnesota intrastate call if the customer's billing address were used as a proxy for the originating point, but appear to be an interstate call between Arizona and Minnesota if the NANP number were used as a proxy for the originating point.
- Minnesota PUC v. FCC, Case No 05-1069 Sec. 1 (8th Cir Mar. 2007)
Because Minnesota inextricably links pre-approval of a 911 plan to becoming certificated to offer service in the state, the application of its 911 requirements operates as an entry regulation. Vonage explains that there is no practicable way for it to comply with this requirement: it cannot today identify with sufficient accuracy the geographic location of a caller, and it has not obtained access in all cases to incumbent LEC E911 trunks that carry calls to specialized operators at public safety answering points (PSAPs).146
146 See Vonage Petition at 8-9, 24-25.
Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an Order of the Minnesota Public Utilities Commission, WC Docket No. 03-211, Memorandum Opinion and Order, para. 42 (FCC Nov. 12, 2004)
23. In this section, we examine whether there is any plausible approach to separating DigitalVoice into interstate and intrastate components for purposes of enabling dual federal and state regulations to coexist without “negating” federal policy and rules.86 We find none. Without a practical means to separate the service, the Minnesota Vonage Order unavoidably reaches the interstate components of the DigitalVoice service that are subject to exclusive federal jurisdiction. Vonage has no means of directly or indirectly identifying the geographic location of a DigitalVoice subscriber. Even, however, if this information were reliably obtainable, Vonage’s service is far too multifaceted for simple identification of the user’s location to indicate jurisdiction. Moreover, the significant costs and operational complexities associated with modifying or procuring systems to track, record and process geographic location information as a necessary aspect of the service would substantially reduce the benefits of using the Internet to provide the service, and potentially inhibit its deployment and continued availability to consumers.87
24. DigitalVoice harnesses the power of the Internet to enable its users to establish a virtual presence in multiple locations simultaneously, to be reachable anywhere they may find a broadband connection, and to manage their communications needs from any broadband connection. The Internet’s inherently global and open architecture obviates the need for any correlation between Vonage’s DigitalVoice service and its end users’ geographic locations. As we noted above, however, the Commission has historically applied the geographic “end-to-end” analysis to distinguish interstate from intrastate communications.88 As networks have changed and the services provided over them have evolved, the Commission has increasingly acknowledged the difficulty of using an end-to-end analysis when the services at issue involve the Internet. 89 DigitalVoice shares many of the same characteristics as these other services involving the Internet, thus making jurisdictional determinations about particular DigitalVoice communications based on an end-point approach difficult, if not impossible. 90
25. In fact, the geographic location of the end user at any particular time is only one clue to a jurisdictional finding under the end-to-end analysis. The geographic location of the “termination” of the communication is the other clue; yet this is similarly difficult or impossible to pinpoint. This “impossibility” results from the inherent capability of IP-based services to enable subscribers to utilize multiple service features that access different websites or IP addresses during the same communication session and to perform different types of communications simultaneously, none of which the provider has a means to separately track or record.91 For example, a DigitalVoice user checking voicemail or reconfiguring service options would be communicating with a Vonage server. A user forwarding a voicemail via e-mail to a colleague using an Internet-based e-mail service would be “communicating” with a different Internet server or user. An incoming call to a user invoking forwarding features could “terminate” anywhere the DigitalVoice user has programmed. A communication from a DigitalVoice user to a similar IP-enabled provider’s user would “terminate” to a geographic location unknown either to Vonage or to the other provider. 92 These functionalities in all their combinations form an integrated communications service designed to overcome geography, not track it. Indeed, it is the total lack of dependence on any geographically defined location that most distinguishes DigitalVoice from other services whose federal or state jurisdiction is determined based on the geographic end points of the communications.93 Consequently, Vonage has no service-driven reason to know users’ locations, 94 and Vonage asserts it presently has no way to know. 95 Furthermore, to require Vonage to attempt to incorporate geographic “end-point” identification capabilities into its service solely to facilitate the use of an end-to-end approach would serve no legitimate policy purpose. 96 Rather than encouraging and promoting the development of innovative, competitive advanced service offerings, 97 we would be taking the opposite course, molding this new service into the same old familiar shape.
26. In the absence of a capability to identify directly DigitalVoice communications that originate and terminate within the boundaries of Minnesota, we still consider whether some method exists to identify such communications indirectly, such that Minnesota’s regulations could nonetheless apply to only that “intrastate” usage such as voice calls between persons located in the same state.98 For example, assume Minnesota were to use DigitalVoice subscribers’ NPA/NXXs as a proxy for those subscribers’ geographic locations when making or receiving calls. If a subscriber’s NPA/NXX were associated with Minnesota under the NANP, Minnesota ’s telephone company regulations would attach to every DigitalVoice communication that occurred between that subscriber and any other party having a Minnesota NPA/NXX. But because subscribers residing anywhere could obtain a Minnesota NPA/NXX, a subscriber may never be present in Minnesota when communicating with another party that is, yet Minnesota would treat those calls as subject to its jurisdiction.99
27. Similarly, if a Minnesota NPA/NXX subscriber residing in Minnesota used its service outside the state to call someone in Minnesota , that call would appear to be an intrastate call when it is actually interstate. Some commenters suggest that because Vonage markets DigitalVoice to provide “local” and “long distance” calls it surely has an ability to distinguish between intrastate and interstate calls.100 These commenters fail to recognize that these calls are not “local” and “long distance” in the sense that they are for traditional wireline telephone services. Rather, like we have seen with the proxy example above, Vonage describes these calling capabilities for convenience in terms that its subscribers understand. A DigitalVoice call that would be deemed “local,” for example, is actually a call between two NPA/NXXs associated with particular rate centers in a particular state, yet when the actual communication occurs one or both parties can be located outside those rate centers, outside the state, or even on opposite ends of the world.
28. We further consider whether Minnesota could assert jurisdiction over DigitalVoice communications based on whether the subscriber’s billing address or address of residence are in Minnesota . This too fails. When a subscriber with a Minnesota billing address or address of residence uses DigitalVoice from any location outside the state to call a party located in Minnesota , Minnesota would treat that communication as “intrastate” based on the address proxy for that subscriber’s location, yet in actuality it would be an interstate call.101
29. These proxies are very poor fits, yet even their implementation would impose substantial costs retrofitting DigitalVoice into a traditional voice service model for the sole purpose of making it easier to apply traditional voice regulations to only a small aspect of Vonage’s integrated service.102 Forcing such changes to this service would greatly diminish the advantages of the Internet's ubiquitous and open nature that inspire the offering of services such as DigitalVoice in the first instance. 103 Indeed, Vonage would have to change multiple aspects of its service operations that are not nor were ever designed to incorporate geographic considerations, including modifications to systems that track and identify subscribers’ communications activity and facilitate billing; the development of new rate and service structures; and sales and marketing efforts, 104 just for regulatory purposes. 105 The Commission has previously recognized the significant efforts and inefficiency to attempt to separate out an intrastate component of other services for certain regulatory purposes where the provider, like Vonage here, had no service-driven reason to incorporate such capability into its operations. 106 We have declined to require such separation in those circumstances, treating the services at issue as jurisdictionally interstate for the particular regulatory purpose at issue and preempting state regulation where necessary. 107 For example, in preempting a state regulation specifying default per line blocking of a customer’s “Caller ID” for intrastate calls based on “impossibility,” the Commission found that “we need not demonstrate absolute future impossibility to justify federal preemption here. We need only show that interstate and intrastate aspects of a regulated service or facility are inseverable as a practical matter in light of prevailing technological and economic conditions.” 108
30. In the case of DigitalVoice, Vonage could not even avoid violating Minnesota ’s order by trying not to provide intrastate communications in that state. 109 For the same reasons that Vonage cannot identify a communication that occurs within the boundaries of a single state, it cannot prevent its users from making such calls by attempting to block any calls between people in Minnesota . 110 Indeed, Vonage could not avoid similar “intrastate” regulations if imposed by any of the other more than 50 separate jurisdictions. Due to the intrinsic ubiquity of the Internet, nothing short of Vonage ceasing to offer its service entirely could guarantee that any subscriber would not engage in some communications where a state may deem that communication to be “intrastate” thereby subjecting Vonage to its economic regulations absent preemption.
31. There is, quite simply, no practical way to sever DigitalVoice into interstate and intrastate communications that enables the Minnesota Vonage Order to apply only to intrastate calling functionalities without also reaching the interstate aspects of DigitalVoice, nor is there any way for Vonage to choose to avoid violating that order if it continues to offer DigitalVoice anywhere in the world. 111 Thus, to whatever extent, if any, DigitalVoice includes an intrastate component, because of the impossibility of separating out such a component, we must preempt the Minnesota Vonage Order because it outright conflicts with federal rules and policies governing interstate DigitalVoice communications.
32. Indeed, the practical inseverability of other types of IP-enabled services having basic characteristics similar to DigitalVoice would likewise preclude state regulation to the same extent as described herein. Specifically, these basic characteristics include: a requirement for a broadband connection from the user’s location ; a need for IP-compatible CPE; and 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, including enabling them to originate and receive voice communications and access other features and capabilities, even video.112 In particular, the provision of tightly integrated communications capabilities greatly complicates the isolation of intrastate communication and counsels against patchwork regulation. Accordingly, to the extent other entities, such as cable companies, provide VoIP services,113 we would preempt state regulation to an extent comparable to what we have done in this Order.
86 SeeLouisiana Pub. Serv. Comm’n v. FCC, 476 U.S. at 368 (holding that the Supremacy Clause of Article VI of the Constitution provides Congress with the power to preempt state law and explaining the numerous bases for preemption); see also Pub. Serv. Comm’n of Maryland v. FCC, 909 F.2d at 1515 (citing Nat’l Ass’n of Regulatory Util. Comm’rs v. FCC , 880 F.2d at 429-31); Nat’l Ass’n of Regulatory Util. Comm’rs , 880 F.2d at 425 (“ We conclude that the Commission may only preempt state regulation over intrastate wire communication to the degree necessary to keep such regulation from negating the Commission's exercise of its lawful authority over interstate communication service.” ).
87See Letter from William B. Wilhelm, Jr. and Ronald W. Del Sesto, Jr., Counsel for Vonage, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 03-211, at 5 (filed Oct. 19, 2004) (Vonage Oct. 19 Ex Parte Letter)
88See supra para. 17.
89For example, in attempting to apply an end-to-end analysis to an incumbent LEC’s digital subscriber line (DSL) telecommunications service to determine whether federal or state tariffing requirements should attach, the Commission noted that “an Internet communication does not necessarily have a point of ‘termination’ in the traditional sense.” GTE ADSL Order, 13 FCC Rcd at 22478-79, para. 22. In a later proceeding involving the provision of Telecommunications Relay Service over the Internet, the Commission similarly noted the difficulty in pinpointing the origination of an IP-Relay call arising over the Internet because Internet addresses do not have geographic correlates equivalent to the PSTN’s automatic number identifiers, which are tied to geographic locations, and thus, there is no automatic way to determine whether any call is intrastate or interstate. See Provision of Improved Telecommunications Relay Services and Speech-to-Speech Services for Individuals with Hearing and Speech Disabilities, CC Docket No. 98-67, Declaratory Ruling and Second Further Notice of Proposed Rulemaking, 17 FCC 7779, 7784, para. 15 (2002) (IP-Relay Second FNPRM). Significantly, as recently as June, the Commission issued yet another Further Notice of Proposed Rulemaking in this proceeding, recognizing the continued technological inability to identify the location of an IP-Relay user. See Telecommunications Relay Services and Speech-to-Speech Services for Individuals with Hearing and Speech Disabilities, CC Docket Nos. 90-571, 98-67; CG Docket No. 03-123, Report and Order; Order on Reconsideration; Further Notice of Proposed Rulemaking, 19 FCC Rcd 12475, 12561, para. 221 (2004) (2004 IP-Relay FNPRM). In Pulver, the Commission concluded that the concept of “end points” and an end-to-end analysis were not relevant to Pulver’s Internet-based VoIP information service. See Pulver, 19 FCC Rcd at 3316-23, paras. 15-25.
90See Vonage Petition at 5, 28.
91See, e.g., Vonage Oct. 19 Ex Parte Letter at 4-5 (explaining that in addition to having no way to determine a geographic origination point, determining a geographic destination is not possible either); see also Letter from Glenn T. Reynolds, BellSouth Corp., to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 04-36; 03-211, Attach. at 6-12 (filed Oct.26, 2004) (BellSouth Oct. 26 Ex Parte Letter) (explaining the multitude of simultaneous capabilities during a single communication that makes a point of destination unknown); Letter from Howard Symons, Counsel for NTCA, to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 03-211, 04-36 Attach. at 2-3 (filed Oct.28, 2004) (NCTA Oct. 28 Ex Parte Letter) (describing the core integrated features that “cable VoIP” provides to subscribers); Letter from Adam D. Krinsky, Counsel for CTIA, to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 04-36; 03-211, (filed Oct.25, 2004) (CTIA Oct. 25 Ex Parte Letter) (explaining that IP-enabled services do not have definable termination points).
92See Vonage Oct. 19 Ex Parte Letter at 4-5.
93We note that these integrated capabilities and features are not unique to DigitalVoice, but are inherent features of most, if not all, IP-based services having basic characteristics found in DigitalVoice, including those offered or planned by facilities-based providers. See infra note 113 for a brief summary of these basic characteristics; see also, e.g., Letter from Kathleen Grillo, Verizon, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 03-211 at 1-3 (filed Nov. 1, 2004) (Verizon Nov. 1 Ex Parte Letter) (describing Verizon’s VoiceWing service); Letter from Cronan O’Connell, Qwest, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 03-211 (filed Sept. 27, 2004) (Qwest Sept. 27 Ex Parte Letter) (describing Qwest’s VoIP architecture and service); Letter from Judy Sello, AT&T, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 03-211 at 1-4, (filed Oct. 21, 2004) (AT&T Oct 21 Ex Parte Letter) (describing AT&T’s CallVantage service); Letter from James K. Smith, Executive Director – Federal Regulatory, SBC, to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 03-211, 04-29, 04-36, Attach. at 4-11 (filed Oct. 8, 2004) (SBC Oct. 8 Ex Parte Letter) (describing SBC’s VoIP architecture and service);Letter from Glenn T. Reynolds, Vice President – Federal Regulatory, BellSouth, to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 03-211, 04-36, Attach. at 6-12 (filed Oct. 26, 2004) (BellSouth Oct. 26 Ex Parte Letter) (describing BellSouth’s VoIP architecture and service); Letter from Glenn T. Reynolds, Vice President – Federal Regulatory, BellSouth, to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 03-211, 04-36, Attach. at 4 (filed Oct. 7, 2004) (BellSouth Oct. 7 Ex Parte Letter) (describing BellSouth’s VoIP architecture and service);Letter from Howard J. Symons, Counsel for National Cable & Telecommunications Association (NCTA), to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 03-211, 04-36, Attach. at 3-5 (filed Oct. 28, 2004) (NCTA Oct. 28 Ex Parte Letter) (describing cable VoIP architecture).
94 See American Libraries Ass’n v. Pataki, 969 F. Supp. 160, 170 (S.D.N.Y. 1997) (“Internet protocols were designed to ignore rather than document geographic location.”).
95We acknowledge that certain geolocation products may be capable of identifying, to some degree, the geographic location of a Vonage user in the future, see, e.g., Sprint Reply at 7, but the record does not reflect that such information is readily obtainable at this time. See, e.g., 8x8 Comments at 14-15. Should Vonage decide in the future to incorporate geolocation capabilities into its service to facilitate additional features that may be dependent on reliable location determining capabilities, e.g., E911-type features or law enforcement surveillance capabilities, this would not alter the fact that the service enables the user’s location to change continually. See Vonage Oct. 19 Ex Parte Letter at 3-6 (explaining how user location information for emergency services purposes would have no relevance to an end to end jurisdictional analysis for DigitalVoice).
96See Pulver, 19 FCC Rcd at 3320-21, para. 21 (“Attempting to require Pulver to locate its members for the purpose of adhering to a regulatory analysis that served another network would be forcing changes on this service for the sake of regulation itself, rather than for any particular policy purpose.”).
97See, e.g., Letter from Staci L. Pies, The VON Coalition, to Marlene H. Dortch, Secretary, FCC, CC Docket No. 01‑92; WC Docket Nos. 02-361, 03-211, 03-266, 04-36, Attach. at 1 (filed Aug. 19, 2004) (VON Coalition Aug. 19 Ex Parte Letter).
98Where the Commission has found it difficult to apply an end-to-end approach for jurisdictional purposes, it has proposed or adopted proxy or allocation mechanisms to approximate an end-to-end result. See, e.g., GTE ADSL Order, 13 FCC Rcd at 22479, para. 23 (applying the 10% rule for determining interstate jurisdiction for federal tariffing purposes); IP-Relay Second FNPRM, 17 FCC Rcd at 7784, para. 15 (proposing either an allocator to approximate the mix of interstate/intrastate traffic or a user self-identification mechanism to identify its end-point location); 2004 IP-Relay FNPRM, 19 FCC Rcd at 12561-64, paras. 221-30 (proposing either user-registration or allocation mechanisms to determine interstate or intrastate use; asking whether, in the alternative, all IP-Relay calls should simply be deemed interstate). We find a ‘percentage’ proxy to be unhelpful in addressing the conflict between the federal and state regulatory regimes (in particular, the tariffing and certification requirements) at issue in this proceeding, because using such a proxy would not avoid frustration of the Commission’s policy objectives discussed above. See supra section III.A.3. But see, e.g., MTA Comments at 10.
99In this example, if we further assume Minnesota requires entry certification for Vonage, but has an entry condition that Vonage cannot meet, Vonage could be subject to state sanctions for “operating” in the state without authority to the extent any of its customers nationwide obtain Minnesota NPA/NXXs and use the service to communicate with someone in Minnesota even though that subscriber never had a physical presence in Minnesota.
100See, e.g., NASUCA Reply at 15.
101In this example, if we further assume Minnesota has imposed a specific rate requirement on DigitalVoice’s intrastate communications, this rate requirement would apply to all DigitalVoice communications made by that subscriber to someone in Minnesota even though many of those communications are interstate under the Act.
102See Pulver, 19 FCC Rcd at 3321-23, paras. 22, 24 (finding it similarly impossible to separate Pulver’s VoIP service).
103See, e.g., Vonage Oct. 19 Ex Parte Letter at 6.
104In reviewing a challenge to a Commission requirement for BOC joint CPE/service marketing because it would “surely ‘affect’ charges for” and regulate “intrastate communications services,” and preemption of inconsistent state regulation, the D.C. Circuit affirmed the Commission stating that “[e]ven if [it] were a purely intrastate service, the FCC might well have authority to preemptive regulate its marketing if – as would appear here – it was typically sold in a package with interstate services. Marketing realities might themselves create inseparability.” Illinois Bell Tel. Co. v. FCC, 883 F.2d 104, 112-13 & n.7 (D.C. Cir. 1989) (referencing Louisiana Pub. Serv. Comm’n, 476 U.S. 355).
105Seegenerally Vonage Oct. 19 Ex Parte Letter.
106See MTS and WATS Market Structure, Amendment of Part 36 of the Commission’s Rules and Establishment of a Joint Board, CC Docket Nos. 78-72, 80-286, Decision and Order, 4 FCC Rcd 5660, n.7 (1989) (MTS/WATS Market Structure Separations Order) (finding that “mixed use” special access lines carrying more than a de minimis amount of interstate traffic to private line systems are subject to the Commission’s jurisdiction for jurisdictional separations purposes because separating interstate from intrastate traffic on many such lines could not be measured without “significant additional administrative efforts”); see alsoQwest Corp. v. Minnesota Pub. Utils. Comm’n, 380 F.3d 367, 374 (finding that the Commission’s preemptive intent concerning the de minimis rule relates to cost allocation for ratemaking purposes rather than plenary regulatory authority but stating that the Commission “certainly has the wherewithal to preempt state regulation in this area if it so desires”) (emphasis added); BellSouth MemoryCall, 7 FCC Rcd at 1620, para. 7 (preempting order of a state commission imposing regulatory conditions on the offering of the intrastate portion of a jurisdictionally mixed service because of the expense, operational, and technical difficulties associated with identifying the intrastate portion and the effect it would likely have on the provider’s continued offering of the interstate portion).
107See, e.g ., MTS/WATS Market Structure Separations Order, 4 FCC Rcd 5660, n.7; BellSouth MemoryCall, 7 FCC Rcd at 1620, para. 7
108 See Rules and Policies Regarding Calling Number Identification Service – Caller ID, Memorandum Opinion and Order on Reconsideration, Second Report and Order and Third Notice of Proposed Rulemaking, 10 FCC Rcd 11700, 11727-28, para. 77 (1995) (citing California v. FCC, 39 F.3d 919 (9th Cir. 1994)), aff’d, California v. FCC, 75 F.3d 1350 (9th Cir. 1996). Th e Ninth Circuit affirmed the Commission’s preemption in this case, finding it to fit within the impossibility exception. SeeCalifornia v. FCC, 75 F.3d at 1360. Indeed, when possible, this Commission prefers that economic and market considerations drive the development of technology, rather than regulatory requirements. See,e.g.,Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers; Implementation of the Local Competition Provisions of the Telecommunications Act of 1996; Deployment of Wireline Services Offering Advanced Telecommunications Capability, Order on Reconsideration, CC Docket Nos. 01-338, 96-98, 98-147, FCC 04-248, para. 19 (rel. Oct. 18, 2004) (concluding that decision regarding “which broadband technologies to deploy is best left to . . . the market . . . . We decline to second-guess or skew those technology choices . . . .”).
109See Vonage Petition at v, 31; see alsoAmerican Libraries Ass’n v. Pataki, 969 F. Supp. at 171 (explaining that no aspect of the Internet can fairly be closed off to users from any state).
110See Vonage Petition at v, 31.
111See Public Util. Comm’n of Texas v. FCC , 886 F.2d 1325 (citing Louisiana Pub. Serv. Comm’n v. FCC, 476 U.S. 355, 375, the court upheld preemption of a Texas Public Utility Commission order prohibiting an incumbent LEC from providing interconnection to the PSTN to a customer where the FCC cannot “separate the interstate and the intrastate components of [its] asserted regulation.”); Public Serv. Comm’n of Maryland v. FCC, 909 F.2d at 1515 (citing Louisiana Pub. Serv. Comm’n v. FCC, 476 U.S. 355, 375, to uphold Commission’s preemption of a state commission’s prescribed rates for LEC charges to interexchange carriers for customer disconnections based on the impossibility exception).
112See, e.g., SBC Oct. 8 Ex Parte Letter, Attach. at 4-11;BellSouth Oct. 26 Ex Parte Letter, Attach. at 6-12; BellSouth Oct. 7 Ex Parte Letter, Attach. at 4.
113See, e.g., Letter from J.G. Harrington, Counsel for Cox Communications, Inc., to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 03-211, 04-36, at 1-2 (filed Oct. 27, 2004) (“This network design also permits providers to offer a single, integrated service that includes both local and long distance calling and a host of other features that can be supported from national or regional data centers and accessed by users across state lines. . . . In addition to call setup, these functions include generation of call announcements, record-keeping, CALEA, voice mail and other features such as *67, conferencing and call waiting. ... [T]here are no facilities at the local level of a managed voice over IP network that can perform these functions.”); Letter from Henk Brands, Counsel for Time Warner Inc., to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 03-211, 04-36, at 2, 9 (filed Oct. 29, 2004) (Time Warner Oct. 29 Ex Parte Letter) (“[T]he Commission should take a broader approach by recognizing additional characteristics of IP-based voice services and extend the benefits of preemption to all VoIP providers. . . . [B]y its nature, VoIP is provided on a multistate basis, making different state regulatory requirements particularly debilitating.”); NCTA Oct. 28 Ex Parte Letter, Attach. at 1 (“ Cable VoIP offers consumers an integrated package of voice and enhanced features that are unavailable from traditional circuit-switched service. . . . A cable company may have no idea whether a customer is accessing these features from home or from a remote location. The integral nature of these features and functions renders cable VoIP service an interstate offering subject to exclusive FCC jurisdiction. . . . Not every cable VoIP service has the same mix of features and functionalities . . . , but all cable VoIP offers the types of enhancements that render it an interstate service. Similarly, while the network architecture of each cable VoIP system will not be identical, they share the same centralized network design that impart an interstate nature.”); Letter from Daniel L. Brenner, Senior Vice President, Law & Regulatory Policy, NCTA, to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 03-211, 04-36, Attach. at 1 (filed Oct. 27, 2004) (“Functions integral to every call, such as CALEA compliance, voicemail recording, storage, and retrieval, call record-keeping, 3-way calling and other functions are provided from these central facilities. These facilities are often located in a state different from the origin of the call.”).
Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an Order of the Minnesota Public Utilities Commission, WC Docket No. 03-211, Memorandum Opinion and Order, para. 4(FCC Nov. 12, 2004)Inseverability / Impossibility Doctrine
La. Pub. Serv. Comm'n v. FCC, 476 U.S. 355, 368, 106 S.Ct. 1890, 90 L.Ed.2d 369 (1986) (indicating the FCC can preempt state law "where compliance with both federal and state law is in effect physically impossible"); see also id. at 375, 106 S.Ct. 1890 n. 4 ("FCC pre-emption of state regulation [should be] upheld where it [is] not possible to separate the interstate and the intrastate components of the asserted FCC regulation.")
the "impossibility exception" of 47 U.S.C. § 152(b) allows the FCC to preempt state regulation of a service if (1) it is not possible to separate the interstate and intrastate aspects of the service, and (2) federal regulation is necessary to further a valid federal regulatory objective, i.e., state regulation would conflict with federal regulatory policies. Qwest Corp. v. Scott, 380 F.3d 367, 372 (8th Cir.2004).
The FCC may preempt state regulation under the so-called “impossibility exception” in situations where “(1) it is not possible to separate the interstate and intrastate aspects of the service, and (2) federal regulation is necessary to further a valid federal regulatory objective, i.e., state regulation would conflict with federal regulatory policies.” MPUC, 483 F.3d at 578
Several parties further argue that because it is difficult, if not impossible, to separate intrastate and interstate Internet traffic, federal regulation of this traffic is appropriate pursuant to the inseverability doctrine.[97] Under the inseverability doctrine, pre-emption of state regulation is permissible "where it is not possible to separate the interstate and the intrastate components of the asserted FCC regulation."[98] The Commission bears the burden of demonstrating that state regulation "negates the exercise by the FCC of its own lawful authority over interstate communications."[99] In light of our finding that GTE's ADSL service is subject to federal jurisdiction under the Commission's mixed use facilities rule and properly tariffed as an interstate service, we need not reach the question of whether the inseverability doctrine applies.
[97] GTE Direct Case at 18; Time Warner Comments at 2; USTA Comments at 6-7; Covad Comments at 3-7; and Bell Atlantic Comments at 3-4.
[98] Louisiana Pub. Serv. Comm'n v. FCC, 476 U.S. 355, 375 n.4 (1986); see also North Carolina Utils. Comm'n v. FCC, 537 F.2d 787 (4th Cir.), cert. denied, 429 U.S. 1027 (1976); North Carolina Utils. Comm'n v. FCC, 552 F.2d 1036 (4th Cir.), cert. denied, 434 U.S. 874 (1977).
[99] NARUC v. FCC, 880 F.2d 422, 429 (D.C. Cir. 1989) (citing North Carolina Utils. Comm'n v. FCC, 552 F.2d 1036, 1043 (4th Cir.) (where Commission acted within its authority to permit subscribers to provide their own telephones, pre-emption of inconsistent state regulation prohibiting subscribers from connecting their own phones unless used exclusively in interstate service upheld since state regulation would negate the federal tariff), cert. denied, 434 U.S. 874 (1977)).
-- In Re GTE Telephone Operators GTOC Tariff No. 1 GTE Transmittal No. 1148, Memorandum Opinion And Order, CC Docket No. 98-79 ¶ 20 (October 30, 1999), recon. denied (February 26, 1999).
Ill. Bell Tel. Co. v. FCC, 883 F.2d 104, 116 (D.C.Cir.1989) (noting the Communications Act does not require "construction of wholly independent intrastate and interstate networks")
California v. FCC, 567 F.2d 84, 86 (D.C.Cir.1977) (upholding FCC preemption on basis that it would be "impractical" to require investment in "expensive additional equipment" solely to create a separate intrastate communication service)
Leaky PBX Theory
"In searching for a way to include leaky PBX use in the access charge plan, we are mindful that it will be difficult to devise a plan which specifically identifies interstate use of local exchange service and charges for such use on a discrete basis. We are not aware, for example, of any current practical means whereby interstate traffic can be distinguished from local or intrastate traffic on a private line. In many cases for example, the interstate private line extends between points in the same state making it very likely that some indeterminate amount of solely intrastate traffic on such line is jurisdictionally interstate.[58]" -- In Re MTS and WATS Market Structure, 97 FCC2d 682 & 81 (1983)
[FN58] However, where two PBXs in the same state are tied together by private lines, in almost all cases such private lines are jurisdictionally interstate since the potential exists to handle interstate communications on such lines by switching to WATS, MTS, private lines or other transmission services which extend to out-of-state points. People of the State of California v. FCC, 567 F.2d 84 (D.C.Cir. 1977), cert. denied 434 U.S. 1010 (2978). Since the nature of the communications determines jurisdiction, Ward v. Northern Ohio Telephone Company, 300 F.2d 816 (6th Cir. 1962), it would be most difficult to show that any switched private line within a state is not jurisdictionally interstate since it is not practical to separate the interstate from the intrastate traffic. It should also be pointed out that a private line which extends between points in different states can carry jurisdictionally intrastate communications. See Section 3(e) of the Act.
Federal Preemption of State jurisdiction
- See also Information Services (Federal Preemption) versus Telecom Services (not preempted)
- See VoIP Preemption
Supremacy Clause of the Constitution Article VI: "This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding. "
The Supremacy Clause of Art. VI of the Constitution provides Congress with the power to pre-empt state law. Preemption occurs when Congress, in enacting a federal statute, expresses a clear intent to pre-empt state law, Jones v. Rath Packing Co., 430 U.S. 519 (1977), when there is outright or actual conflict between federal and state law, e.g., Free v. Bland, 369 U.S. 663 (1962), where compliance with both federal and state law is in effect physically impossible, Florida Lime and Avocado Growers, Inc. v. Paul, 373 U.S. 132 (1963), where there is implicit in federal law a barrier to state regulation, Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983), where Congress has legislated comprehensively, thus occupying an entire field of regulation and leaving no room for the States to supplement federal law, Rice v. Sante Fe Elevator Corp., 331 U.S. 218 (1947), or where the state law stands as an obstacle to the accomplishment and execution of the full objectives of Congress. Hines v. Davidowitz, 312 U.S. 52 (1941). Pre-emption may result not only from action taken by Congress itself; a federal agency acting within the scope of its congressionally delegated authority may preempt state regulation. Fidelity Federal Savings and Loan Assn. v. De la Cuesta, 458 U.S. 141 (1982). . . . --Louisiana Public Service Comm'n v. FCC, 476 U.S. 355, 368-69 (1986)
Charter Advanced Services (MN) LLC et al. v. Nancy Lange in her official capacity as Chair of the Minnesota Public Utilities Commission et al., case number 0:15-cv-03935, in U.S. District Court for the District of Minnesota Memorandum Opinion and Order at 8 (May 8, 2017)
“When the Federal Government acts within the authority it possesses under the Constitution, it is empowered to pre-empt state laws to the extent it is believed that such action is necessary to achieve its purposes.” City of New York v. F.C.C., 486 U.S. 57, 63 (1988). Preemptive laws and regulations are given effect by the Supremacy Clause of the Constitution. See id. (citing U.S. Const. art. VI, cl. 2.). While the Supreme Court has delineated several instances in which preemption may arise, of particular relevance here is its conclusion that federal agencies acting pursuant to their congressionally delegated authority may preempt state regulation. Louisiana Pub. Serv. Comm’n v. F.C.C., 476 U.S. 355, 369 (1986). As this Court recognized in its Motion to Dismiss Order, there “is simply no doubt” that the F.C.C. has this general authority. See Charter Advanced, 2016 WL 3661136, at *3 (citing 47 U.S.C. § 201(b)).
The fount of regulatory authority, in this matter, is the Telecommunications Act of 1996. By its enactment, Congress “unquestionably” took “the regulation of local telecommunications competition away from the States” with respect to matters covered by the Act. AT & T Corp. v. Iowa Util. Bd., 525 U.S. 366, 378 n.6 (1999).
Charter Advanced Servs. (MN), LLC v. Heydinger, 15-cv- 3935 (SRN/KMM), 2016 WL 3661136 (D. Minn. July 5, 2016)
The Supremacy Clause of Art. VI of the Constitution empowers Congress to pre-empt state law. Louisiana Pub. Serv. Comm'n v. FCC, 476 U.S. 355, 368, 106 S.Ct. 1890, 1898, 90 L.Ed.2d 369 (1986). Pre-emption occurs when (1) Congress enacts a federal statute that expresses its clear intent to pre-empt state law; (2) there is a conflict between federal and state law; (3) "compliance with both federal and state law is in effect physically impossible;" (4) federal law contains an implicit barrier to state regulation; (5) comprehensive congressional legislation occupies the entire field of regulation; or (6) state law is an obstacle to the "accomplishment and execution of the full objectives of Congress." Louisiana PSC, 476 U.S. at 368-69, 106 S.Ct. at 1898. Moreover, "a federal agency acting within the scope of its congressionally delegated authority may pre-empt state regulation." Id. at 369, 106 S.Ct. at 1898-99. - Vonage Holdings Corp. v. MINNESOTA PUBLIC UTIL., 290 F. Supp. 2d 993 - Dist. Court, Minnesota
Computer and Commc'ns Indus. Ass'n v. FCC,693 F.2d 198, 214-18 (D.C.Cir.1982) (concluding the FCC may preempt state regulation to promote a federal policy of fostering competition in the market for customer premises equipment).No Preemption Intrastate Services
47 USC 152 (b) Except as provided in sections 223 through 227 of this title, inclusive, and section 332 of this title, and subject to the provisions of section 301 of this title and subchapter V–A, nothing in this chapter shall be construed to apply or to give the Commission jurisdiction with respect to (1) charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communication service by wire or radio of any carrier, or (2) any carrier engaged in interstate or foreign communication solely through physical connection with the facilities of another carrier not directly or indirectly controlling or controlled by, or under direct or indirect common control with such carrier, or (3) any carrier engaged in interstate or foreign communication solely through connection by radio, or by wire and radio, with facilities, located in an adjoining State or in Canada or Mexico (where they adjoin the State in which the carrier is doing business), of another carrier not directly or indirectly controlling or controlled by, or under direct or indirect common control with such carrier, or (4) any carrier to which clause (2) or clause (3) of this subsection would be applicable except for furnishing interstate mobile radio communication service or radio communication service to mobile stations on land vehicles in Canada or Mexico; except that sections 201 to 205 of this title shall, except as otherwise provided therein, apply to carriers described in clauses (2), (3), and (4) of this subsection.
"the broad language of [section 152(b)(1)] makes clear that the sphere of state authority which the statute 'fences off from FCC reach or regulation,'. . . includes, at a minimum, services that are delivered by a telephone carrier 'in connection with' its intrastate common carrier telephone services." --California v. FCC, 905 F.2d 1217, 1240 (9th Cir. 1990) (quoting Louisiana Pub. Serv. Comm'n v. FCC, 476 U.S. 355, 370 (1986)).
Preemption Interstate Services
Qwest Corp. v. Scott, 380 F.3d 367, 370 (8th Cir. 2004)
Preemption Enhanced Services / Information Services
As this Court has previously recognized, telecommunications services are subject to state regulation, while information services are not. See Charter Advanced, 2016 WL 3661136, at *3; Vonage Holdings Corp. v. Minn. Pub. Utils. Comm’n, 290 F. Supp. 2d 993, 997 (D. Minn. 2003) (“Vonage I”); see also Minn. Pub. Utils. Comm’n v. F.C.C., 483 F.3d 570, 580 (8th Cir. 2007) (“Vonage III”) (observing that “any regulation of an information service conflicts with the federal policy of nonregulation”).
~ Charter Advanced Services, LLC, v. Nancy Lange, in her official capacity as Chair of the MN PUC, Case. No. 15-cv-3935, MOO (DCMN May 8, 2017)
19. Although the Communications Act establishes dual federal-state authority to regulate certain communications services, courts routinely recognize that there may be circumstances where state regulation would necessarily conflict with the Commission’s valid exercise of authority.65 Where separating a service into interstate and intrastate communications is impossible or impractical, the Supreme Court has recognized the Commission’s authority to preempt state regulation that would thwart or impede the lawful exercise of federal authority over the interstate component of the communications.66 The D.C. Circuit, for example, applied this impossibility exception in affirming a Commission order preempting state regulation of the rate a local exchange carrier (LEC) charged an interexchange carrier for a disconnection service.67 The court explained that Commission preemption of state regulation is permissible when the matter to be regulated has both interstate and intrastate aspects; preemption is necessary to protect a valid federal regulatory objective; and “state regulation would ‘negate[ ] the exercise by the FCC of its own lawful authority’ because regulation of the interstate aspects of the matter cannot be ‘unbundled’ from regulation of the intrastate aspects.”68 Such is the case with DigitalVoice service as discussed in detail below.
20. Regardless of the definitional classification of DigitalVoice under the Communications Act, the Minnesota Vonage Order directly conflicts with our pro-competitive deregulatory rules and policies governing entry regulations, tariffing, and other requirements arising from these regulations for services such as DigitalVoice.69 Were DigitalVoice to be classified a telecommunications service, Vonage would be considered a nondominant, competitive telecommunications provider for which the Commission has eliminated entry and tariff filing requirements with respect to services like DigitalVoice.70 In particular, in completely eliminating interstate market entry requirements, the Commission reasoned that retaining entry requirements could stifle new and innovative services whereas blanket entry authority, i.e., unconditional entry, would promote competition.71 State entry and certification requirements, such as the Minnesota Commission’s, require the filing of an application which must contain detailed information regarding all aspects of the qualifications of the would-be service provider, including public disclosure of detailed financial information, operational and business plans, and proposed service offerings.72 The application process can take months and result in denial of a certificate, thus preventing entry altogether.73 Similarly, when the Commission ordered the mandatory detariffing of most interstate, domestic, interexchange services (including services like DigitalVoice), the Commission found that prohibiting such tariffs would promote competition and the public interest, and that tariffs for these services may actually harm consumers by impeding the development of vigorous competition.74 Tariffs and “price lists,” such as those required by Minnesota’s statutes and rules, are lengthy documents subject to specific filing and notice requirements that must contain every rate, term, and condition of service offered by the provider, including terms and conditions to which the provider may be subject in its certificate of authority.75 The Minnesota Commission may also require the filing of cost-justification information or order a change in a rate, term or condition set forth in the tariff.76 The administrative process involved in entry certification and tariff filing requirements, alone, introduces substantial delay in time-to-market and ability to respond to changing consumer demands, not to mention the impact these processes have on how an entity subject to such requirements provides its service.
21. On the other hand, if DigitalVoice were to be classified as an information service, it would be subject to the Commission’s long-standing national policy of nonregulation of information services,77 particularly regarding economic regulation such as the type imposed on Vonage in the Minnesota Vonage Order.78 In a series of proceedings beginning in the 1960’s, the Commission issued orders finding that economic regulation of information services would disserve the public interest because these services lacked the monopoly characteristics that led to such regulation of common carrier services historically. The Commission found the market for these services to be competitive and best able to “burgeon and flourish” in an environment of “free give-and-take of the market place without the need for and possible burden of rules, regulations and licensing requirements.”79
22. Thus, under existing Commission precedent, regardless of its definitional classification, and unless it is possible to separate a Minnesota-only component of DigitalVoice from the interstate component, Minnesota’s order produces a direct conflict with our federal law and policies, and impermissibly encroaches on our exclusive jurisdiction over interstate services such as DigitalVoice.
65 SeeLouisiana Pub. Serv. Comm’n, 476 U.S. at 375 n.4 (citing North Carolina Utils. Comm’n v. FCC, 537 F.2d 787 (4th Cir. 1976), cert. denied, 429 U.S. 1027 (1976); North Carolina Utils. Comm’n v. FCC, 552 F.2d 1036 (4th Cir. 1977) cert. denied, 434 U.S. 874 (1977) (upholding Commission preemption of state regulation because it was not possible to separate the interstate and intrastate components of the asserted Commission regulation)); see also New York State Comm’n on Cable Television v. FCC, 749 F.2d 804 (D.C. Cir. 1984) (affirming Commission order preempting state and local entry regulation of satellite master antenna television); Promotion of Competitive Networks in Local Telecommunications Markets; Wireless Communications Association International, Inc. Petition for Rulemaking to Amend Section 1.4000 of the Commission’s Rules to Preempt Restrictions on Subscriber Premises Reception or Transmission Antennas Designed to Provide Fixed Wireless Services; Implementation of the Local Competition Provisions in the Telecommunications Act of 1996; Review of Sections 68.104, and 68.213 of the Commission’s Rules Concerning Connection of Simple Inside Wiring to the Telephone Network , WT Docket No. 99-217; CC Docket Nos. 96-98, 88-57, First Report and Order and Further Notice of Proposed Rulemaking; Fifth Report and Order and Memorandum Opinion and Order; Fourth Report and Order and Memorandum Opinion and Order, 15 FCC Rcd 22983, 23031-32, para. 107 (2000) (preempting state regulation of fixed wireless antennas as an impediment to the full achievement of important federal objectives).
66SeeLouisiana Pub. Serv. Comm’n, 476 U.S. at 368-69. The Court also said that the “critical question in any pre-emption analysis is always whether Congress intended that federal regulation supersede state law.” Id. at 369. As summarized by the Supreme Court, federal law and policy preempt state action in several circumstances: (1) where compliance with both federal and state law is in effect physically impossible (citingFlorida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132); (2) when there is outright or actual conflict between federal and state law (citing Free v. Bland, 369 U.S. 663 (1962)); (3) where the state law stands as an obstacle to the accomplishment and execution of the full objectives of Congress (citingHines v. Davidowitz, 312 U.S. 52 (1941)); (4) when Congress expresses a clear intent to preempt state law; (5) where there is implicit in federal law a barrier to state regulation; and (6) where Congress has legislated comprehensively, thus occupying an entire field of regulation. Additionally, the Supreme Court has held that preemption may result not only from action taken by Congress but also from a federal agency action that is within the scope of the agency’s congressionally delegated authority. Louisiana Pub. Serv. Comm’n, 476 U.S. at 369 ( citingFidelity Federal Savings & Loan Ass’n v. De la Cuesta, 458 U.S. 141 (1982); Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691 (1984)).
67 See Pub. Serv. Comm’n of Maryland v. FCC, 909 F.2d 1510 (D.C. Cir. 1990).
68Id. at 1515 (citing National Ass'n of Regulatory Util. Comm’rs v. FCC, 880 F.2d 422, 429-31 (D.C. Cir. 1989); Illinois Bell Tel. Co. v. FCC, 883 F.2d 104, 113 (D.C. Cir. 1989); Public Util. Comm’n of Texas v. FCC, 886 F.2d 1325, 1329, 1331-33 (D.C. Cir. 1989)).
69While we do not rely on it as a basis for our action in this Order, we also note that section 253 of the Act provides the Commission additional preemption authority over state regulations that “prohibit or have the effect of prohibiting the ability of an entity to provide any interstate or intrastate telecommunications service.” 47 U.S.C. § 253. See Vonage Petition at 28 n.55 (indicating it does not submit its petition under section 253). Were DigitalVoice to be classified as a telecommunications service, however, it is possible that we could find state economic regulation such as that imposed by Minnesota to be a prohibition on the provision of an interstate and intrastate telecommunications services under section 253. See Vonage Petition at 11, 28 (describing that it is technically and practically impossible to comply with Minnesota’s “telephone company” rules).
70See, e.g., Implementation of Section 402(b)(2)(A) of the Telecommunications Act of 1996; Petition for Forbearance of the Independent Telephone & Telecommunications Alliance, CC Docket No. 97-11; AAD File No. 98-43, Report and Order and Second Memorandum Opinion and Order, 14 FCC Rcd 11364, 11372-75, paras. 12-16 (1999) (Section 214 Order) (granting blanket section 214 authority for new lines of all domestic carriers including dominant carriers like the Bell operating companies (BOCs)); Policy and Rules Concerning the Interstate, Interexchange Marketplace; Implementation of Section 245(g) of the Communications Act of 1934 , CC Docket No. 96-61, Second Report and Order, 11 FCC Rcd 20730 (1996) (Interexchange Detariffing Order) (adopting mandatory detariffing of most domestic interstate, interexchange services); Order on Reconsideration, 12 FCC 15014 (1997); Second Order on Reconsideration and Erratum, 14 FCC Rcd 6004 (1999), aff'd, MCI WorldCom, Inc. v. FCC, 209 F.3d 760 (D.C. Cir. 2000); Policy and Rules Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations Therefor, First Report and Order, 85 FCC 2d 1 (1980) (subsequent history omitted) (Competitive Carrier Proceeding) ( adopting regulatory framework based on dominant or nondominant status of carriers).
71See Section 214 Order, 14 FCC Rcd at 11373, para. 14 (“By its very terms, blanket authority removes regulatory hurdles to market entry, thereby promoting competition.”); id. at 11373, para. 13 (“Rather than maintaining [entry requirements] that may stifle new and innovative services[,] … we believe it is more consistent with the goals of the 1996 Act to remove this hurdle.”).
72 See Minn. Rule § 7812.0200.
73 See Minn. Stat. § 237.16(c)
74See Interexchange Detariffing Order, 11 FCC Rcd at 20760, para. 52 (emphasis added) (“ [W]e find that not permitting nondominant interexchange carriers to file tariffs with respect to interstate, domestic, interexchange services will enhance competition among providers of such services, promote competitive market conditions, and achieve other objectives that are in the public interest, including eliminating the possible invocation of the filed rate doctrine by nondominant interexchange carriers, and establishing market conditions that more closely resemble an unregulated environment.”); id. at 20750, para. 37 (“We also adopt the tentative conclusion that in the interstate, domestic, interexchange market, requiring nondominant interexchange carriers to file tariffs for interstate, domestic, interexchange services may harm consumers by impeding the development of vigorous competition, which could lead to higher rates.”). We note that certain exceptions to the Commission’s mandatory detariffing rules exist; however, these exceptions would not apply to services like DigitalVoice were it to be classified a telecommunications service.
75 See Minn. Stat. § 237.07; see also, e.g., Minn. Rules §§ 7812.0300(6), 7812.0350(6), 7812.2210(2).
76 See, e.g., Minn. Rule §§ 7812.2210(4),(8).
77See Regulatory and Policy Problems Presented by the Interdependence of Computer and Communication Services and Facilities, Docket No. 16979, Notice of Inquiry, 7 FCC 2d 11 (1966) (Computer INOI); Regulatory and Policy Problems Presented by the Interdependence of Computer and Communication Services and Facilities, Docket No. 16979, Final Decision and Order, 28 FCC 2d 267 (1971) (Computer I Final Decision); Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Tentative Decision and Further Notice of Inquiry and Rulemaking, 72 FCC 2d 358 (1979) (Computer II Tentative Decision); Computer II Final Decision, 77 FCC 2d 384 (1980); Amendment of Section 64.702 of the Commission's Rules and Regulations (Third Computer Inquiry), CC Docket No. 85-229, Report and Order, 104 FCC 2d 958 (1986) (Computer III) (subsequent history omitted) (collectively the Computer Inquiry Proceeding). In its Second Computer Inquiry proceeding, the Commission “adopted a regulatory scheme that distinguished between the common carriage offering of basic transmission services and the offering of enhanced services.” Computer II Final Decision, 77 FCC 2d at 387; see alsoComputer III Further Remand Proceedings: Bell Operating Company Provision of Enhanced Services; 1998 Biennial Regulatory Review – Review of Computer III and ONA Safeguards and Requirements, 13 FCC Rcd 6040, 6064, para. 38 (1998). The former services are regulated under Title II and the latter services are not. See Computer II Final Decision, 77 FCC 2d at 428-30, 432-43, paras. 113-18, 124-49 (indicating it would not serve the public interest to subject enhanced service providers to traditional common carrier regulation under Title II because, among other things, the enhanced services market was “truly competitive”). The 1996 Act uses different terminology (i.e., “telecommunications services” and “information services”) than used by the Commission in its Computer Inquiry proceeding, but the Commission has determined that “enhanced services” and “information services” should be interpreted to extend to the same functions, although the definition in the 1996 Act is even broader. See Implementation of the Non-Accounting Safeguards of Sections 271 and 272 of the Communications Act of 1934, as Amended, CC Docket No. 96-149, First Report and Order and Further Notice of Proposed Rulemaking, 11 FCC Rcd 21905, 21955-56, para. 102 (1996) (Non-Accounting Safeguards Order) (subsequent history omitted) (explaining that all enhanced services are information services, but information services are broader and may not be enhanced services).
78See, e.g., Pulver, 19 FCC Rcd at 3317-20, paras. 17-20 (explaining the Commission’s policy of nonregulation for information services and how the 1996 Act reinforces this policy). This policy of nonregulation refers primarily to economic, public-utility type regulation, as opposed to generally applicable commercial consumer protection statutes, or similar generally applicable state laws. Indeed, the preeminence of federal authority over information services has prevailed unless a carrier-provided information service could be characterized as “purely intrastate,” see California v. FCC, 905 F.2d 1217, 1239-42 (9th Cir. 1990), or it is possible to separate out the interstate and intrastate components and state regulation of the intrastate component would not negate valid Commission regulatory goals. SeeCalifornia v. FCC, 39 F.3d 919 (9th Cir. 1994) (California III), cert. denied, 514 U.S. 1050 (1995) (affirming Commission preemption of certain state requirements for separation of facilities and personnel in the BOC provision of jurisdictionally mixed enhanced services as state regulations would negate national policy).
79SeeComputer II Final Decision, 77 FCC 2d at 425-33, paras. 109-27 (citing Computer I, Tentative Decision, 27 FCC 2d at 297-298).
Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an Order of the Minnesota Public Utilities Commission, WC Docket No. 03-211, Memorandum Opinion and Order (FCC Nov. 12, 2004)
We determine, consistent with our precedent regarding information services, that FWD is an unregulated information service and any state regulations that seek to treat FWD as a telecommunications service or otherwise subject it to public-utility type regulation would almost certainly pose a conflict with our policy of nonregulation.55
16. As discussed more fully below, two separate lines of reasoning compel this determination. First, federal authority has already been recognized as preeminent in the area of information services, and particularly in the area of the Internet and other interactive computer services, which Congress has explicitly stated should remain free of regulation.56 In reaching this conclusion, we note that the Commission's traditional test for determining the boundaries of interstate versus intrastate jurisdiction - the end-to-end analysis - is inapplicable in the context of FWD and, even if it were applicable, would not support a finding of intrastate jurisdiction.57 Second, state-by-state regulation of a wholly Internet-based service is inconsistent with the controlling federal role over interstate commerce required by the Constitution.58
17. Asserting federal jurisdiction over FWD is consistent with - and supported by - the states' already-limited role with regard to information services. The Commission has, on prior occasions, determined that certain state regulations of information services would conflict with the national policy of nonregulation.59 Several decades ago, the Commission recognized in its Computer Inquiry proceeding60 that enhanced services would continue to develop best in an unregulated environment and, given the competitive nature of the market, regulation of enhanced services was thus unwarranted.61 For example, in adopting non-structural requirements for the Bell operating company provision of enhanced services, the Commission recognized that certain state requirements affecting the intrastate portion of jurisdictionally mixed enhanced services would thwart Commission objectives and thus were not permitted.62 Indeed, in those instances where the states have attempted to assert jurisdiction, this Commission has been affirmed in asserting its national policy of nonregulation.63 Consequently, states have generally played a very limited role with regard to information services. We see no reason to depart from this precedent here.
18. Passage of the 1996 Act increases substantially the likelihood that any state attempt to impose economic regulation of FWD would conflict with federal policy.64 In section 230 of the 1996 Act, Congress expressed its clear preference for a national policy "to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services" unfettered by Federal or State regulation.65 Courts have repeatedly recognized this congressional intent and, as a result, have rejected state attempts to regulate such services.66 In addition, in section 706 of the 1996 Act Congress required the Commission to
encourage deployment of advanced telecommunications capability to all Americans by using measures that "promote competition in the local telecommunications market."67 We recognize that most states have not acted to produce an outright conflict between federal and state law that justifies Commission preemption,68 but nevertheless confirm that the Commission does have the authority to act in this area if states promulgate regulations applicable to FWD's service that are inconsistent with its current nonregulated status.
19. We find that granting Pulver's petition and declaring FWD to be an unregulated information service subject to Commission jurisdiction will facilitate the further development of FWD and Internet applications like it and these offerings, in turn, will encourage more consumers to demand broadband service.69 Ensuring that FWD, as it is currently offered, remains unregulated by the Commission or the states is thus consistent with the requirements of the Act.70 To rule otherwise would effectively apply a regulatory paradigm that was previously developed for different types of services, which were provided over a vastly different type of
network. Indeed, we would risk eliminating an innovative service offering that, as noted by Pulver, promotes consumer choice, technological development and the growth of the Internet, and universal service objectives.71 For reasons provided herein, that FWD happens to, among other things, enable members to talk over the Internet, as opposed to play video games, for example, does not affect our conclusion that FWD is most appropriately characterized as an unregulated information service.
20. Unless an information service can be characterized as "purely intrastate,"72 or it is practically and economically possible to separate interstate and intrastate components of a jurisdictionally mixed information service without negating federal objectives for the interstate component, exclusive Commission jurisdiction has prevailed.73 FWD clearly can not appropriately be characterized as a purely intrastate information service. FWD's members currently reside in over 170 countries around the world, with less than 33% of those members indicating their country of residence as the United States.74 Of those members based in the United States, all 50 states are identified as member locations.75 Because FWD facilitates its members' ability to contact any of its other members worldwide, to communicate with more than one at any given time, and because these members' physical locations can continually change, it is evident that the capabilities FWD provides its members are not purely intrastate capabilities. Moreover, it would be impractical to determine whether there was any intrastate component to FWD given the fact that FWD's information service as provided to its members occurs solely within the confines of the Internet.
21. Indeed, these characteristics of FWD render our normal approach to determining jurisdiction -the end-to-end analysis -unhelpful. Traditionally, the Commission has applied its so-called end-to-end analysis, looking at the end points of a communication, to determine the jurisdictional nature of any given service.76 Briefly, the Commission considers the "continuous path of communications," beginning with the inception of a call to its completion, and has rejected attempts to divide communications at any intermediate points between providers.77 While our traditional end-to-end approach to determining a communication's jurisdiction has relevance for a circuit-switched network, it has little or none with regard to FWD. Indeed, in the case of FWD the concept of "end points" has little relevance. What Pulver provides is information on its server located on the Internet.78 If an FWD member uses that information to set up communications, such as voice, between itself and other members, that communication- the only conceivable "end points" involved here-is transmitted by that member's ISP over the Internet. That does not, however, impute those "end points" to FWD, which remains a server on the Internet. Furthermore, even if the members' locations were somehow relevant to their use of FWD, FWD's portable nature without fixed geographic origination or termination points means that no one but the members themselves know where the end points are.79 Attempting to require Pulver to locate its members for the purpose of adhering to a regulatory analysis that served another network would be forcing changes on this service for the sake of regulation itself, rather than for any particular policy purpose. The Act counsels against it,80 and we decline to do it. Finally, we are not aware that the Commission has ever applied an end-to-end-analysis for determining the jurisdiction of a particular service where the service provider was not itself providing some aspect of the user's underlying transmission capability.
22. We find that even if some form of an end-to-end analysis were deemed applicable to FWD, FWD would be considered an interstate information service in accordance with our "mixed use" doctrine.81 Where separating interstate traffic from intrastate traffic is impossible or impractical, the Commission has declared such traffic to be interstate in nature.82 Based on the record in this proceeding, it is evident that it is impossible or impractical to attempt to separate FWD into interstate and intrastate components.83 This "impossibility" results from the global portability feature of an FWD member's unique identification number, enabling that member to initiate and receive on-line communications from anywhere in the world where it can access the Internet via a broadband connection.84 Moreover, FWD's technology does not enable Pulver to determine the actual physical location of an underlying IP address.85 Finally, it is evident that more than a de minimus amount of FWD's offering is interstate.86 Therefore, we would analogize the FWD offering to those previously deemed exclusively interstate by the Commission where it has applied its "mixed use" rule.87
23. Finally, our conclusions today also are consistent with the Commerce Clause, which denies "the States the power unjustifiably to discriminate against or burden the interstate flow of articles of commerce."88 The nature of FWD as an Internet application not bound by geography may well render an attempt by a state to regulate any theoretical intrastate FWD component an impermissible extraterritorial reach.89 In other words, as we have noted above, FWD itself is merely an Internet application available on Pulver's server, which members anywhere reach via the Internet. FWD members reaching Pulver's server to initiate a communication may be located anywhere in the world where an Internet connection is available to them. Because of the way FWD is offered, one state's regulation of FWD may have the practical effect of requiring those same regulations to be applied to FWD service for all users.
24. Moreover, even where state regulation is not a per se violation of the Commerce Clause, courts have inquired whether the burden imposed on interstate commerce by state regulation would be "clearly excessive in relation to the putative local benefits."90 This may well be the case with respect to FWD. As an initial matter, we cannot envision how state economic regulation of the FWD service described in this proceeding could benefit the public. In contrast, however, the burdens upon interstate commerce would be significant. Even if it were relevant and possible to track the geographic location of packets and isolate traffic for the purpose of ascertaining state jurisdiction over a theoretical intrastate component of an otherwise integrated bit stream, such efforts would be impractical. Tracking FWD's packets to determine their geographic location would involve the installation of systems that are unrelated to providing its service to end users. Rather, imposing such compliance costs on providers such as Pulver would
be designed simply to comply with legacy distinctions between the federal and state jurisdictions. Here, such distinctions do not appear to serve any legitimate public policy purpose. Investment in such systems would improve neither service nor efficiency. In a dynamic market such as the market for Internet applications like FWD, we find that imposing this substantial burden would make little sense and would almost certainly be significant and negative for the development of new and innovative IP services and applications.
25. Furthermore, if Pulver were subject to state regulation, it would have to satisfy the requirements of more than 50 state and other jurisdictions with more than 50 different certification, tariffing and other regulatory obligations. State regulation of FWD would make FWD unique among Internet applications as the only Internet application to be subject to such state obligations. Indeed, allowing the imposition of state regulation would eliminate any benefit of using the Internet to provide the service: the Internet enables individuals and small providers, such as Pulver, to reach a global market simply by attaching a server to the Internet; requiring Pulver to submit to more than 50 different regulatory regimes as soon as it did so would eliminate this fundamental advantage of IP-based communication. Certainly, it is this kind of impact Congress considered when it made clear statements about leaving the Internet and
interactive computer services free of unnecessary federal and state regulation noted above.9152 See Pulver Dec. 11 Ex Parte Letter at 3 (acknowledging that there is "some transmission involved in the-- In re Petition for Declaratory Ruling that pulver.com's Free World Dialup is Neither Telecommunications Nor a Telecommunications Service, WC Docket No. 03-45, Memorandum Opinion And Order (FCC February 19, 2004)
provision of FWD").
53 See Non-Accounting Safeguards Order, 11 FCC Rcd at 21956, para. 103.
54 While we do not rely on the framework outlined by the Commission in its 1998 Report to Congress, we note that the conclusion we reach here that FWD is an information service is consistent with the framework discussed by the Commission in that report for two reasons: (1) to the extent FWD service is carried out entirely over the Internet using computer-based software, this resembles what that report characterized as computer-to-computer VoIP and, as contemplated therein, would be considered an information service; and (2) FWD fails the four-prong test for determining whether it is a phone-to-phone service, specifically, because it does not use NANP numbers and does not use the same CPE as may be used for circuit-switched calls (rather it uses dedicated SIP phones or soft phones). See Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report to Congress, 13 FCC Rcd 11501, 11520, para. 39 (1998) (Stevens Report).
55 We note that this conclusion is confined to the FWD service as described in this Order. See supra note 3.
56 See 47 U.S.C. § 230; see also infra para. 18. In section 230(e)(2) Congress defines "interactive computer
service" as "any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server." 47 U.S.C. § 230(e)(2) (emphasis added).
57 See 47 U.S.C. § 153(22) (defining "interstate communication"). In section 2(a) of the Act, Congress has given the Commission exclusive jurisdiction over interstate communications. 47 U.S.C. § 152(a). Section 2(b) of the Act reserves to the states jurisdiction over intrastate services. See 47 U.S.C. § 152(b); see infra note 81.
58 See infra paras. 23-25 (discussing the applicability of the Commerce Clause).
59 California v. FCC, 39 F.3d 919, 931 (9th Cir. 1994) (When state regulations would negate national policy, the Commission may preempt state regulations.).
60 The Commission launched its Computer Inquiry proceedings more than 30 years ago. See Regulatory and
Policy Problems Presented by the Interdependence of Computer and Communication Services and Facilities,
Docket No. 16979, Notice of Inquiry, 7 FCC 2d 11 (1966) (Computer I NOI); Regulatory and Policy Problems
Presented by the Interdependence of Computer and Communication Services and Facilities, Docket No. 16979, Final Decision and Order, 28 FCC 2d 267 (1971) (Computer I Final Decision); Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Tentative Decision and Further Notice of Inquiry and Rulemaking, 72 FCC 2d 358 (1979) (Computer II Tentative Decision); Computer II Final Decision, 77 FCC 2d 384 (1980); Amendment of Section 64.702 of the Commission's Rules and Regulations (Third Computer Inquiry), CC Docket No. 85-229, Report and Order, 104 FCC 2d 958 (1986) (Computer III) (subsequent cites omitted) (collectively the Computer Inquiry). In its Second Computer Inquiry proceeding, the Commission "adopted a regulatory scheme that distinguished between the common carriage offering of basic transmission services and the offering of enhanced services." Computer II Final Decision, 77 FCC 2d at 387; Computer III Further Remand Proceedings: Bell Operating Company Provision of Enhanced Services; 1998 Biennial Regulatory Review - Review of Computer III and ONA Safeguards and Requirements, 13 FCC Rcd 6040, 6064, para. 38 (1998). The former services are regulated under Title II and the latter services are not. See Computer II Final Decision, 77 FCC 2d at 428-30, 432-43 (indicating it would not serve the public interest to subject enhanced service providers to traditional common carrier regulation under Title II because, among other things, the enhanced services market was "truly competitive"). Although the 1996 Act uses different terminology (i.e., "telecommunications services" and "information services") than used by the Commission in its Computer Inquiry proceeding, the Commission has determined that "enhanced services" and "information services" should be interpreted to extend to the same functions, although the definition in 1996 Act is even broader. See Non- Accounting Safeguards Order, 11 FCC Rcd at 21955-56, para. 102 (explaining that all enhanced services are information services, but information services are broader and may not be enhanced services).
61 Computer II Final Decision, 77 FCC 2d at 433, paras. 127-28 ("[W]e believe the market for these [enhanced] services will continue to burgeon and flourish best in the existing competitive environment") (further citations omitted); see Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, 88 FCC 2d 512, 541, para. 83 n.34 (Computer II Further Reconsideration Order) ("we have determined that the provision of enhanced services is not a common carrier public utility offering and that the efficient utilization and full exploitation of the interstate telecommunications network would best be achieved if these services are free from public utility-type regulation."). Indeed, the Commission said that states "may not impose common carrier tariff regulation on a carrier's provision of enhanced services," id., and such state"regulation of entry and service terms and conditions (including rates and features availability) ostensibly applied to 'intrastate' enhanced services would have a severe impact" on federal open entry policies. Amendment of Section 64.702 of the Commission's Rules and Regulations (Third Computer Inquiry), CC Docket No. 85-229, Memorandum Opinion and Order on Reconsideration, 2 FCC Rcd 3035, 3070, n.374. (1987) (Computer III Phase I Recon). The precise contours of these state limitations were the subject of continued litigation. See Computer and Communications Industry Ass'n v. FCC, 693 F.2d 198, 204 (D.C. Cir. 1982) (on appeal of Computer II the court explicitly noted the Commission's preemption of any state regulation of enhanced services, affirming Computer II
in its entirety); id. at 205-06 nn. 26-28; California v. FCC, 905 F. 2d 1217, 1239-1242 (9th Cir. 1990) (California I) (vacating Computer III preemption of all state regulation of enhanced services due to Commission's failure to consider the possibility of "purely intrastate enhanced services" and what effect state regulation may have on valid Commission goals); but see California v. FCC, 39 F.3d 919 (9th Cir. 1994) (affirming Commission preemption of state requirements for structural separation of facilities and personnel used to provide the intrastate portion of jurisdictionally mixed enhanced services, and state regulations regarding CPNI and network disclosure rules). The Commission has stated that it has exclusive jurisdiction to regulate enhanced services where it is not possible to separate out the interstate and intrastate components and state regulations would negate valid Commission regulatory goals. See Policy and Rules Concerning the Interstate Interexchange Marketplace, CC Docket No. 96-6, Further Notice of Proposed Rulemaking, 13 FCC Rcd 21531, 21553 (1998) (citing California III).
62 See Computer III Remand Proceedings: Bell Operating Company Safeguards and Tier 1 Local Exchange
Company Safeguards, 6 FCC Rcd 7571, 7632, paras. 122-24 (BOC Safeguards Order) (preempting state
requirements for separation of facilities and personnel in the provision of jurisdictionally mixed enhanced services); see also note 81 infra (discussing the Commission's "mixed use" standard to determine jurisdiction).
63 See California III, 39 F.3d 932; see also Petition For Emergency Relief And Declaratory Ruling Filed By The BellSouth Corporation, 7 FCC Rcd 1619, 1620, para. 7 (BellSouth MemoryCall) (preempting order of the state public utility commission because of its impact on a BellSouth jurisdictionally mixed information service).
64 See MCI Dec. 12 Ex Parte Letter at 3 n.8 (quoting AT&T v. Iowa Utils. Bd., 525 U.S. 366, 377-80 & n.6 (1999) ("[T]he question in these cases is not whether the Federal Government has taken the regulation of local telecommunications competition away from the States. With regard to the matters addressed by the 1996 Act, it unquestionably has.")). As noted previously by the Commission, through its 1996 Act, Congress codified the distinction that the Commission made between "basic services" and "enhanced services" (as "telecommunications services" and "information services"). See Non-Accounting Safeguards Order, 11 FCC Rcd at 21955-56, para. 102. By not including information services within the ambit of Title II, Congress expressed a preference that information services not be regulated. Although the Commission has clear authority to do so, it has only rarely sought to regulate information services using its Title I ancillary authority. See Section 255 Order, 16 FCC Rcd at 6457.
65 See 47 U.S.C. § 230(b)(2).
66 See, e.g., Vonage Holdings Co. v. Minnesota Pub. Utils. Comm'n, 290 F. Supp. 2d 993, 997, 1001-02 (D.
Minn. 2003); Southwestern Bell Tel. Co. v. FCC, 153 F.3d 523, 544 (8th Cir. 1998); Zeran v. America Online, Inc., 129 F.3d 327, 330 (4th Cir. 1997).
67 47 U.S.C. § 157 nt. Section 706 of the 1996 Act is located in the notes of section 7 and we note that section 7, itself, clearly explains that it is the policy of the United States to encourage the provision of new technologies and services to the public. To implement this mandate, the Commission has considered, among other things, whether its rules promote the delivery of innovative advanced services offerings. See Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, Deployment of Wireline Services Offering Advanced Telecommunications Capability, CC Docket Nos. 01-338, 96-98, 98-147, Report and Order and Order on Remand and Further Notice of Proposed Rulemaking, 18 FCC Rcd 16978, 17125-26, para. 242 (2003) (Triennial Review Order), corrected by Errata, 18 FCC Rcd 19020 (2003) (Triennial Review Order Errata), petitions for review pending, United States Telecom Ass'n v. FCC, D.C. Cir. No. 00-1012 (and consolidated cases). We find that our actions in this ruling are also consistent with this provision of the Act.
68 See Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an Order of the Minnesota
Public Utilities Commission, WC Docket No. 03-211 (filed Sept. 22, 2003).
69 As noted above, Congress has clearly indicated that information services are not subject to the economic and entry/exit regulation inherent in Title II. In so doing, however, Congress has provided the Commission with ancillary authority under Title I to impose such regulations as may be necessary to carry out its other mandates under the Act. We expressly decline to exercise Title I jurisdiction over FWD to impose any economic or entry/exit regulation. Such regulation would not only run counter to our decades old goals and objectives to enable information services to function in a freely competitive, unregulated environment, but would directly contravene Congress's express directives in sections 706 and 230 of the Act that services such as FWD not be subject to suchregulation. Moreover, we decline to impose any other type of regulation on Pulver's FWD information service at this time.
70 Any state attempt to impose economic or other regulations that treat FWD like a telecommunications service would impermissibly interfere with the Commission's valid federal interest in encouraging the further development of Internet applications such as these, unfettered by Federal or state regulation, and thus would be preempted.
71 Pulver Reply at 6.
72 See California v. FCC, 905 F.2d 1217 (1990). We recognize that states theoretically could have a role in
regulating a purely intrastate information service, but we doubt that, with the particular service at issue here, any state could claim FWD to be "purely intrastate."
73 See supra para. 17.
74 See Pulver Jan. 15 Ex Parte Letter, Attach. at 3-4; Pulver Jan. 20 Ex Parte Letter at 1 (indicating there are currently about 141,000 registered FWD members, approximately 45,000 of which identify themselves with an address in the United States).
75 See Pulver Jan. 20 Ex Parte Letter at 1.
76 See, e.g., Bell Atlantic Tel. Cos. v. FCC, 206 F.3d 1, 3 (D.C. Cir. 2000).
77 See, e.g., BellSouth Memory Call, 7 FCC Rcd at 1620; Teleconnect Company v. Bell Telephone Company of Penn., 10 FCC Rcd 1626, 1629 (1995); GTE ADSL Order, 13 FCC Rcd at 22466, 22475-78, paras. 17-21. In the GTE ADSL Order, the Commission disagreed that an end-to-end ADSL communication must be separated into two components - an intrastate telecommunications service (provided in this instance by GTE) and an interstate information service (provided by an ISP). GTE ADSL Order, 13 FCC Rcd at 22477-78, para. 20.
78 In the GTE ADSL Order, the Commission identified the practical difficulties of applying its end-to-end analysis to Internet communications by noting that such communications do not necessarily have an identifiable point of"termination," in the traditional sense, for jurisdictional purposes. GTE ADSL Order, 13 FCC Rcd at 22479, para. 22. In a more recent context, the Commission similarly found it difficult to pinpoint the origination of a communication arising over the Internet. Provision of Improved Telecommunications Relay Services and Speechto- Speech Services for Individuals with Hearing and Speech Disabilities, CC Docket No. 98-97, Declaratory Ruling and Second Further Notice of Proposed Rulemaking, 17 FCC 7779, 7784, para. 15 (2002) (Because the first leg of an IP Relay call comes over the Internet, rather than from a telephone, there is no automatic way to determine whether any call is intrastate or interstate. This is because Internet addresses do not have geographic correlates, and there is currently no Internet address identifier that can automatically give the location of the caller.). In the FNPRM in that proceeding, the Commission tentatively proposed to use an end-to-end analysis to define whether anIP Relay call is interstate or intrastate for the limited purpose of determining a statutorily mandated cost allocation. Id. at 7792, para. 42; see also 47 U.S.C. § 225(d)(3)(B). That proceeding is still pending. Furthermore, unlike the FWD communications addressed in this Order, the IP Relay call does not both begin and end in the Internet.
79 See Pulver Dec. 16 Ex Parte Letter at 1-2.
80 See supra para. 18.
81 See MTS and WATS Market Structure, Amendment of Part 36 of the Commission's Rules and Establishment of a Joint Board, CC Docket Nos. 78-72, 80-286, Decision and Order, 4 FCC Rcd 5660, n.7 (1989) (MTS/WATS Market Structure Separations Order) (the Commission found that "mixed use" special access lines carrying more than a de minimis amount of interstate traffic to private line systems are subject to the Commission's jurisdiction because traffic on many such lines could not be measured without "significant additional administrative efforts").
82 Id.
83 See, e.g., MCI Dec. 12 Ex Parte Letter at 1; Cisco Dec. 11 Ex Parte Letter at 5; Level 3 Dec. 16 Ex Parte Letter at 2; Verizon Feb.5 Ex Parte Letter at 2.
84 See Pulver Dec. 16 Ex Parte Letter at 1-2.
85 Id.
86 See supra para. 20.
87 See, e.g., Cisco Dec. 11 Ex Parte Letter at 4-5; Vonage Dec. 10 Ex Parte Letter at 3-4.
88 U.S. Const. art. 1, § 8, cl. 3; see also Oregon Waste Sys. v. Dep't of Envtl. Quality, 511 U.S. 93, 98 (1994).
89 See Cotto Waxo Co. v. Williams, 46 F.3d 790, 793 (8th Cir. 1995) ("Under the Commerce Clause, a state
regulation is per se invalid when it has an 'extraterritorial reach,' that is, when the statute has the practical effect of controlling conduct beyond the boundaries of the state. The Commerce Clause precludes application of a state statute to commerce that takes place wholly outside of the state's borders.") (citation omitted).
90 See Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970); see also Cotto Waxo Co. at 793 ("[I]f the challenged statute regulates evenhandedly, then it burdens interstate commerce indirectly and is subject to a balancing test. Under the balancing test, a state statute violates the Commerce Clause only if the burdens it imposes on interstate commerce are 'clearly excessive in relation to the putative local benefits.'") (citation omitted).
91 We note the existence of other "network"-based service examples where, although an intrastate component of such service may exist, this intrastate component must nonetheless yield to exclusive federal jurisdiction in the area of economic or other state regulations affecting entry to advance articulated congressional or federal deregulatory objectives. See, e.g., 49 U.S.C.A. § 14501 (preempting state economic regulation of motor carriers); Carsten v. United Parcel Service, Inc., 1996 WL 335421(E.D.Cal.1996) (holding that section 14501(c)(1) clearly reaffirms Congress's intent to preempt state laws relating to the prices of motor carriers); 47 U.S.C. § 332(c)(A) (preempting state regulation of entry or rates of commercial mobile radio service providers); New York State Commission v. FCC, 749 F.2d 804 (1984) (preempting state and local entry regulation of satellite master antenna television.).
We conclude that LocalDials service meets the definition of telecommunications under federal law.31 LocalDial does not provide information service or enhanced service.The FCC has not preempted the states from regulating intrastate telecommunications services. We have the jurisdiction to decide, and are not preempted from deciding, whether LocalDial’s service is subject to our regulatory authority under chapter 80 RCW.
... LocalDial goes further with this line of argument to suggest that we await the outcome of the FCC’s Notice of Proposed Rulemaking (NPRM) on IP-enabled services, which was initiated in March of this year. It is unclear whether the outcome of the NPRM will have any bearing on the issues pending here. Moreover, the timing of the NPRM is uncertain, but likely will consume much of this year and may extend into 2005. Considering that this matter is before us by referral from the Federal District Court, it would be inappropriate for us to not respond in a timely manner.
Washington Exchange Carriers Association v. LocalDial Corporation, Docket UT-031472, Order, p. 25 (WUTC June 11, 2004)
Vonage and others claim that state regulation of its service is preempted because: (1) Vonage offers information service under federal law; (2) state regulation of information services and the Internet is inconsistent with federal law; and (3) the interstate and intrastate aspects of its service cannot be segregated; or (4) its service is an Internet application and Congress declared that the Internet should be free of regulation.
First, Vonage service is not an information service under federal law, despite claims to the contrary. The Telecommunications Act of 1996 14 (the 1996 Act) defines "telecommunications" as "the transmission, between or among points specified by the user, of information of the user's choosing without change in the form or content of the information as sent and received."15 The 1996 Act further defines "telecommunications service" as "offering of telecommunications for a fee directly to the public . regardless of the facilities used."16
In contrast, "information service" is defined in the 1996 Act as "the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications, and includes electronic publishing, but does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service." 17
The FCC view of the differences between telecommunications services and information services was discussed in its April 10, 1998, Report to Congress on Universal Service.18 The critical distinction drawn by the FCC in classifying a service as either information or telecommunications was whether the provider performed some function that modifies the information, or merely transmits it.19
A Vonage customer's voice is transmitted between or among points specified by the customer, without any change in the form or content of the conversation. Nothing is changed, added or subtracted to the conversation in any way. Moreover, its provision of analog-to-IP (and vice-versa) conversion equipment in order to utilize the Internet as a transmission medium ultimately changes neither the form nor content of the caller's information. Consequently, Vonage's service is a "telecommunications service"
which can be regulated by the states.
Likewise, Vonage's service is not an information service. It does not offer its customers a capability to manipulate or interact with stored data. Vonage's service merely transmits its users' voices between and among endpoints chosen by the caller.
With regard to its argument that it is an information service because it provides a net protocol conversion, the FCC has ruled that when there are protocol conversions at both ends of the call ("no net" protocol conversion), the service is a telecommunications
service.20 Vonage's service involves this type of "no net" protocol conversion. Its adapter and/or software convert its customers' speech into the Internet protocol (IP) data format. Vonage's network subsequently converts IP packets back to TDM in order to
facilitate calls between its customers and other carriers' telephone subscribers.
Second, neither Congress nor the FCC has preempted state law. Section 601 of the 1996 Act states that the 1996 Act "shall not be construed to modify, impair or supersede Federal, State or local law unless expressly so provided."21 While Voice on
the Net Coalition argues that §230(b)22 of the Act preempts state regulation of IP telephony, this argument incorrectly states the intent of §230. Section 230 is entitled "Protection for private blocking and screening of offensive material," and is intended to
address the content of speech transmitted over the Internet rather than traditional common carrier regulation.
Moreover, the FCC has not acted to preempt state law. While not binding, the FCC's report to Congress tentatively concluded that "phone-to-phone" IP telephony appears to be a telecommunications service.23 It makes no definitive statements, however, as to the statutory classification of other types of IP telephony.24 Instead, the FCC deferred classification of specific IP telephony services to further proceedings.25
More recently, in a Notice of Proposed Rulemaking, the FCC initiated a global proceeding to investigate in detail the classification and appropriate regulation of the various forms of IP-enabled services, including Vonage-type services.26 Thus, Vonage's argument that state regulation conflicts with FCC findings is, at best, premature.
Even if the FCC were to classify Vonage's service as an information service, the Commission would not be preempted from regulating its intrastate aspects. The Communications Act §152 (b) expressly preserves state jurisdiction over intrastate information services.27
Third, Vonage claims that the impossibility doctrine and the FCC's mixed use rule preempt state regulation of VoIP services such as those provided by Vonage. The impossibility doctrine holds that state jurisdiction over intrastate communications is preserved unless it is impossible to separate the interstate and intrastate aspects of a service, and state regulation would negate the FCC's lawful exercise of its authority over interstate communications.28 The FCC has the burden of showing that its rules preempt only state rules that actually interfere with its goals.29 It has made no such declaration. Moreover, Vonage's claim that it is technically impossible to separate intrastate and interstate regulation of its services is incorrect. The company's "Unlimited Local Plan"30 allows customers unlimited local and regional calling and up to 500 minutes of long distance calls. By implementing this plan, the company has shown that it can distinguish local calls from long distance calls. Consequently, it is not impossible to separate intrastate and interstate calls.
The FCC's mixed use rule also does not apply to Vonage. The FCC established the mixed use rule as a way to establish the appropriate jurisdiction over special access lines where it was impractical to determine the jurisdictional status of the traffic.31 It was not used by the FCC for any purpose other than allocating special access jurisdiction32 and, therefore, is inapposite to Vonage's service.
Finally, the claim that our jurisdiction is preempted because Congress declared that the Internet should be free of regulation misreads the Act. As we stated above, §230 is aimed at the content of speech on the Internet and does not affect states' application of traditional common carrier regulation.
-- Complaint of Frontier Telephone of Rochester, Inc. Against Vonage Holdings Corporation Concerning Provision of Local Exchange and InterExchange Telephone Service in New York State in Violation of the Public Service Law, CASE 03-C-1285, Order Establishing Balanced Regulatory Framework for Vonage Holding Corporation, p. 11-15 (May 21, 2004)
Further, although there have been arguments that other states and the FCC are addressing the status of the VOIP technology, the Commission finds that, at this time, there is no evidence that supports the claim that this issue has been decided. Nor is there any federal law that preempts state law with respect to telephone services provided using VOIP technology. Further, the Minnesota Legislature has not exempted services provided by VOIP technology from regulation.
-- In the Matter of the 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 (Minnesota PUC Sept. 11, 2003) http://www.puc.state.mn.us/docs/orders/03-0108.pdf
The Commission has not definitively determined if any form of IP telephony is either telecommunications service or information service.4 In its 1998 Universal Service Report to Congress, the Commission observed that information service providers (ISPs) do not appear to be providing telecommunications when users of the ISP's services conduct "computer-to-computer" VOIP calls. In the same Report, however, the Commission opined that "phone-to-phone" VOIP telephony services appear to lack "the characteristics that would render them "information services" within the meaning of the statute, and instead are "telecommunications services." The Commission deferred definitive resolution of these issues pending development of a fuller record. The allegations contained in Vonage's petition for declaratory ruling are insufficient for determining whether its service meets the Act's definition of information service, particularly considering the specific exemption in the criteria for the use of the capabilities for the operation of a telecommunications service.
-- In re Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an Order of the Minnesota Public Utilities Commission, WC Docket No. 03-211, Comments of the New York State Department of Public Service (Oct 27, 2003) http://www.dps.state.ny.us/fcc/FCC_10_27_03_b.pdf
The Court must follow the statutory intent expressed by Congress, and interpreted by the FCC. Short of explicit statutory language, the Court can find no stronger guidance for determining that Vonage's service is an information service, as defined by Congress and interpreted by the FCC.
Having determined that Vonage's services constitute information services, the Court next examines Congress's intent with regard to state regulation of information services, to determine whether the MPUC's order is pre-empted. By clearly separating information services from telecommunications services, the Court finds ample support for the proposition that Congress intended to keep the Internet and information services unregulated.
Because Congress has expressed an intent that services like Vonage's must remain unregulated by the Communications Act, and because the MPUC has exercised state authority to regulate Vonage's service, the Court concludes that that state and federal laws conflict, and pre-emption is necessary. Louisiana PSC, 476 U.S. at 368, 106 S.Ct. at 1898.
Where federal policy is to encourage certain conduct, state law discouraging that conduct must be pre-empted. See Xerox Corp. v. County of Harris, 459 U.S. 145, 151-53, 103 S.Ct. 523, 527-29 (1982) (holding state tax could not be imposed on Mexican-manufactured goods shipped to the United states where Congress clearly intended to create a duty-free enclave to encourage merchants to use American ports); see also 1 Laurence H. Tribe, American Constitutional Law § 6-29, at 1181-82 (3d ed. 2000) ("state action must ordinarily be invalidated if its manifest effect is to penalize or discourage conduct that federal law specifically seeks to encourage").
In the Universal Service Report, the FCC explained that policy considerations required keeping the definition of telecommunications services distinct from information services so that information services would be open to healthy competition. Its discussion demonstrates the FCC's reluctance to permit state regulation of information services providers, foreshadowing the very issue before the Court today:An approach in which a broad range of information service providers are simultaneously classed as telecommunications carriers, and thus presumptively subject to the broad range of Title II constraints, could seriously curtail the regulatory freedom that the Commission concluded in Computer II was important to the healthy and competitive development of the enhanced-services industry. . . . The classification of information service providers as telecommunications carriers, moreover, could encourage states to impose common-carrier regulation on such providers. . . . State requirements for telecommunications carriers vary from jurisdiction to jurisdiction, but include certification, tariff filing, and various reporting requirements and fees.Universal Service Report, 13 FCC Rcd. ¶ 46, at 11524. The Court thus concludes that Minnesota regulations that have the effect of regulating information services are in conflict with federal law and must be pre-empted.
-- Vonage v. Minnesota PUC, Civil No. 03-5287, Sec. IV.A. (MJD/JGL) (DMN October 16, 2003)Vonage Holdings Corp. v. Minn. Pub. Utils. Comm’n, 290 F. Supp. 2d 993, 997 (D. Minn. 2003) (“Vonage I”)
2. There are both legal and policy implications presented by VoIP. Before a state may regulate VoIP, the service must be considered intrastate - which seems dubious given that Internet protocol packets often traverse several states before reaching their destination, even in an otherwise "local" call. Recently, a federal judge in Minnesota struck down a state agency's attempt to regulate VoIP just like traditional telephone service, holding that federal law preempts state regulation because VoIP is an "information service." Even if the Minnesota court's opinion is eventually reversed, the FCC may rule that VoIP is interstate in nature, and then the FCC likely would itself forebear from imposing much regulation upon the service. Indeed, FCC Chairman Michael Powell recently opined that state and federal agencies should not regulate VoIP unless there is an absolutely compelling justification for doing so.
--In The Matter Of The Investigation Into Voice Over Internet Protocol (Voip) Services, Docket No. 03M-220T, Order Closing Docket ¶ 1 (Colorado PUC Dec. 17, 2003) (Chairman Gregory E. Sopkin Specially Concurring)
3. We note that the Federal Communications Commission (FCC) has asserted jurisdiction over the internet and related services, and has opened a docket to address issues raised by VoIP. (Staff will continue to monitor the FCC proceedings and comments made by parties to the FCC's docket.) Because of the legal uncertainty of whether a state may regulate VoIP services, as well as the host of policy issues involved with VoIP, we believe the most prudent course is to take no action with respect to VoIP pending FCC action.
--In The Matter Of The Investigation Into Voice Over Internet Protocol (Voip) Services, Docket No. 03M-220T, Order Closing Docket ¶ 2 (Colorado PUC Dec. 17, 2003)
Last but not least, to ensure that these markets would truly be able to develop on deregulated, procompetitive basis, the FCC asserted its jurisdiction under Title I of the Act to preempt the states from imposing common carrier regulation on either CPE or enhanced services . Computer II Final Decision, 77 FCC2d at 4555-57; Computer II Further Reconsideration, 88 FCC2d at 5451 n . 3845." --Janice Obuchowski, Must the Ninth Circuit's Reversal of Computer III Lead to Regulations of Enhanced Services?, 8 Comm. Law. 1 (Fall 1990).
-Robert J. Butler, In the Aftermath of California V. FCC: Computer III remand Proceedings Pose Difficult Policy Choices For the enhanced service Industry, 8 No. 5 Computer Law. 24, 25 (May 1991) (petition refered to is Investigation of Regulation of enhanced services, Formal Case No. 904, Order No. 9659 (D.C. PSC Feb 22, 1991); Public Notice, DA 91-223 (FCC Feb 22, 1991)).
Minn. Pub. Utils. Comm’n v. F.C.C., 483 F.3d 570, 580 (8th Cir. 2007) (“Vonage III”) (observing that “any regulation of an information service conflicts with the federal policy of nonregulation”)
Preempting Multiple Avoiding Jurisdictions
37. Allowing Minnesota’s order to stand would invite similar imposition of 50 or more additional sets of different economic regulations on DigitalVoice, which could severely inhibit the development of this and similar VoIP services.129 We cannot, and will not, risk eliminating or hampering this innovative advanced service that facilitates additional consumer choice, spurs technological development and growth of broadband infrastructure, and promotes continued development and use of the Internet. To do so would ignore the Act’s express mandates and directives with which we must comply, in contravention of the pro-competitive deregulatory policies the Commission is striving to further.
129See Pulver, 19 FCC Rcd at 3319-20, para. 19; see also American Libraries Ass’n v. Pataki, 969 F. Supp. at 183 (“Haphazard and uncoordinated state regulation [of the Internet] can only frustrate the growth of cyberspace.”).
Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an Order of the Minnesota Public Utilities Commission, WC Docket No. 03-211, Memorandum Opinion and Order (FCC Nov. 12, 2004 )
We determine, consistent with our precedent regarding information services, that FWD is an unregulated information service and any state regulations that seek to treat FWD as a telecommunications service or otherwise subject it to public-utility type regulation would almost certainly pose a conflict with our policy of nonregulation.55
-- In re Petition for Declaratory Ruling that pulver.com's Free World Dialup is Neither Telecommunications Nor a Telecommunications Service, WC Docket No. 03-45, Memorandum Opinion And Order ¶ 15 (FCC February 19, 2004)
In the Universal Service Report, the FCC explained that policy considerations required keeping the definition of telecommunications services distinct from information services so that information services would be open to healthy competition. Its discussion demonstrates the FCC's reluctance to permit state regulation of information services providers, foreshadowing the very issue
before the Court today:An approach in which a broad range of information service providers are simultaneously classed as telecommunications carriers, and thus presumptive ly subject to the broad range of Title II constraints, could seriously curtail the regulatory freedom that the Commission concluded in Computer II was important to the healthy and competitive development of the enhanced-services industry. . . . The classification of information service providers as telecommunications carriers, moreover, could encourage states to impose common-carrier regulation on such providers. . . . State requirements for telecommunications carriers vary from jurisdiction to jurisdiction, but include certification, tariff filing, and various reporting requirements and fees.
Universal Service Report, 13 FCC Rcd. ¶ 46, at 11524. The Court thus concludes that Minnesota regulations that have the effect of regulating information services are in conflict with federal law and must be pre-empted.
- Vonage Holding Company v. Minnesota PUC, Civil No 03-5287, Sec. IV.A. (DMinn Oct 16, 2003)
In my opinion, the nascent VoIP industry should not be subjected to death-by-regulation, which could well occur by having 51 state commissions imposing idiosyncratic, inconsistent, and costly obligations. I welcome FCC direction as to whether and how VoIP should be regulated.
--In The Matter Of The Investigation Into Voice Over Internet Protocol (Voip) Services, Docket No. 03M-220T, Order Closing Docket ¶ 1 ( Colorado PUC Dec. 17, 2003) (Chairman Gregory E. Sopkin Specially Concurring)
Federal Trade Commission Exception
Statute
5 U.S.C. 45(a)(2) The Commission is hereby empowered and directed to prevent persons, partnerships, or corporations, except banks, savings and loan institutions described in section 57a(f)(3) of this title, Federal credit unions described in section 57a(f)(4) of this title, common carriers subject to the Acts to regulate commerce, air carriers and foreign air carriers subject to part A of subtitle VII of title 49, and persons, partnerships, or corporations insofar as they are subject to the Packers and Stockyards Act, 1921, as amended [7 U.S.C. 181 et seq.], except as provided in section 406(b) of said Act [7 U.S.C. 227(b)], from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce
Caselaw
- Federal Trade Commission, v. AT&T Mobility LLC, No. 15-16585 (9th Cir. Feb. 26, 2018) (en banc) ("The en banc court held that the FTC Act’s common carrier exemption was activity-based, and therefore the phrase “common carriers subject to the Acts to regulate commerce” provided immunity from FTC regulation only to the extent that a common carrier was engaging in commoncarrier services. In reaching this conclusion, the en banc court looked to the FTC Act’s text, the meaning of “common carrier” according to the courts around the time the statute was passed in 1914, decades of judicial interpretation, the expertise of the FTC and Federal Communications Commission (“FCC”), and legislative history. Addressing the FCC’s order, issued on March 12, 2015, reclassifying mobile data service from a non-commoncarriage service to a common carriage service, the en banc court held that the prospective reclassification order did not rob the FTC of its jurisdiction or authority over conduct occurring before the order. Accordingly, the en banc court affirmed the district court’s denial of AT&T’s motion to dismiss.")
- Statement by Acting FTC Chairman on Ninth Circuit Court of Appeals Ruling, FTC Press Release, Feb. 26, 2018
- Harper Neidig, AT&T Drops Court Challenge to FTC's Authority, The Hill May 31, 2018
- Jon Brodkin, AT&T Wants to Settle with FTC to Avoid Unlimited Data Throttling Lawsuit, Ars Technica May 31, 2018 ("Just weeks ago, AT&T said it intended to appeal its loss in the case to the US Supreme Court before a deadline of May 29. But today, AT&T informed court officials that it has decided not to file a petition to the Supreme Court and did not ask for a deadline extension")
- FTC v ATT Mobility, 9th Cir. Aug. 29, 2016
- Holding
- "the common carrier exception is a status-based exemption and that AT&T, as a common carrier, is not covered by section 5." Slip at 9
Slip at 10: "The plain language of the common carrier exemption casts the exemption in terms of status, contrary to the FTC’s position. The phrase “common carriers subject to the Acts to regulate commerce,” 15 U.S.C. § 45(a)(2), does not contain any language suggesting that the activities of a common carrier affect the exemption’s application. A literal reading of the words Congress selected simply does not comport with an activity-based approach. See BedRoc Ltd., LLC v. United States, 541 U.S. 176, 183 (2004) (“The preeminent canon of statutory interpretation requires us to ‘presume that the legislature says in a statute what it means and means in a statute what it says there.’” (quotingConn. Nat’l Bank v. Germain, 503 U.S. 249, 253–54 (1992)) (brackets omitted)).
The common carrier exemption is surrounded by exemptions for “banks,” “savings and loan institutions,” and “Federal credit unions,” all of which the FTC acknowledges are status-based exemptions even though phrased in similar terms as the common carrier exemption it contends is activity-based. The fact that surrounding exemptions are defined in terms of status suggests that “common carriers subject to the Acts to regulate commerce” also carves out a group of entities based on status.
- FTC v ATT Mobility, 87 F. Supp. 3d 1087 NDCA March 31, 2015 (denied AT&T's motion to dismiss on grounds that FTC lacked jurisdiction pursuant to common carrier excpetion, concluding that exception applies “only where the entity has the status of common carrier and is actually engaging in common carrier activity.” Id. at 1104. )
- NOTE: This has created a conundrum for Internet Privacy. If the FCC abandons its Internet privacy rules as it has signaled, the FTC would not be able to step in and create rules to fill the void. There would be a discontinuity between the FTC's privacy authority over non common carriers, the FCC's CPNI authority over carriers, and the space in between involving Internet access providers.
- FTC v. American eVoice, Ltd, et al, CV-13-03-M-DLC, DC Montana Mar. 14, 2017 (Defendants are enhanced service providers,"there is no evidence before the Court that the corporate Defendants operated a transmission pipeline," and Defendants are not registered as common carriers with the FCC, have not designated an agent as required as a common carrier, and do not contribute to the universal service fund as required - therefore defendants do not fall under the FTC Common Carrier Exception)
- The issue of FTC jurisdiction over common carriers has become an issue for Internet privacy. After Congress blocked the FCC's Broadband Privacy rules from taking effect, the Privacy Jurisdiction over Internet Access Companies landscape looks as follows:
- FCC has CPNI jurisdiction over common carriers. This authority over Broadband Internet Access Service providers was blocked by Congress.
- FTC has jurisdiction over Internet companies that are not common carriers in any part of their business plan
- No agency has jurisdiction over Broadband Internet Access Service Providers who offer common carriage as some part of their business plan (i.e., Verizon, AT&T, Centurylink, Sprint, Charter...)
Congress decided that there should be two (actually more - the SEC, FDA, etc.) agencies regulating different segments of the economy. The FCC regulates common carriers (Verizon, AT&T, Charter...) pursuant to the Communications Act of 1934. The FTC regulates general firms in the market except for those specifically regulated by other agencies - like common carriers regulated by the FCC. This means there are different rules for different firms because of the laws and agencies Congress created. The agencies promulgate regulation pursuant to the authority given to them by Congress (they dont create the jurisdictional difference).
Govt Activity
- FTC has interpreted the common carrier exception as activity-based (only applies when firm is acting as a common carrier; does not apply to non common carrier activity)
- FTC-FCC: When is Two a Crowd? FTC Commissioner Maureen K. Ohlhausen 33rd Annual Institute on Telecommunications Policy & Regulation December 4, 2015
- Additional Statement of Commissioner Thomas B. Leary Before the U.S. House of Representatives Committee on Energy and Commerce Subcommittee on Commerce, Trade and Consumer Protection
- FCC-FTC Consumer Protection Memorandum of Understanding (Nov. 16, 2015)
- Broadband Connectivity Competition Policy, FTC Staff Report, at 38 (June 2007)
- FTC Reauthorization, Hearing Before the Subcommittee on Consumer Affairs, Foreign Commerce and Tourism, S. Hrg. 107-1147, at 28 (2002) (statement of Hon. Sheila F. Anthony, FTC).
- Prepared Statement of the Fed. Trade Comm’n, 2003 WL 21353573, at *19 (2003)
Commerce Clause
38. We note that our decision today is fully consistent with the Commerce Clause of the United States Constitution. The Commerce Clause provides that “[t]he Congress shall have Power … [t]o regulate Commerce … among the several States.”130 As explained by the Supreme Court, “[t]hough phrased as a grant of regulatory power to Congress, the Clause has long been understood to have a ‘negative’ aspect that denies the States the power unjustifiably to discriminate against or burden the interstate flow of articles of commerce.”131 Under the Commerce Clause jurisprudence, a state law that “has the ‘practical effect’ of regulating commerce occurring wholly outside that [s]tate’s borders” is a violation of the Commerce Clause.132 In addition, state regulation violates the Commerce Clause if the burdens imposed on interstate commerce by state regulation would be “clearly excessive in relation to the putative local benefits.”133 Finally, courts have held that “state regulation of those aspects of commerce that by their unique nature demand cohesive national treatment is offensive to the Commerce Clause.”134
39. Minnesota’s regulation likely has “the ‘practical effect’ of regulating commerce occurring wholly outside that [s]tate’s borders.”135 Because the location of Vonage’s users cannot practically be determined,136 Vonage would likely be required to comply with Minnesota’s regulation for all use of DigitalVoice – including communications that do not originate or terminate in Minnesota, or even involve facilities or equipment in Minnesota – in order to ensure that it could fully comply with the regulations for services in Minnesota. And, as we have explained above, this would likely be the result even if Vonage elected to discontinue seeking subscribers in Minnesota, given that end users could use the service from any broadband connection in Minnesota.137 While states can and should serve as laboratories for different regulatory approaches, we have here a very different situation because of the nature of the service – our federal system does not allow the strictest regulatory predilections of a single state to crowd out the policies of all others for a service that unavoidably reaches all of them. For these reasons, Minnesota’s regulation would likely have the “practical effect” of regulating beyond its borders and therefore would likely violate the Commerce Clause.138
40. In addition, we believe the burdens imposed on interstate commerce by the Minnesota Commission’s regulation would likely be “clearly excessive in relation to the putative local benefits.”139 The Minnesota regulation would impose significant burdens on interstate commerce.140 As discussed above, even if it were relevant and possible to track the geographic location of packets and isolate traffic for the purpose of ascertaining jurisdiction over a theoretical intrastate component of an otherwise integrated bit stream, such efforts would be impractical and costly.141 At the same time, we believe that the local benefits of state economic regulation would be limited. In a dynamic market such as the market for Internet-based services, we believe that imposing this substantial burden on Vonage would serve no useful purpose and would almost certainly be significant and negative for the development of new and innovative interstate Internet-based services.
41. Finally, DigitalVoice, like other Internet services, is likely the type of commerce that is of such a “unique nature” that it “demand[s] cohesive national treatment” under the Commerce Clause.142 Because DigitalVoice is not constrained by geographic boundaries and cannot be excluded from any particular state, inconsistent state economic regulation could cripple development of DigitalVoice and services like it. If Vonage’s DigitalVoice service were subject to state regulation, it would have to satisfy the requirements of more than 50 jurisdictions with more than 50 different sets of regulatory obligations.143 As discussed above, because of the unbounded characteristics of the Internet, Vonage would likely be required in practical effect to subject its service to all customers across the country to the regulations imposed by Minnesota . Moreover, state regulation of Internet-based services, such as DigitalVoice, would make them unique among Internet services as the only Internet service to be subject to such state obligations. Indeed, allowing the imposition of state regulation on Vonage would likely eliminate any benefit of using the Internet to provide the service. The Internet enables individuals and small providers to reach a global market simply by attaching a server to the Internet; requiring Vonage to submit to more than 50 different regulatory regimes as soon as it did so would eliminate this fundamental advantage of Internet-based communication. Thus, services, such as DigitalVoice, are likely of a “unique nature” that “demand[s] cohesive national treatment,” and therefore, inconsistent state regulations would likely violate the Commerce Clause.144130 U.S. Const. art. 1, § 8, cl. 3.
131Oregon Waste Sys. v. Dep’t of Envtl. Quality, 511 U.S. 93, 98 (1994) (citations omitted); see alsoPSINet, Inc. v. Chapman, 362 F.3d 227, 239 (4th Cir. 2004) (quoting General Motors Corp. v. Tracey, 519 U.S. 278, 287 (1997)); American Libraries Ass’n v. Pataki, 969 F. Supp. at 173 (holding that the Internet is an instrument of “interstate commerce” under the Commerce Clause).
132Healy v. Beer Institute, 491 U.S. 324, 332 (1989); see alsoCotto Waxo Co. v. Williams, 46 F.3d 790, 793 (8th Cir. 1995) (“Under the Commerce Clause, a state regulation is per se invalid when it has an ‘extraterritorial reach,’ that is, when the statute has the practical effect of controlling conduct beyond the boundaries of the state. The Commerce Clause precludes application of a state statute to commerce that takes place wholly outside of the state’s borders.”) (emphasis added) (citation omitted).
133See Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970); see alsoCotto Waxo Co. v. Williams, 46 F.3d at 793 (“[I]f the challenged statute regulates evenhandedly, then it burdens interstate commerce indirectly and is subject to a balancing test. Under the balancing test, a state statute violates the Commerce Clause only if the burdens it imposes on interstate commerce are ‘clearly excessive in relation to the putative local benefits.’”) (citation omitted).
134American Libraries Ass’n v. Pataki, 969 F. Supp. at 169 (citing Wabash, St. Louis & Pac. Ry. Co. v. Illinois, 118 U.S. 557 (1886)); see id. at 181 (“The courts have long recognized that certain types of commerce demand consistent treatment and are therefore susceptible to regulation only on a national level.”); American Civil Liberties Union v. Johnson, 194 F.3d 1149, 1162 (10th Cir. 1999).
135 Healy v. Beer Institute, 491 U.S. at 332; see also American Libraries Ass’n v. Pataki, 969 F. Supp. at 173-74, 177; American Booksellers Found. v. Dean, 342 F.3d 96, 103 (2d Cir. 2003) (acknowledging that because of “the Internet’s boundary-less nature,” regulations of Internet communications may not be “wholly outside” a state’s borders, but nonetheless may impose extraterritorial regulation in violation of the Commerce Clause).
136 See supra para. 5.
137 See supra para. 30.
138 See Vonage Petition at 29 (“Vonage has no way of assuring that it is in compliance with the [Minnesota Vonage Order] unless it blocks a substantial amount of interstate traffic as well.”); id. at 31 (“[S]ince any Vonage customer could, in theory, travel to Minnesota at any time and connect their MTA computer to a broadband Internet connection, Vonage could never prevent all intrastate Minnesota use of its service unless it blocked all interstate ‘calls’ as well.”) (emphasis in original); id. at 25, 27; see also American Libraries Ass’n v. Pataki, 969 F. Supp. at 171 (“[N]o aspect of the Internet can feasibly be closed off to users from another state.”).
139 See Pike v. Bruce Church, Inc., 397 U.S. at 142; see alsoCotto Waxo Co. v. Williams, 46 F.3d at 793. See generally Michael A. Bamberger, The Clash Between the Commerce Clause and State Regulation of the Internet, Internet Newsletter, Apr. 2002 (explaining that “[f]or the most part, courts have analyzed the constitutionality of state Internet regulation under the test employed by the Pike court”) (emphasis added).
140 Indeed, one federal court has already determined, in the specific context of Vonage, that state entry regulation of DigitalVoice would interfere with interstate commerce. See New York Preliminary Injunction at 2; seealsoAmerican Booksellers Found. v. Dean, 342 F.3d at 104 (“We think it likely that the [I]nternet will soon be seen as falling within the class of subjects that are protected from State regulation because they ‘imperatively demand [] a single uniform rule.’”) (citing Cooley v. Bd. of Wardens, 53 U.S. 299 (1851)).
141 Seesupra para. 29; see alsoAmerican Libraries Ass’n v. Pataki, 969 F. Supp. at 170 (“The Internet is wholly insensitive to geographic distances. . . . Internet protocols were designed to ignore rather than document geographic location . . . .”).
142 American Libraries Ass’n v. Pataki, 969 F. Supp. at 69 (citing Wabash, St. Louis & Pac. Ry. Co. v. Illinois, 118 U.S. 557); see alsoAmerican Civil Liberties Union v. Johnson, 194 F.3d at 1162 (“As we observed, . . . certain types of commerce have been recognized as requiring national regulation. . . . The Internet is surely such a medium.”).
143 See alsoAmerican Libraries Ass’n v. Pataki, 969 F. Supp. at 169 (“ The menace of inconsistent state regulation invites analysis under the Commerce Clause of the Constitution, because that clause represented the framers' reaction to overreaching by the individual states that might jeopardize the growth of the nation ‑ and in particular, the national infrastructure of communications and trade ‑ as a whole.”) (citing Quill Corp. v. North Dakota, 504 U.S. 298, 312 (1992)).
144 Federal court decisions applying the Commerce Clause to state regulation of Internet services have come to similar conclusions. In American Libraries Ass’n v. Pataki, a leading case on this issue, a federal district court struck down a New York state statute making it a crime to disseminate indecent material to minors over the Internet. The court held that the New York law violated the Commerce Clause because it (1) overreached by seeking to regulate conduct occurring outside its borders; (2) imposed burdens on interstate commerce that exceeded any local benefit; and (3) subjected interstate use of the Internet to inconsistent regulations. See American Libraries Ass’n v. Pataki, 969 F. Supp. at 183-84. In several subsequent cases, federal courts of appeal expressly adopted these holdings. See PSINet, Inc. v. Chapman, 362 F.3d 227; American Booksellers Found. v. Dean, 342 F.3d 96; American Civil Liberties Union v. Johnson, 194 F.3d 1149; see also American Libraries Ass’n v. Pataki, 969 F. Supp. at 182 (“The Internet . . . requires a cohesive national scheme of regulation so that users are reasonably able to determine their obligations.”).
We also note examples from other network-based industries where, although an intrastate component may exist, state authority must nonetheless yield to exclusive federal jurisdiction in the area of economic or other state regulations affecting interstate commerce. For example, in the case of railroads, the Supreme Court struck down a state regulation regarding the length of trains, holding that “examination of all the relevant factors makes it plain that the state interest is outweighed by the interest of the nation in an adequate, economical and efficient railway transportation service, which must prevail.” Southern Pac. Co. v. Arizona, 325 U.S. 761, 783-84 (1945). Similarly, in trucking cases, the Supreme Court has invalidated state laws regulating the length of trucks under the Commerce Clause when the regulation imposes a burden on interstate trucking that is not outweighed by the local interest. SeeRaymond Motor Transportation, Inc. v. Rice, 434 U.S. 429 (1978); Kassel v. Consolidated Freightways Corp., 450 U.S. 662 (1981). In another transportation case, the Court struck down an Illinois law mandating a particular type of mudguards on trucks operating in the state, concluding that the regulation imposed significant burdens on interstate trucking with no countervailing benefits. See Bibb v. Navajo Freight Lines, Inc., 359 U.S. 520 (1959).
Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an Order of the Minnesota Public Utilities Commission, WC Docket No. 03-211, Memorandum Opinion and Order (FCC Nov. 12, 2004 )
