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Notes: FCC Jurisdiction

Dont be a FOOL; The Law is Not DIY
- FCC
- FCC Jurisdiction
- - Ancillary Jurisdiction
- Personal Jurisdiction
- Admin Procedure Act

Statutory Jurisdiction

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)

Chevron

"In addressing these questions, we apply the familiar two-step analysis of Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). As the Supreme Court has recently made clear, Chevron deference is warranted even if the Commission has interpreted a statutory provision that could be said to delineate the scope of the agency’s jurisdiction. See City of Arlington v. FCC, 133 S. Ct. 1863, 1874 (2013). Thus, if we determine that the Commission’s interpretation of section 706 represents a reasonable resolution of a statutory ambiguity, we must defer to that interpretation. See Chevron, 467 U.S. at 842–43." -Verizon v. FCC, No. 11-1355, Slip at 18 (D.C. Cir. Jan. 14, 2014)


"As the court explained in Motion Picture Ass’n of America, Inc. v. FCC, 309 F.3d 796, 801 (D.C. Cir. 2002) (“MPAA”), an “agency’s interpretation of [a] statute is not entitled to deference absent a delegation of authority from Congress to regulate in the areas at issue.” The court observed that the Supreme Court’s decision in Mead “reinforces” the command in Chevron that “deference to an agency’s interpretation of a statute is due only when the agency acts pursuant to ‘delegated authority.’” Id. (quoting Mead, 533 U.S. at 226). See also Cal. Indep. Sys. Operator Corp. v. FERC, 372 F.3d 395, 399 (D.C. Cir. 2004); Bluewater Network v. EPA, 370 F.3d 1, 11 (D.C. Cir. 2004); AT&T Corp. v. FCC, 323 F.3d 1081, 1086 (D.C. Cir. 2003); Ry. Labor Executives’ Ass’n v. Nat’l Mediation Bd., 29 F.3d 655, 670-71 (D.C. Cir. 1994) (en banc). "- ALA v. FCC, No. 04-1037, slip at 17 (DC Cir. May 6, 2005)


“Chevron is principally concerned with whether an agency has authority to act under a statute.” Arent v. Shalala, 70 F.3d 610, 615 (D.C. Cir. 1995). Chevron analysis “is focused on discerning the boundaries of Congress’ delegation of authority to the agency; and as long as the agency stays within that delegation, it is free to make policy choices in interpreting the statute, and such interpretations are entitled to deference.” Id.; see also Mead, 533 U.S. at 226-27 (holding that Chevron deference is due only when the agency acts pursuant to “delegated authority”)...

"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)

Interstate Telecommunications

End to End Analysis

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

    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).

Federal Preemption of State jurisdiction

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)


"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)).

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 servicesComputer 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)).

Mixed in Nature


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).

Inseverability Doctrine

    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).

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 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

  • FTC v. American eVoice, Ltd, et al, CV-13-03-M-DLC, DC Montana Mar. 14, 2017 (Defendants are enhanced service providers and therefore do not fall under the FTC Common Carrier Exception)

Govt Activity