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2015 PUC Decision that Interconnected VoIP is a Telecom Service (Charter)

Federal Appeal

  • 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 (May 8, 2017) denying 75 Motion for Summary Judgment; granting 81 Motion for Summary Judgment; denying 91 Motion to Exclude Expert Testimony(Written Opinion)
      • FACTS: To effect transmission of voice signals as IP data packets, Charter Advanced provides its Spectrum Voice subscribers with a device known as an embedded Multimedia Terminal Adapter (“eMTA”). The eMTA is housed in the same device as the cable modem that provides access generally to Charter’s broadband internet service. The eMTA alters the format of voice calls between an analog electrical signal—as transmitted by the customer’s handset—and the IP data packets transmitted over Charter Advanced’s cable network. When a Charter Advanced customer calls or receives a call from a subscriber of a traditional telecommunications carrier, the call must be converted between IP and TDM—a process commonly referred to as “protocol conversion.” Because it offers this capability to interact seamlessly with PSTN networks, Spectrum Voice is an “interconnected” VoIP service. Although not all Spectrum Voice calls involve protocol conversion, the majority of Charter Advanced’s voice traffic in Minnesota currently does so.
      • ISSUE: whether Spectrum Voice is a telecommunications service [i.e., state jurisdiction not pre-empted] or an information service [i.e., state jurisdiction pre-empted] for purposes of the .
    • Jacob Fischier, State VoIP Regulations Contradict Federal Law, Charter Says, Law360 (Oct. 27, 2015) ("Charter Advanced Services LLC asked a Minnesota federal judge on Monday to block the state’s public utility commission from regulating its Voice over Internet Protocol service as a telecommunications service instead of an information service, a move the company said violates federal law. ")
  • Charter Advanced Servs. (MN), LLC v. Heydinger, 15-cv- 3935 (SRN/KMM), 2016 WL 3661136 (D. Minn. July 5, 2016)

PUC Decision

  • "The MPUC issued an order on July 28, 2015, finding that state regulation is not preempted. It ordered Charter Advanced to submit within thirty days a proposed plan for compliance with applicable Minnesota rules and regulations. A final order to that effect was issued on September 24, 2015." MOO, MN DC 2017 at 6
  • Nancy Lebens, Commerce Dept: PUC Ruling means VoIP Providers Must Follow Minn Law, MPRNews May 10, 2015 ("The PUC voted 5-0 in favor of extending Minnesota's telephone regulations to companies that provide services through "fixed interconnected VoIP" which uses traditional land lines to route digitized voice packets.")

Vonage Proceeding

Summary

Derived From: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. 10-11 (FCC Nov. 12, 2004 )

"In July 2003, the Minnesota Department of Commerce filed an administrative complaint against Vonage with the Minnesota Commission, asserting that Vonage was providing telephone exchange service in Minnesota and was thus subject to state laws and regulations governing a “telephone company.” Among other things, the laws and regulations in question require such companies to obtain operating authority, file tariffs, and provide and fund 911 emergency services. The Minnesota Department of Commerce sought an administrative order from the Minnesota Commission to compel Vonage to comply with these state regulatory requirements. In response to the administrative complaint, Vonage argued that these state laws and regulations do not apply to it and that, even if they do, they are preempted by the Communications Act of 1934, as amended (Communications Act or Act).

"In September 2003, the Minnesota Commission issued an order asserting regulatory jurisdiction over Vonage and ordering the company to comply with all state statutes and regulations relating to the offering of telephone service in Minnesota. In so holding, the Minnesota Commission declined to decide whether Vonage’s service is a telecommunications service or an information service under the Act. Instead, it found DigitalVoice to be a “telephone service” as defined by Minnesota law, thus subjecting Vonage to the state requirements for offering such a service. In response, Vonage filed suit against the Minnesota Commission in the U.S. District Court for the District of Minnesota. In October 2003, the district court entered a permanent injunction in favor of Vonage. The court determined that Vonage is providing an information service under the Act and that the Act preempts the Minnesota Commission’s authority to subject such a service to common carrier regulation. The court concluded that “VoIP services necessarily are information services, and state regulation over VoIP services is not permissible because of the recognizable congressional intent to leave the Internet and information services largely unregulated.” In January 2004, the court denied a motion by the Minnesota Commission for reconsideration, and an appeal to the U.S. Court of Appeals for the Eighth Circuit followed.."

FCC Proceeding

Petition of Vonage Holdings Corporation for Declaratory Ruling Concerning an Order of the Minnesota Public Utilities Commission, WC Docket No. 04-267, Memorandum Opinion and Order, 19 FCC Rcd 22404 (2004).

     1. "In this Memorandum Opinion and Order (Order), we preempt an order of the Minnesota Public Utilities Commission (Minnesota 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 – the Pulver Declaratory Ruling and the AT&T Declaratory Ruling –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. Similarly, to the extent that other VoIP services are not the same as Vonage’s but share similar basic characteristics, we believe it highly unlikely that the Commission would fail to preempt state regulation of those services to the same extent. We express no opinion here on the applicability to Vonage of Minnesota’s general laws governing entities conducting business within the state, such as laws concerning taxation; fraud; general commercial dealings; and marketing, advertising, and other business practices. We expect, however, that as we move forward in establishing policy and rules for DigitalVoice and other IP-enabled services, states will continue to play their vital role in protecting consumers from fraud, enforcing fair business practices, for example, in advertising and billing, and generally responding to consumer inquiries and complaints.

     2. Our decision today will permit the industry participants and our colleagues at the state commissions to direct their resources toward helping us answer the questions that remain after today’s Order – questions regarding the regulatory obligations of providers of IP-enabled services. We plan to address these questions in our IP-Enabled Services Proceeding in a manner that fulfills Congress’s directions “to promote the continued development of the Internet” and to “encourage the deployment” of advanced telecommunications capabilities. Meanwhile, this Order clears the way for increased investment and innovation in services like Vonage’s to the benefit of American consumers. "


Appeal of FCC Order

Minnesota PUC v. FCC, Case No 05-1069 (8th Cir Mar. 2007) Affirming FCC Order in Part, Finding Other Parts of Appeal Not Ripe for Review

Petition for review of FCC order which determined that Voice over Internet Protocol technology was impossible or impractical to separate intrastate components from interstate components and thus preempted state regulation was not arbitrary or capricious. It was not arbitrary or capricious for FCC to fail to classify VoIP as either information service or telecommunications service. FCC properly considered economic burden of identifying geographic endpoints. Any inconsistencies with 911 Order did not render FCC order arbitrary. FCC did not arbitrarily determine state regulation of information service conflicted with federal policy of nonregulation or preempt 911 requirements. NYPSC appeal challenging fixed nomadic VoIP was premature.

News

 

Federal Litigation of PUC Order

  • Vonage v. MN Public Utilities,  No. 04-1434 8th Circuit
  • Vonage v MPUC, Fed Dist Court 10/17/2003

    This case illustrates the impact of emerging technologies evolving ahead of the regulatory scheme intended to address them. The issue before the Court is tied to the evolution of the Internet and the expansion of its capability to transmit voice communications. Despite its continued growth and development, the Internet remains in its infancy, and is an uncharted frontier with vast unknowns left to explore. Congress has expressed a clear intent to leave the Internet free from undue regulation so that this growth and exploration may continue. Congress also differentiated between “telecommunications services,” which may be regulated, and “information services,” which like the Internet, may not.

       Plaintiff Vonage Holdings Corporation (“Vonage”) provides a service that permits voice communications over the Internet. The Minnesota Public Utilities Commission (“MPUC”) issued an order requiring Vonage to comply with Minnesota laws that regulate telephone companies. Vonage has asked this Court to enjoin the MPUC, arguing that it provides information services, and not telecommunications services.
        The Court concludes that Vonage is an information service provider. In its role as an interpreter of legislative intent, the Court applies federal law demonstrating Congress’s desire that information services such as those provided by Vonage must not be regulated by state law enforced by the MPUC. State regulation would effectively decimate Congress’s mandate that the Internet remain unfettered by regulation. The Court therefore grants Vonage’s request for injunctive relief.

    • Vonage v. Minnesota PUC, Civil No. 03-5287 Order (Jan 14, 2004) (denying Qwest's motion to intervene, PUC's motion for a new trial, and MN Dept. of Commerce's Motion to Intervene)

State Proceeding

  • In the Matter of the Complaint of the Minnesota Department of Commerce Against Vonage Holding Corp Regarding Lack of Authority to Operate in Minnesota, P-6214/C-03-108 (Minnesota PUC September 11, 2003)
  • In the Matter of the Complaint of the Minnesota Department of Commerce Against Vonage Holdings Corp. Regarding Lack of Authority to Operate in Minnesota, DOCKET NO. P-6214/C-03-108, Order Staying Order Of September 11, 2003(Nov. 30, 2004)
  • Minnesota Halts Efforts to Regulate VoIP, topix 12/3/2004
  • MN PUC Option Paper on MN DOC Complaint Against VONAGE, MN 8/14/03
  • MN DOC Complaint Against VONAGE: Docket, MN PUC 8/14/03
  • MC DOC Complaint Against VONAGE: Procedure History, MN PUC 8/14/03
  • MC DOC Complaint Against VONAGE: Staff Briefing Papers, MN PUC 8/14/03
  • History: "On July 15, 2003, The [Minnesota] Department of Commerce (DOC) filed a complaint against Vonage Holdings Corporation (Vonage) alleging, among other things, that Vonage has offered and continues to furnish telephone services in Minnesota, including local exchange service and long distance service, without first obtaining a certificate under Minn. Stat. ss 237.16 and 237.74, for those services.  The complaint further alleges that the manner in which Vonage provides local service violates Minnesota law in that if fails to provide adequate 911 service.  The complaint includes a request for temporary relief.
  • Holding:  "The Commission finds that what Vonage is offering is two-way communication that is functionally no different than any other telephone service.  This is telephone service within the meaning of Minn. Stat. ss 237.01, subd. 7, and 237.16, subd. 1(b) and is clearly subject to regulation by the Commission... For the above reasons, the Commission finds that it has jurisdiction over Vonage as a company providing telephone service in Minnesota, and the Commission will require that Vonage comply with Minnesota Statutes and Rules, including certification requirements and the provisioning of 911 service.
  • Rule: "Minn Stat. s 237.01 subd 7 defines "telephone company" as follows:

"Telephone company," means and applies to any person, firm, association or any corporation, private or municipal, owning or operating any telephone line or telephone exchange for hire, wholly or partly within this state, or furnishing any telephone service to the public.

  • Parties:
    • Vonage: "argued that its service was not a 'telephone service' within the statutory meaning of that term.  Rather, Vonage argued that it was an 'information service' provider and, as such, was not subject to the jurisdiction of the Commission....It argued that while the function that Vonage provides is similar to that provided by traditional telephone companies, the manner in which Vonage provides its service is significantly different.  It stated that it does not provides its customers with facilities for communication; rather, the customers must obtain access services independently from an ISP.
    • DOC: [cites the FCC factors for whether VoIP is a telecom service as set forth in the Steven's Report, and argues that Vonage satisfies those factors]
    • MCI: "recommended that the C dismiss the complaint, open an investigation to determine whether the service is a telecom service or an info service under the above statutes... argued that any decision made by the C regarding the regulation of a VoIP service will affect Universal Service Fund issues, intercarrier compensation issues and carrier obligations under s 251 of the Federal Telecom Act of 1996 (the Act).  It will affect other parties than those that are the subject of this complaint.
    • Motorola: "supports Vonage's motion to dismiss the complaint. [await FCC action]
    • AT&T: "questioned the appropriateness of the C contemplating these broad policy issues based on an isolated fact pattern involving services offered by one company.
    • Level3: "urged [PUC] to consider unintended consequences of any decision
    • Sprint: "several disputed issues could affect Sprint's interests

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