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Notes: VoIP

Notes > Applications > VoIP These notes are not complete and there is no guarantee that they are accurate. They are presented simply as notes. Feel free to use them but as with all material on the Internet Telecom Project, you should consider them a beginning to your research and not an end.

Jurisdiction Federal / State

Federal versus State Jurisdiction
Interstate Analysis

Mixed / Impossible

GeoLocation

Supremacy Clause / Preemption

FCC
States
Preempted
Not Preempted

47 USC 230 Unfettering
Sec. 706

Commerce Clause
Opposition to Multiple Jurisdictions Regulation

Definitions / Descriptions
VoIP 
Caselaw
FCC
States
State - Not in Regulatory Proceding
Defined as Bypass
Various Designs
Free World Dialup 
Vonage
Explanations
Telephony over Broadband
Dial Around
Interconnection to PSTN
Benefits of VoIP
Cost Savings
Arbitrage
Markets
Barriers to Entry
Adoption
Nascent Deployment
Classification
Functional Approach 
Application of State Law
Facilities
Computer Inquiries: Basic v. Enhanced Services Dichotomy
Computer Inquires
Telecom / Information Service (Telecom Act)
Telecom Service / Info Service Mutually Exclusive
Steven's Report
Steven's Criteria
Classes of Providers 
Duck
Steven's Report Criteria Applied 
Computer to Computer
Phone to Phone
Phone to Phone Long Distance
Information Service Analysis
Telecom Service Analysis
Telecom
Layered Approach
Market Approach
Legacy Regulations on Nascent / New Network
Unfettered
Issues
Universal Service
Access Charges
911
Power / Emergencies
CALEA Wiretaps
Voluntary Calea
Consumer Protection
Access by Individuals with Disabilities
NANP
State Proceedings

Classification

 Functional Approach (Telecom Service)

Were it appropriate to base our decision today on the applicability of Minnesota’s “telephone company” regulations to DigitalVoice solely on the functional similarities between DigitalVoice and other existing voice services (as the Minnesota Commission appears to have done),81 we would find DigitalVoice far more similar to CMRS, which provides mobility, is often offered as an all-distance service, and needs uniform national treatment on many issues.82

81See Minnesota Vonage Order at 8 (finding Vonage’s service to be “functionally no different than any other telephone service”).

82Indeed, other commenters note how DigitalVoice is like CMRS. See, e.g., California Commission Comments at 20-22; HTBC Comments at 9.

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. 22 (FCC Nov. 12, 2004)


VoIP is a public utility telecommunications service that delivers voice and other related services using Internet Protocol (IP) technology.
. . . .
Viewing VoIP functionally from the end-user's perspective, and consistent with definitions in the Public Utilities Code, we tentatively conclude that those who provide VOIP service interconnected with the PSTN are public utilities offering a telephone service subject to our regulatory authority. Under section 216(a) of the Public Utilities Code, a "public utility" includes "every telephone corporation ... where the service is performed for ... the public or any portion thereof." Under section 234(a), a "telephone corporation" includes "every corporation or person owning, controlling, operating, or managing any telephone line for compensation within this state." Section 233 defines a "telephone line" to include "all conduits, ducts, poles, wires, cables, instruments, and appliances, and all other real estate, fixtures, and personal property owned, controlled, operated, or managed in connection with or to facilitate communication by telephone, whether such communication is had with or without the use of transmission wires." Against this statutory backdrop, to the extent that a VoIP provider holds itself out to the public to offer for a fee voice telephony on a local or intrastate basis, it appears to qualify as a public utility telephone corporation in California. Cf. Commercial Communications, Inc. v. Public Utilities Commission, 40 Cal. 2d 512 (1958).
     Our preliminary analysis suggests that similar to federal law, it is the functional nature of the service offered, not the technology used to deploy the service that determines whether a service qualifies as a public utility service under state law.1 From an end-user's functional standpoint, the subscriber controls the form or content of the information sent and received when placing real-time, point-to-point voice calls anywhere the subscriber chooses. Placing such calls using IP technology does not appear to alter the fundamental character of the voice telephone call from the end user's standpoint.2
-- Order instituting investigation on the Commission's own motion to determine the extent to which the public utility telephone service known as Voice over Internet Protocol should be exempted from regulatory requirements, CA PUC February 11, 2004 http://www.cpuc.ca.gov/published/agenda_decision/33960.htm


In order to formulate an informed, consistent regulatory policy, the Commission would like to obtain information about VOIP activity in Michigan . The Commission, therefore, requests comments on VOIP activity in Michigan on the following topics that may be affected by both state and federal law:
. . .
b. Estimations of the proper degree of regulation, based on transmission method, to ensure Michigan citizens are protected while using VOIP, while allowing VOIP services to avoid unnecessarily burdensome regulations.
-- U-14073 - Commission's Own Motion (investigation of VOIP) -Michigan PUC 3/16/2004 HTML | PDF


  Vonage offers two-way communications service that is functionally the same as any other telephone service. The only difference between Vonage's local exchange service and any other provider's local exchange service is the technolo gy being utilized. Vonage utilizes Voice over Internet Protocol (VoIP). This technology basically transforms the analog Plain Old Telephone Service (POTS) signal sent from the subscriber's phone into an Internet Protocol (IP) digital signal by means of a Vonage-provided router. This signal is connected to the Internet through a cable or DSL modem. The call is then converted back to POTS and sent over the phone network to the end user who can communicate vocally with the caller
-- Complaint of Frontier Company v Vonage, Comments of CWA  (NY PSC) (Oct 31, 2003)

On the other hand, the clear fact is, from the consumer’s point of view, Vonages’s DigitalVoice SM service is functionally equivalent to traditional telephone service provided by regulated carriers such as Frontier, and appears to meet the statutory jurisdictional requirements
of the PSL. Vonage’s entry into New York telecommunications markets therefore raises a host of important issues involving public policies aimed to protect public safety and promote universally affordable local telephone service.
. . .
2. Vonage Offers A Telecommunications Service
Consistent with the foregoing FCC interpretation of the 1996 Telecommunications Act, the PSC should perform a similar “functional analysis” to determine what classification of service subscribers obtain from Vonage’s DigitalVoice SM service. The facts as described herein clearly demonstrate that Vonage’s subscribers only obtain voice transmission, rather than “a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information.” 34 Indeed, from the user’s standpoint, there is no functional difference between a Vonage call and a Frontier call. Therefore, Vonage is offering a telecommunications service, not an information service.
-- Initial Comments of NY AG , Complaint of Frontier Telephone of Rochester, Inc. Against Vonage Holding Corp. Concerning Provision of Local Exchange and Inter-Exchange Telephone Service in New York State in Violation of the Public Service Law, Case 03-C-1285 (Oct 31, 2003)

 Applcation of State Law (Telecom Service)

Focusing on the terms of RCW 80.04.010, WECA states correctly that there is no question concerning LocalDial’s status as a corporation doing business in Washington. Its business is the sale to the general public of telecommunications as discussed in this Order, and as evidenced by the company’s own advertising. As Staff argues, LocalDial owns and operates the gateways, servers, and other equipment that are part of the network it uses to provide telecommunications service. In short, it is an inescapable conclusion under the undisputed facts before us that LocalDial offers telecommunications service for sale to the general public in Washington and is a telecommunications company subject to our jurisdiction under chapter 80 RCW.

. . . . .

LocalDial argues that even if subject to Commission jurisdiction as a matter of law, the Commission should not regulate LocalDial’s service for policy reasons. The simple response to this argument is that, as WECA argues, we do not have the statutory authority to forebear from regulating LocalDial. LocalDial, in terms of the service under consideration here, is no different from other interexchange carriers that do business in Washington. To the extent Complainants’ tariffs require interexchange carriers to pay access charges for interexchange calls made by or to Complainants’ customers, those tariffs must be enforced as to LocalDial.

The access charge regime in Washington is mandated by RCW 80.36.160. It is implemented by the companies’ tariffs. Complainants’ tariffs, once approved by the Commission, have the force and effect of law.32 They must be applied uniformly to all interexchange carriers to avoid giving undue preference under RCW 80.28.090 or allowing for the application of discriminatory rate practices under RCW 80.28.100. LocalDial’s phone-to-phone IP telephony service is ‘telecommunications service,’ and is functionally identical to the inter-local-calling area service that is provided by other interexchange carriers that pay access charges. LocalDial obtains the same access to the Complainants’ networks as obtained by other interexchange carriers. LocalDial, therefore, imposes the same burdens on the local exchange carriers as do other interexchange carriers. LocalDial should bear its fair share of the associated costs, as reflected in the local exchange carriers’ tariffs.

Washington Exchange Carriers Association v. LocalDial Corporation, Docket UT-031472, Order, p. 26-7 (WUTC June 11, 2004)


Under the Public Service Law a “telephone corporation” is defined as “every corporation...owning, operating or managing any telephone line or part of telephone line used in the conduct of the business of affording telephonic communication for hire.” (PSL §2(17)). The Public Service Law defines “telephone line” as including “receivers, transmitters, instruments, machines, appliances and all devices,...apparatus, property and routes used, operated or owned by any telephone corporation to facilitate the business of affording telephonic communication....” (PSL §2(18)).

The company is in the business of affording "telephonic communication for hire." Vonage's service allows subscribers to make and receive voice communications with any other telephone subscribers in the world, and its service is marketed as a substitute for "home phone service." Vonage owns and manages equipment (a media gateway server)11 that is used to connect Vonage’s customers to the customers of other telephone corporations via their public networks, as necessary. This equipment constitutes a "telephone line" under the PSL and is used to facilitate the provisioning by Vonage of telephonic communication to customers. Accordingly, Vonage is a "telephone corporation" under our jurisdiction.

-- 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. 9-10 (May 21, 2004)


Based on our monitoring of the telecommunications market and actions being taken by other state regulatory commissions, the Telecommunications Division concludes that your company, Vonage, is offering intrastate telecommunications service for profit in California without having received formal certification from this Commission to provide such service. ... Accordingly, the Attorney General recommends that the PSC find that Vonage’s Digital Voice SM service is a telecommunications service and subject to state regulatory jurisdiction.
-- Letter from John M. Leutza, Director Telecommunications Division, State of California Utilities Commission, to Jeffrey Citron, CEO Vonage Holdings Company (Sept 22, 2003) Attached to Hearing Report


Minn. Stat. § 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.
Minn. Stat. § 237.16, subd. 1 (b) gives the Commission the following authority:
No person shall provide telephone service in Minnesota without first obtaining a determination that the person possesses the technical, managerial, and financial resources to provide the proposed telephone services and a certificate of authority from the commission under terms and conditions the commission finds to be consistent with fair and reasonable competition, universal service, the provision of affordable telephone service at a quality consistent with commission rules, and the commission's rules.
The statute does not specifically define telephone service.
    In Minnesota Microwave, Inc. v. Public Service Commission, 291 Minn. 241, 190 N.W.2d 661 (1971), the Minnesota Supreme Court considered for the first time whether a private company providing unidirectional, closed-circuit, microwave facilities was subject to the jurisdiction of the Commission as a "telephone company" or a supplier of "telephone service." The court stated:
[W]hether appellant is supplying "telephone service" is a question of law to be determined on the basis of the operative facts determined by the commission.
. . . . .
The threshold question facing the Commission is whether the Commission has jurisdiction to address the DOC's complaint. This is a legal issue under Minnesota law, not a factual dispute. As noted by the court in the Minnesota Microwave decision, this question is resolved by applying the facts in this case to the relevant Minnesota law. It is not necessary for the Commission to determine whether VOIP service is a telecommunications service or an informational service under federal law, and the Commission will not do so.
    Further, the Commission finds that the facts of this case are well set forth in the record and there are no material facts in dispute that require the matter be sent for contested case proceedings. To address this matter, the Commission examined the service that Vonage provides. The Commission finds that Vonage offers unlimited local and long distance calling as well as Caller ID, Call Waiting and Voicemail. Vonage itself holds itself out as providing all-inclusive home phone service and advertises that it replaces a customer's current phone company.
    With the Vonage service the customer uses an ordinary touch-tone phone to make calls and carry on conversations. The customer must have an ISP and a computer modem. Although the phone is plugged into an MTA router which, in turn, is plugged into the modem, the consumer is being provided with service that is functionally the same as any other telephone service. Further, the Vonage service intersects with the public switched telephone network.
    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. § § 237.01, subd.7, and 237.16, subd. 1(b) and is clearly subject to regulation by the Commission.
--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)



The Joint Petitioners assert that the APSC has jurisdiction over "utilities", which under Alabama Code §37-1-30 (1975) includes any company considered a "transportation company." According to the ILECs, Title 37 of the Alabama Code provides that "the term 'transportation company' shall include every person not engaged solely in interstate commerce or business that now or may hereafter own, operate, lease, manage, or control those common carriers or for hire.any telephone line."4 The ILECs assert that the APSC's regulatory authority is predicated on the interpretation of what constitutes a "telephone line". The ILECs represent that the term telephone line has never been restricted to apply solely to old copper lines, but has instead been broadly interpreted as incorporating the provision of voice telephone service over any type of medium including microwave frequencies and light waves carried over fiber optic strands.5
-- IN RE: Petition for a Declaratory Order regarding classification of IP Telephony Service. Order Establishing Declaratory Proceeding, DOCKET 29016, p. 3 (Alabama PSC August 2003) PDF

The provision and regulation of local telephone service is under the jurisdiction of the California Public Utilities Commission. Section 234 of the California Public Utilities Code defines a telephone corporation as every corporation or person who owns, controls, or manages a telephone line for profit. Section 233 defines a telephone line as any asset used to facilitate telephone communication. Section 216 states that any telephone corporation that performs compensated service to any portion of the California public is a public utility. Section 1001 requires that a telephone corporation must first be certificated by the Commission to place a telephone
line into service.
-- Letter from John M. Leutza, Director Telecommunications Division, State of California Utilities Commission, to Jeffrey Citron, CEO Vonage Holdings Company (Sept 22, 2003) Attached to Hearing Report.


1. Vonage's DigitalVoice SM Service Is Subject to PSC Regulation
A. Vonage Is A Telephone Corporation Under New York Public Service Law
PSL § 2(17) includes in the definition of “telephone corporation” “every corporation . . . owning, operating, or managing any telephone line used in the conduct of the business of telephonic communication for hire.” PSL § 2(18) defines “telephone line” as including “receivers, transmitters, instruments, machines, appliances and all devices, . . . apparatus . . and routes used, operated or owned by any telephone corporation to facilitate the business of affording telephonic communication.” Since Vonage offers New York subscribers telephone communications for hire, including “communication by telegraph or telephone between one point and another within the state of New York,” 23 it is subject to PSC regulation under PSL § 90, et seq. regardless of whether its subscribers calls are routed partially over the PSTN or completely via the Internet
-- Initial Comments of NY AG , Complaint of Frontier Telephone of Rochester, Inc. Against Vonage Holding Corp. Concerning Provision of Local Exchange and Inter-Exchange Telephone Service in New York State in Violation of the Public Service Law, Case 03-C-1285 (Oct 31, 2003)

State Law: Facilities
Focusing on the terms of RCW 80.04.010, WECA states correctly that there is no question concerning LocalDial’s status as a corporation doing business in Washington. Its business is the sale to the general public of telecommunications as discussed in this Order, and as evidenced by the company’s own advertising. As Staff argues, LocalDial owns and operates the gateways, servers, and other equipment that are part of the network it uses to provide telecommunications service. In short, it is an inescapable conclusion under the undisputed facts before us that LocalDial offers telecommunications service for sale to the general public in Washington and is a telecommunications company subject to our jurisdiction under chapter 80 RCW.

Washington Exchange Carriers Association v. LocalDial Corporation, Docket UT-031472, Order, p. 26-7 (WUTC June 11, 2004) (emphasis added)


Under the Public Service Law a “telephone corporation” is defined as “every corporation...owning, operating or managing any telephone line or part of telephone line used in the conduct of the business of affording telephonic communication for hire.” (PSL §2(17)). The Public Service Law defines “telephone line” as including “receivers, transmitters, instruments, machines, appliances and all devices,...apparatus, property and routes used, operated or owned by any telephone corporation to facilitate the business of affording telephonic communication....” (PSL §2(18)).

The company is in the business of affording "telephonic communication for hire." Vonage's service allows subscribers to make and receive voice communications with any other telephone subscribers in the world, and its service is marketed as a substitute for "home phone service." Vonage owns and manages equipment (a media gateway server)11 that is used to connect Vonage’s customers to the customers of other telephone corporations via their public networks, as necessary. This equipment constitutes a "telephone line" under the PSL and is used to facilitate the provisioning by Vonage of telephonic communication to customers. Accordingly, Vonage is a "telephone corporation" under our jurisdiction.

-- 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. 9-10 (May 21, 2004)

Reseller

Vonage interconnects with, and purchases services and the use of network facilities from other telephone corporations to enable its customers to place calls to, and receive calls from, telephone customers throughout the world. In so doing, Vonage is reselling12 to its own customers capabilities it acquires from the other, third party, telephone corporations. We have previously determined that entities reselling telephone services are telephone corporations subject to our jurisdiction.13
-- 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. 10 (May 21, 2004)

 Computer Inquiries: Basic v Enhanced / Information Service Dichotomy

 Computer Inquiries

See also Computer Inquiries general discussion


4. The first set of definitions relevant to the Commission's regulatory treatment of VoIP was developed in the Computer Inquiries line of decisions.   In those decisions, the Commission created a distinction between basic services and enhanced services.  A basic service is transmission capacity for the movement of information without net change in form or content.   By contrast, an enhanced service contains a basic service component but also involves some degree of data processing that changes the form or content of the transmitted information.   Therefore, the Commission found that, generally, services that result in a protocol conversion are enhanced services, while services that result in no net protocol conversion to the end user are basic services.   The Commission found that, "[i]n enhanced services, communications and data processing technologies have become intertwined so thoroughly" that they are distinctly separate from basic services.   The Commission concluded that enhanced services constitute the electronic transmission of writing, signs, signals, pictures, etc., over the interstate telecommunications network and therefore are subject to the Commission's jurisdiction.   It further found, however, that the enhanced service market was highly competitive with low barriers to entry; therefore, the Commission declined to treat providers of enhanced services as common carriers subject to regulation under Title II of the Communications Act of 1934, as amended (the Act).   The Commission exercised its Title I jurisdiction to impose conditions on both telephone carriers' entry into the enhanced services market and their provision of basic service to enhanced service providers.
-- In re Petition for Declaratory Ruling that AT&T's Phone-to-Phone IP Telephony Services are Exempt from Access Charges, WC Docket No. 02-361, Order para 4 (April 21, 2004)

In addressing the parties' arguments, the Court must also examine the recent history of the regulatory scheme governing the telecommunications industry. The growing capability of the computer and its interaction with telecommunications technology presented challenges acknowledged by the Federal Communications Commission ("FCC") over twenty years ago. In 1980,
recognizing the computer's involvement with telecommunications, the FCC distinguished between "basic services" and "enhanced services." See In the Matter of Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), 77 FCC 2d 384, ¶5 (1980) (Final Decision) ("Second Computer Inquiry").2 After making this distinction, the FCC noted that basic services offered by a common carrier would continue to be

regulated by Title II of the Communications Act, but that regulation of enhanced services is not required in furtherance of some overall statutory objective. In fact, the absence of traditional public utility regulation of enhanced services offers the greatest potential for efficient utilization and full exploitation of the interstate telecommunications network.
Id. ¶ 7, at 387.3
         The line demarcating basic services from enhanced services became more defined when, in passing the Communications Act of 1996, Congress defined the terms "telecommunications,"4 "telecommunications services"5 and "information services."6 See 47 U.S.C. § 153.
2 The FCC stated:
[W]e adopt a regulatory scheme that distinguishes between the common carrier offering of basic transmission services and the offering of enhanced services . . . We find that basic service is limited to the common carrier offering of transmission capacity for the movement of information, whereas enhanced service combines basic service with computer processing applications that act on the format, content, code, protocol or similar aspects of the subscriber's transmitted information, or provide the subscriber additional, different, or restructured information, or involve subscriber interaction with stored information.
Second Computer Inquiry ¶5.
3 Later, as the FCC went further to protect enhanced services from regulation it discussed a theory of "contamination" whereby "[t]he enhanced component of [service providers'] offerings 'contaminates' the basic component, and the entire offering is therefore considered to be enhanced." In re Amendment to Sections 64.702 of the Commission's Rules and Regulations (Third Computer Inquiry), 3 FCC Rcd. 11501, 1170 n. 23 (1988).
4 "The term 'telecommunications' means 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." 47 U.S.C. § 153(43).
5 "Telecommunications service" is "the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used." 47 U.S.C. § 153(46).
6 "Information service" is defined 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." 47 U.S.C. § 153(20).
-- Vonage v. Minnesota PUC, Civil No. 03-5287, Sec. IV.A. (MJD/JGL) (DMN October 16, 2003)

Telecom Act of 1996: Telecom v. Info Service

      5. In the Telecommunications Act of 1996 (the 1996 Act),18  Congress included definitions of the terms "telecommunications," "telecommunications service," and "information service."19   Telecommunications is defined in the statute as "the transmission, between or among points specified by the user, of information of the user's choosing, without change in form or content of the information as sent and received."20   A "telecommunications service" is "the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used."21   An "information service" consists of "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." 22
        6. In the Non-Accounting Safeguards Order, the Commission has determined that the statutory term "telecommunications service" is similar to the Commission's Computer Inquiries definition of a basic service, and the statutory term "information service" is similar to the definition of an enhanced service.23   The Commission found that, like basic services and enhanced services, telecommunications services and information services are separate and distinct categories, with Title II regulation applying to telecommunications services but not to information services.24   The Commission also found that services that involve no net protocol conversion are telecommunications services, rather than information services, under the 1996 Act definitions.25
 18  Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996).
 19  47 U.S.C. §§ 153(20), (43), and (46).
 20  47 U.S.C. § 153(43).
 21  47 U.S.C. § 153(46).
 22 47 U.S.C. § 153(20).
 23  Non-Accounting Safeguards Order, 11 FCC Rcd at 21955-58, paras. 102-107; Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report to Congress, 13 FCC Rcd 11501, 11507-08, 11516-17, paras. 13, 33 (1998) (Stevens Report).
 24  Stevens Report, 13 FCC Rcd at 11507-08, para. 13.
 25  Non-Accounting Safeguards Order, 11 FCC Rcd at 21957-58, para. 106.  Similarly, the Commission found that certain classes of "excepted" protocol processing services are telecommunications services as well.  Non-Accounting Safeguards Order, 11 FCC Rcd at 21958, para. 106.
-- In re Petition for Declaratory Ruling that AT&T's Phone-to-Phone IP Telephony Services are Exempt from Access Charges, WC Docket No. 02-361, Order para 5-6 (April 21, 2004)
 

            Telecom Service / Info Service Mutually Exclusive

 Steven's Report

9. Between the issuance of the Stevens Report and the date AT&T filed its petition for declaratory ruling in this proceeding, the Commission took no further action with regard to classifying IP telephony for purposes of determining if carriers are subject to interstate access charges for such traffic.   In its Intercarrier Compensation notice of proposed rulemaking, the Commission mentioned the application of access charges to VoIP, stating that "[IP] telephony threatens to erode access revenues for LECs because it is exempt from the access charges that traditional long-distance carriers must pay."
. . . .
16. AT&T argues that, even if section 69.5(b) of our rules applies on its face, the Commission waived it or otherwise established a carve-out for AT&T's specific service in the Stevens Report.   We disagree.  If the Commission had wanted to establish an exemption from section 69.5(b) for certain telecommunications services, it would have been obligated to conduct a rulemaking in conformity with the Administrative Procedure Act.   Statements of policy in a Report to Congress or a Notice of Proposed Rulemaking ? even if clear  ? cannot change our rules.  The Commission can, of course, grant a waiver for a particular type of service,  but we conclude that neither the Stevens Report nor the Intercarrier Compensation NPRM constitutes a waiver of section 69.5(b) as applied to AT&T's specific service.  As discussed below,  although we decide that the Commission did not waive section 69.5(b) or otherwise create a blanket exemption for AT&T's specific service, we do not decide at this time whether AT&T or any similarly situated party has a valid defense against damages based on equitable considerations.
-- In re Petition for Declaratory Ruling that AT&T's Phone-to-Phone IP Telephony Services are Exempt from Access Charges, WC Docket No. 02-361, Order para 9, 16 (April 21, 2004)


In a report to Congress regarding universal service that addressed many of the issues before the Court in this matter, the FCC explained that the new terms it adopted to describe different types of communications services were comparable to the old. In re Federal-State Joint Board on Universal Service, 13 FCC Rcd. ¶ 21, at 11511 (April 10, 1998) (Report to Congress) ("Universal Service Report").7 The court has examined both the legislative history of the Communications Act of 1996 and the Universal Service Report, and agrees with the FCC's interpretation of congressional intent. The Universal Service Report provided enhanced clarity with regard to the distinction between traditional telephone services offered by common carriers, and the continuously growing universe of information services.
            It also solidified and added a supportive layer to the historical architecture of the as yet largely unregulated universe of information services. The FCC noted the "intention of the drafters of both the House and Senate bills that the two categories be separate and distinct, and that information service providers not be subject to telecommunications regulation." Id. ¶ 43, at 11523. In addition to the positions taken by the FCC, Congress has expressly stated that enhanced services8 are not to be regulated under Title II of the Telecommunications Act. 47 C.F.R. § 64.702(a).
            Examining the statutory language of the Communications Act, the Court concludes that the VoIP service provided by Vonage constitutes an information service because it offers the "capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications." 47 U.S.C. § 153(20). The process of transmitting customer calls over the Internet requires Vonage to "act on" the format and protocol of the information. 47 C.F.R. § 64.702(a). For calls originating with one of Vonage's customers, calls in the VoIP format must be transformed into the format of the
PSTN before a POTS user can receive the call. For calls originating from a POTS user, the process of acting on the format and protocol is reversed. The Court concludes that Vonage's activities fit within the definition of information services. Vonage's services are closely tied to the provision of telecommunications services as defined by Congress, the courts and the FCC, but this Court finds that Vonage uses telecommunications services, rather than provides them.
    Looking beyond the plain statutory language, the Court also examines the nature of IP telephony, a subject that by its very nature calls into question the telecommunications services/information services distinction adopted by the 1996 Communications Act.9 At issue is whether Vonage's IP telephony service constitutes a telecommunications service or an information service.
    In the Universal Service Report, the FCC examined two types of IP telephony: phone-to-phone and computer-to-computer. The FCC refrained from explicitly classifying either type as a telecommunications service or an information service.10 The FCC tentatively concluded that phone-to-phone IP telephony "lacks the characteristics that would render them 'information services' within the meaning of the statute, and instead bear the characteristics of 'telecommunications services.'" Universal Service Report, 13 FCC Rcd. ¶ 89, at 11544. The FCC devised a set of conditions used to determine whether a provider's offering constituted phone-to-phone IP telephony.
In using the term 'phone-to-phone' IP telephony, we tentatively intend to refer to services in which the provider meets the following conditions: (1) it holds itself out as providing voice telephony or facsimile transmission service; (2) it does not require the customer to use CPE different from that CPE necessary to place an ordinary touch-tone call (or facsimile transmission) over the public switched telephone network; (3) it allows the customer to call telephone numbers assigned in accordance with the North American Numbering Plan, and associated international agreements; and (4) it transmits customer information without net change in form or content.
Id. ¶ 88, at 11543-44.
7 "Specifically, we find that Congress intended the categories of 'telecommunications service' and 'information service' to parallel the definitions of 'basic service' and 'enhanced service.'" In re Federal- State Joint Board on Universal Service, 13 FCC Rcd. ¶ 21, at 11511 (April 10, 1998) (Report to Congress) ("Universal Service Report"). Further, the FCC found that "[t]he language and legislative history of both the House and Senate bills [which became the Communications Act of 1996] indicate that the drafters of each bill regarded telecommunications services and information services as mutually exclusive categories." Id. ¶ 43, at 11521-22.8 Enhanced services are defined as "services, offered over common carrier transmission facilities used in interstate communications, which employ computer processing applications that act on the format, content, code, protocol or similar aspects of the subscriber's transmitted information." 47 C.F.R. § 64.702(a); Universal Service Report, 13 FCC Rcd. ¶ 21, at 11511 (stating that the definition for enhanced services parallels the definition of information services).
-- Vonage v. Minnesota PUC, Civil No. 03-5287, Sec. IV.A. (MJD/JGL) (DMN October 16, 2003)


In a report to Congress regarding universal service that addressed many of the issues before the Court in this matter, the FCC explained that the new terms it adopted to describe different types of communications services were comparable to the old. In re Federal-State Joint Board on Universal Service, 13 FCC Rcd. ¶ 21, at 11511 (April 10, 1998) (Report to Congress) ("Universal Service Report").7
    The court has examined both the legislative history of the Communications Act of 1996 and the Universal Service Report, and agrees with the FCC's interpretation of congressional intent. The Universal Service Report provided enhanced clarity with regard to the distinction between traditional telephone services offered by common carriers, and the continuously growing universe of information services. It also solidified and added a supportive layer to the historical architecture of the as yet largely unregulated universe of information services. The FCC noted the "intention of the drafters of both the House and Senate bills that the two categories be separate and distinct, and that information service providers not be subject to telecommunications regulation." Id. ¶ 43, at 11523. In addition to the positions taken by the FCC, Congress has expressly stated that enhanced services8 are not to be regulated under Title II of the Telecommunications Act. 47 C.F.R. § 64.702(a).
- Vonage Holding Company v. Minnesota PUC, Civil No 03-5287, Sec. IV.A. (DMinn Oct 16, 2003)


We have singled out IP telephony services for discussion in this Report.   As discussed above, users of certain forms of phone-to-phone IP telephony appear to pay fees for the sole purpose of obtaining transmission of information without change in form or content.  Indeed, from the end-user perspective, these types of phone-to-phone IP telephony service providers seem virtually identical to traditional circuit-switched carriers.  The record currently before us suggests that these services lack the characteristics that would render them "information services" within the meaning of the statute, and instead bear the characteristics of "telecommunications services."   -- In re Federal-State Joint Board on Universal Service, Report to Congress, FCC 98-67  101 (April 10, 1998).

"The Commission to date has not formally considered the legal status of IP telephony.  The record currently before us suggests that certain "phone-to-phone IP telephony" services lack the characteristics that would render them "information services" within the meaning of the statute, and instead bear the characteristics of "telecommunications services." We do not believe, however, that it is appropriate to make any definitive pronouncements in the absence of a more complete record focused on individual service offerings.  "  -- In re Federal-State Joint Board on Universal Service, Report to Congress, FCC 98-67  83 (April 10, 1998).

We also have considered the regulatory status of various forms of "phone-to-phone IP telephony" service mentioned generally in the record.   The record currently before us suggests that certain of these services lack the characteristics that would render them "information services" within the meaning of the statute, and instead bear the characteristics of "telecommunications services."  We do not believe, however, that it is appropriate to make any definitive pronouncements in the absence of a more complete record focused on individual service offerings.  As noted, to the extent we conclude that certain forms of phone-to-phone IP telephony are "telecommunications," and to the extent that providers of such services are offering those services directly to the public for a fee, those providers would be "telecommunications carriers."  Accordingly, those providers would fall within section 254(d)'s mandatory requirement to contribute to universal service mechanisms.  If such providers are exempt from universal service contribution requirements, users and carriers will have an incentive to modify networks to shift traffic to Internet protocol and thereby avoid paying into the universal service fund or, in the near term, the universal service contributions embedded in interstate access charges.  If that occurs, it could increase the burden on the more limited set of companies still required to contribute.  Such a scenario, if allowed to manifest itself, could well undermine universal service.  At this time, however, there is no evidence that there is an immediate threat to the sufficiency of universal service support.    - In re Federal-State Joint Board on Universal Service, Report to Congress, FCC 98-67  98 (April 10, 1998).



    83. Having concluded that Internet access providers do not offer "telecommunications service" when they furnish Internet access to their customers, we next consider whether certain other Internet-based services might fall within the statutory definition of "telecommunications."  We recognize that new Internet-based services are emerging, and that our application of statutory terms must take into account such technological developments.  We therefore examine in this section Internet-based services, known as IP telephony, that most closely resemble traditional basic transmission offerings.   The Commission to date has not formally considered the legal status of IP telephony.    The record currently before us suggests that certain "phone-to-phone IP telephony" services lack the characteristics that would render them ?information services? within the meaning of the statute, and instead bear the characteristics of ?telecommunications services.?  We do not believe, however, that it is appropriate to make any definitive pronouncements in the absence of a more complete record focused on individual service offerings.
    84.   "IP telephony" services enable real-time voice transmission using Internet protocols.   The services can be provided in two basic ways:  through software and hardware at customer premises, or through "gateways" that enable applications originating and/or terminating on the PSTN.   Gateways are computers that transform the circuit-switched voice signal into IP packets, and vice versa, and perform associated signalling, control, and address translation functions.  The voice communications can be transmitted along with other data on the "public" Internet, or can be routed through intranets or other private data networks for improved performance.  Several companies now offer commercial IP telephony products.  For example, VocalTec sells software that end users can install on their personal computers to make calls to other users with similar equipment, and also makes software used in gateways.   Companies such as IDT and Qwest employ gateways to offer users the ability to call from their computer to ordinary telephones connected to the public switched network, or from one telephone to another.   To use the latter category of services, a user first picks up an ordinary telephone handset connected to the public switched network, then dials the phone number of a local gateway.  Upon receiving a second dialtone, the user dials the phone number of the party he or she wishes to call.  The call is routed from the gateway over an IP network, then terminated through another gateway to the ordinary telephone at the receiving end.
    85 Commenters that discuss IP telephony are split on the appropriate treatment of these services.   Several parties, including Senators Rockefeller, Snowe, Stevens, and Burns, urge that IP telephony providers offer interstate telecommunications services and, consequently, should contribute to universal service support mechanisms.   Other parties, including Senator McCain, Representative White and the National Telecommunications and Information Administration, oppose application of Title II regulation.   Some commenters argue that IP telephony is a nascent technology that is unlikely to generate significant revenues in the foreseeable future.   Regardless of the size of the market, we must still decide as a legal matter whether any IP telephony providers meet the statutory definitions of offering "telecommunications" or "telecommunications service" in section 3 of the 1996 Act.
    86 As we have observed above in our general discussion of hybrid services,  the classification of a service under the 1996 Act depends on the functional nature of the end-user offering.   Applying this test to IP telephony, we consider whether any company offers a service that provides users with pure "telecommunications."  We first note that "telecommunications" is defined as a form of "transmission."   Companies that only provide software and hardware installed at customer premises do not fall within this category, because they do not transmit information.  These providers are analogous to PBX vendors, in that they offer customer premises equipment (CPE) that enables end users to engage in telecommunications by purchasing local exchange and interexchange service from carriers.  These CPE providers do not, however, transport any traffic themselves.
    87   In the case of "computer-to-computer" IP telephony, individuals use software and hardware at their premises to place calls between two computers connected to the Internet.  The IP telephony software is an application that the subscriber runs, using Internet access provided by its Internet service provider.  The Internet service providers over whose networks the information passes may not even be aware that particular customers are using IP telephony software, because IP packets carrying voice communications are indistinguishable from other types of packets.  As a general matter, Title II requirements apply only to the "provi[sion] " or "offering" of telecommunications.   Without regard to whether "telecommunications" is taking place in the transmission of computer-to-computer IP telephony,  the Internet service provider does not appear to be "provid[ing]" telecommunications to its subscribers.
    88   "Phone-to-phone" IP telephony services appear to present a different case.  In using the term "phone-to-phone" IP telephony, we tentatively intend to refer to services in which the provider meets the following conditions: (1) it holds itself out as providing voice telephony or facsimile transmission service; (2) it does not require the customer to use CPE different from that CPE necessary to place an ordinary touch-tone call (or facsimile transmission) over the public switched telephone network; (3) it allows the customer to call telephone numbers assigned in accordance with the North American Numbering Plan, and associated international agreements; and (4) it transmits customer information without net change in form or content.
    89 Specifically, when an IP telephony service provider deploys a gateway within the network to enable phone-to-phone service, it creates a virtual transmission path between points on the public switched telephone network over a packet-switched IP network.  These providers typically purchase dial-up or dedicated circuits from carriers and use those circuits to originate or terminate Internet-based calls.  From a functional standpoint, users of these services obtain only voice transmission, rather than information services such as access to stored files.   The provider does not offer a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information.  Thus, the record currently before us suggests that this type of IP telephony lacks the characteristics that would render them ?information services? within the meaning of the statute, and instead bear the characteristics of ?telecommunications services.?
    90   We do not believe, however, that it is appropriate to make any definitive pronouncements in the absence of a more complete record focused on individual service offerings.  As stated above, we use in this analysis a tentative definition of "phone-to-phone" IP telephony.  Because of the wide range of services that can be provided using packetized voice and innovative CPE, we will need, before making definitive pronouncements, to consider whether our tentative definition of phone-to-phone IP telephony accurately distinguishes between phone-to-phone and other forms of IP telephony, and is not likely to be quickly overcome by changes in technology.  We defer a more definitive resolution of these issues pending the development of a more fully-developed record because we recognize the need, when dealing with emerging services and technologies in environments as dynamic as today's Internet and telecommunications markets, to have as complete information and input as possible.
  91 In upcoming proceedings with the more focused records, we undoubtedly will be addressing the regulatory status of various specific forms of IP telephony, including the regulatory requirements to which phone-to-phone providers may be subject if we were to conclude that they are "telecommunications carriers."  The Act and the Commission's rules impose various requirements on providers of telecommunications, including contributing to universal service mechanisms, paying interstate access charges, and filing interstate tariffs.   We note that, to the extent we conclude that certain forms of phone-to-phone IP telephony service are "telecommunications services," and to the extent the providers of those services obtain the same circuit-switched access as obtained by other interexchange carriers, and therefore impose the same burdens on the local exchange as do other interexchange carriers, we may find it reasonable that they pay similar access charges.  On the other hand, we likely will face difficult and contested issues relating to the assessment of access charges on these providers.  For example, it may be difficult for the LECs to determine whether particular phone-to-phone IP telephony calls are interstate, and thus subject to the federal access charge scheme, or intrastate.  We intend to examine these issues more closely based on the more complete records developed in future proceedings.
  92  With regard to universal service contributions, to the extent we conclude that certain forms of phone-to-phone IP telephony are interstate "telecommunications," and to the extent that providers of such services are offering those services directly to the public for a fee, those providers would be "telecommunications carriers."  Accordingly, those providers would fall within section 254(d)'s mandatory requirement to contribute to universal service mechanisms.  Finally, under section 10 of the Act, we have authority to forbear from imposing any rule or requirement of the Act on telecommunications carriers.   We will need to consider carefully whether, pursuant to our authority under section 10 of the Act, to forbear from imposing any of the rules that would apply to phone-to-phone IP telephony providers as "telecommunications carriers."
  93   We recognize that our treatment of phone-to-phone IP telephony may have implications for the international telephony market.  In the international realm, the Commission has stated that IP telephony serves the public interest by placing significant downward pressure on international settlement rates and consumer prices.   In some instances, moreover, IP telephony providers have introduced an alternative calling option in foreign markets that otherwise would face little or no competition.  We continue to believe that alternative calling mechanisms are an important pro-competitive force in the international services market.  We need to consider carefully the international regulatory requirements to which phone-to-phone providers would be subject.  For example, it may not be appropriate to apply the international accounting rate regime to IP telephony.
- In re Federal-State Joint Board on Universal Service, Report to Congress, FCC 98-67  98 (April 10, 1998).

 Steven's Criteria

In the Steven’s Report the FCC stated, consistent with the determinations it had previously made on several occasions,26 that “[t]he protocol processing that takes place incident to phone-to-phone IP Telephony does not affect the service’s classification, under the Commission’s current approach, because it results in no protocol conversion to the end user.”27 The FCC defined phone-to-phone IP Telephony as a service that: 1) holds itself out as providing voice telephony service; 2) does not require the customer to use CPE [customer premises equipment] different from that necessary to place an ordinary touch-tone call over the public switched telephone network; 3) allows the customer to call telephone numbers assigned in accordance with the North American Numbering Plan; and 4) transmits customer information without net change in form or content.28

-- Washington Exchange Carriers Association v. LocalDial Corporation, Docket UT-031472, Order, p. 23 (WUTC June 11, 2004)


In the Universal Service Report, the FCC examined two types of IP telephony: phone-to-phone and computer-to-computer. The FCC refrained from explicitly classifying either type as a telecommunications service or an information service.10 The FCC tentatively concluded that phone-to-phone IP telephony "lacks the characteristics that would render them 'information services' within the meaning of the statute, and instead bear the characteristics of 'telecommunications services.'" Universal Service Report, 13 FCC Rcd. ¶ 89, at 11544. The FCC devised a set of conditions used to determine whether a  provider's offering constituted phone-to-phone IP telephony.

In using the term 'phone-to-phone' IP telephony, we tentatively intend to refer to services in which the provider meets the following conditions: (1) it holds itself out as providing voice telephony or facsimile transmission service; (2) it does not require the customer to use CPE different from that CPE necessary to place an ordinary touch-tone call (or facsimile transmission) over the public switched telephone network; (3) it allows the customer to call telephone numbers assigned in accordance with the North American Numbering Plan, and associated international agreements; and (4) it transmits customer information without net change in form or content.
Id. ¶ 88, at 11543-44.
- Vonage Holding Company v. Minnesota PUC, Civil No 03-5287, Sec. IV.A. (DMinn Oct 16, 2003)

Protocol Conversion

7. With respect to protocol conversion and phone-to-phone services, the Commission noted in the Stevens Report that its Non-Accounting Safeguards Order determined that "certain protocol processing services that result in no net protocol conversion to the end user are classified as basic services; those services are deemed telecommunications services."   The Commission further stated that "[t]he protocol processing that takes place incident to phone-to-phone IP telephony does not affect the service's classification, under the Commission's current approach, because it results in no net protocol conversion to the end user."
-- In re Petition for Declaratory Ruling that AT&T's Phone-to-Phone IP Telephony Services are Exempt from Access Charges, WC Docket No. 02-361, Order p. 7 (April 21, 2004)

 Classes of Providers

    In addition to a generic analysis of the varying forms of IP telephony, the FCC examined whether three classes of providers that facilitate IP telephony provide telecommunications services. First, the FCC stated that "[c]ompanies that only provide software and hardware installed at customer premises do not fall within [the telecommunications provider] category, because they do not transmit
information." Id. ¶ 86, at 11543. Second, it concluded that ISPs did "not appear to be 'provid[ing]' telecommunications to its subscribers." Id. ¶ 87, at 11543 (alteration in original) (quotation omitted).
    Third, it addressed the role of "an IP telephony service provider [that] deploys a gateway within the network to enable phone-to-phone service." "[G]ateways" are "computers that transform the circuit-switched voice signal into IP packets, and vice versa, and perform associated [signaling], control, and address translation functions." Id. ¶ 84, at 11541. The FCC concluded that such services possessed "the characteristics of 'telecommunications services.'" Id. ¶ 89, at 11544. The FCC's conclusion focused on gateway providers that provide phone-to-phone IP telephony services. The FCC noted that from a "functional standpoint," the users were only receiving voice transmission, and not information services. Id. In other words, because a person using a POTS telephone was on either end of the call, even if the call was routed over the Internet, there was no form change sufficient to constitute information services.
-- Vonage v. Minnesota PUC, Civil No. 03-5287, Sec. IV.A. (MJD/JGL) (DMN October 16, 2003)

 Duck

The Court acknowledges the attractiveness of the MPUC's simplistic "quacks like a duck" argument, essentially holding that because Vonage's customers make phone calls, Vonage's services must be telecommunications services. However, this simplifies the issue to the detriment of an accurate understanding of this complex question. 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.
-- Vonage v. Minnesota PUC, Civil No. 03-5287, Sec. IV.A. (MJD/JGL) (DMN October 16, 2003)

 Steven's Report Criteria Applied

     In applying the FCC's four phone-to-phone IP telephony conditions to Vonage, it is clear that Vonage does not provide phone-to-phone IP telephony service. Vonage's services do not meet the second and fourth requirements. Use of Vonage's service requires CPE different than what a person connected to the PSTN uses to make a touch-tone call. Further, a net change in form and content occurs when Vonage's customers place a call. If the end user is connected to the PSTN, the information transmitted over the Internet is converted from IP into a format compatible with the PSTN. Vonage's service is not a telecommunications service because "from the user's standpoint" the form of a transmission undergoes a "net change." Id. ¶ 89, at 11544.
    With regard to computer-to-computer IP telephony, the FCC declined to decide whether "'telecommunications' is taking place in the transmission of computer-to-computer IP telephony." Id. ¶ 87, at 11543. When Vonage's users communicate with other customers in computer-to-computer IP telephony, the two customers are again using the Internet to transmit data packets which, by their very nature change form and do not come in contact with the regulated PSTN. Vonage's service effectively carves out a role in the communications scheme that distinguishes it from telecommunications services.
. . . .
Vonage is unlike the first two classes of providers discussed by the FCC; it does more than merely provide software and hardware, and is not an ISP. Vonage does, however, provide gateways that translate IP format into a format compatible with the PSTN. Because Vonage never provides phone-to-phone IP telephony (it only provides computer-to-phone or phone-to-computer IP telephony), from a "functional standpoint," Vonage's service is distinguishable from the scenario the FCC considered to be telecommunications services.
. . . . .
To summarize, it is clear that Congress has distinguished telecommunications services from information services. The purpose of Title II is to regulate telecommunications services, and Congress has clearly stated that it does not intend to regulate the Internet and information services. Vonage's services do not constitute a telecommunications service. It only uses telecommunications, and does not provide them. The Court can find no statutory intent to regulate VoIP, and until Congress speaks more clearly on this issue, Minnesota may not regulate an information services provider such as Vonage as if it were a telecommunications provider. What Vonage provides is essentially the enhanced functionality on top of the underlying network, which the FCC has explained should be left alone. Universal Service Report, 13 FCC Rcd. ¶ 95, at 11546.
-- Vonage v. Minnesota PUC, Civil No. 03-5287, Sec. IV.A. (MJD/JGL) (DMN October 16, 2003)



The ILECs note that as defined by the FCC, "phone-to-phone" IP Telephony consists of services in which the provider: (1) holds itself out as providing voice telephone service; (2) does not require the use of a computer to transmit the message; (3) allows a customer to call telephone numbers assigned in accordance with the North American Numbering Plan; and (4) transmits customer information without change in form or content.
-- IN RE: Petition for a Declaratory Order regarding classification of IP Telephony Service. Order Establishing Declaratory Proceeding, DOCKET 29016, p. 2 (Alabama PSC August 2003) PDF
 Steven's Report: Computer to Computer
In its examination of computer-to-computer IP telephony, the Commission focused on IP telephony provided over the Internet.   In this scenario, callers use software and hardware at their premises to place calls using Internet access provided by an unregulated Internet service provider (ISP), and the ISP may not even be aware that a voice call is taking place.   Thus, the Commission found that the ISP did not appear to be providing telecommunications to its subscribers.
--In re Petition for Declaratory Ruling that AT&T's Phone-to-Phone IP Telephony Services are Exempt from Access Charges, WC Docket No. 02-361, Order para. 7 (April 21, 2004)


We reach our holdings in this Order based on FWD as described by Pulver in its petition and subsequent ex partes. We thus limit the determinations in this Order to Pulver's present FWD offering (only to the extent expressly described below), without regard to any possible future plans Pulver may have. See, e.g., BellSouth Comments at 4 & n.13 (quoting a Pulver press statement about eventually charging a fee); USTA Reply at 4 (citing SBC Comments at 2 that FWD may eventually enable calls to users outside the FWD community). Furthermore, this declaratory ruling addresses FWD only to the extent it facilitates free communications over the Internet between one on-line FWD member using a broadband connection and other on-line FWD members using a broadband connection. Therefore, we specifically decline to extend our classification holdings to the legal status of FWD to the extent it is involved in any way in communications that originate or terminate on the public switched telephone network, or that may be made via dial-up access. See Letter from Susan M. Hafeli, Counsel, pulver.com, to Marlene H. Dortch, Secretary, Federal Communications Commission, WC Docket No. 03-45, at 1 (filed Dec. 11, 2003) (Pulver Dec. 11 Ex Parte Letter) (acknowledging that "third parties can provide FWD subscribers with connectivity to the public switched telephone network" without Pulver's permission). Rather, we will address the legal status of those communications in our companion IP-Enabled Services rulemaking.
-- 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 n. 3 (FCC February 19, 2004)


In addition to a generic analysis of the varying forms of IP telephony, the FCC examined whether three classes of providers that facilitate IP telephony provide telecommunications services. First, the FCC stated that "[c]ompanies that only provide software and hardware installed at customer premises do not fall within [the telecommunications provider] category, because they do not transmit
information." Id. ¶ 86, at 11543. Second, it concluded that ISPs did "not appear to be 'provid[ing]' telecommunications to its subscribers." Id. ¶ 87, at 11543 (alteration in original) (quotation omitted).
- Vonage Holding Company v. Minnesota PUC, Civil No 03-5287, Sec. IV.A. (DMinn Oct 16, 2003)

86 "As we have observed above in our general discussion of hybrid services,  the classification of a service under the 1996 Act depends on the functional nature of the end-user offering.   Applying this test to IP telephony, we consider whether any company offers a service that provides users with pure "telecommunications."  We first note that "telecommunications" is defined as a form of "transmission."   Companies that only provide software and hardware installed at customer premises do not fall within this category, because they do not transmit information.  These providers are analogous to PBX vendors, in that they offer customer premises equipment (CPE) that enables end users to engage in telecommunications by purchasing local exchange and interexchange service from carriers.  These CPE providers do not, however, transport any traffic themselves.
 87 In the case of "computer-to-computer" IP telephony, individuals use software and hardware at their premises to place calls between two computers connected to the Internet.  The IP telephony software is an application that the subscriber runs, using Internet access provided by its Internet service provider.  The Internet service providers over whose networks the information passes may not even be aware that particular customers are using IP telephony software, because IP packets carrying voice communications are indistinguishable from other types of packets.  As a general matter, Title II requirements apply only to the "provi[sion] " or "offering" of telecommunications.   Without regard to whether "telecommunications" is taking place in the transmission of computer-to-computer IP telephony,  the Internet service provider does not appear to be "provid[ing]" telecommunications to its subscribers.
"  ---- In re Federal-State Joint Board on Universal Service, Report to Congress, FCC 98-67 (April 10, 1998)

 Steven's Report: Phone to Phone

8. In its examination of phone-to-phone IP telephony, the Commission stated that:
"we tentatively intend to refer to services in which the provider meets the following conditions:  (1) it holds itself out as providing voice telephony or facsimile transmission service; (2) it does not require the customer to use CPE different from that CPE necessary to place an ordinary touch-tone call (or facsimile transmission) over the public switched telephone network; (3) it allows the customer to call telephone numbers assigned in accordance with the North American Numbering Plan, and associated international agreements; and (4) it transmits customer information without net change in form or content."   [33]
The Commission found that the record then before it suggested that this type of phone-to-phone IP telephony lacks the characteristics of an information service and bears the characteristics of a telecommunications service.[34]   The Commission declined, however, to make a definitive pronouncement as to the regulatory status of phone-to-phone IP telephony absent a more complete record focused on individual service offerings.[35]   The Commission also stated that it would address in future proceedings the regulatory requirements, including interstate access charges, to which specific types of phone-to-phone VoIP services might be subject if they were determined to be telecommunications services.[36]   Specifically with regard to interstate access charges, the Commission stated, "to the extent we conclude that certain forms of phone-to-phone IP telephony service are 'telecommunications services,' and to the extent the providers of those services obtain the same circuit-switched access as obtained by other interexchange carriers, and therefore impose the same burdens on the local exchange as do other interexchange carriers, we may find it reasonable that they pay similar access charges." [37]
[33]   Stevens Report, 13 FCC Rcd at 11543-44, para. 88.
[34]   Stevens Report, 13 FCC Rcd at 11544, para. 89.
[35]   Stevens Report, 13 FCC Rcd at 11544, para. 90.
[36]   Stevens Report, 13 FCC Rcd at 11544, para. 91.
[37]   Stevens Report, 13 FCC Rcd at 11544-45, para. 91
In re Petition for Declaratory Ruling that AT&T's Phone-to-Phone IP Telephony Services are Exempt from Access Charges, WC Docket No. 02-361, Order para 8 (April 21, 2004)


    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.
-- 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)


Third, it addressed the role of "an IP telephony service provider [that] deploys a gateway within the network to enable phone-to-phone service." "[G]ateways" are "computers that transform the circuit-switched voice signal into IP packets, and vice versa, and perform associated [signaling], control, and address translation functions." Id. ¶ 84, at 11541. The FCC concluded that such services possessed "the characteristics of 'telecommunications services.'" Id. ¶ 89, at 11544. The FCC's conclusion focused on gateway providers that provide phone-to-phone IP telephony services. The FCC noted that from a "functional standpoint," the users were only receiving voice transmission, and not information services. Id. In other words, because a person using a POTS telephone was on
either end of the call, even if the call was routed over the Internet, there was no form change sufficient to constitute information services.
- Vonage Holding Company v. Minnesota PUC, Civil No 03-5287, Sec. IV.A. (DMinn Oct 16, 2003)

In the Universal Service Report, the FCC examined two types of IP telephony: phone-to-phone and computer-to-computer. The FCC refrained from explicitly classifying either type as a telecommunications service or an information service.10 The FCC tentatively concluded that phone-to-phone IP telephony "lacks the characteristics that would render them 'information services' within the meaning of the statute, and instead bear the characteristics of 'telecommunications services.'" Universal Service Report, 13 FCC Rcd. ¶ 89, at 11544. The FCC devised a set of conditions used to determine whether a  provider's offering constituted phone-to-phone IP telephony.

In using the term 'phone-to-phone' IP telephony, we tentatively intend to refer to services in which the provider meets the following conditions: (1) it holds itself out as providing voice telephony or facsimile transmission service; (2) it does not require the customer to use CPE different from that CPE necessary to place an ordinary touch-tone call (or facsimile transmission) over the public switched telephone network; (3) it allows the customer to call telephone numbers assigned in accordance with the North American Numbering Plan, and associated international agreements; and (4) it transmits customer information without net change in form or content.
Id. ¶ 88, at 11543-44.
- Vonage Holding Company v. Minnesota PUC, Civil No 03-5287, Sec. IV.A. (DMinn Oct 16, 2003)



 

 88 "Phone-to-phone" IP telephony services appear to present a different case.  In using the term "phone-to-phone" IP telephony, we tentatively intend to refer to services in which the provider meets the following conditions: (1) it holds itself out as providing voice telephony or facsimile transmission service; (2) it does not require the customer to use CPE different from that CPE necessary to place an ordinary touch-tone call (or facsimile transmission) over the public switched telephone network; (3) it allows the customer to call telephone numbers assigned in accordance with the North American Numbering Plan, and associated international agreements; and (4) it transmits customer information without net change in form or content.
89 Specifically, when an IP telephony service provider deploys a gateway within the network to enable phone-to-phone service, it creates a virtual transmission path between points on the public switched telephone network over a packet-switched IP network.  These providers typically purchase dial-up or dedicated circuits from carriers and use those circuits to originate or terminate Internet-based calls.  From a functional standpoint, users of these services obtain only voice transmission, rather than information services such as access to stored files.   The provider does not offer a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information.  Thus, the record currently before us suggests that this type of IP telephony lacks the characteristics that would render them "information services" within the meaning of the statute, and instead bear the characteristics of "telecommunications services."
 90 We do not believe, however, that it is appropriate to make any definitive pronouncements in the absence of a more complete record focused on individual service offerings.  As stated above, we use in this analysis a tentative definition of "phone-to-phone" IP telephony.  Because of the wide range of services that can be provided using packetized voice and innovative CPE, we will need, before making definitive pronouncements, to consider whether our tentative definition of phone-to-phone IP telephony accurately distinguishes between phone-to-phone and other forms of IP telephony, and is not likely to be quickly overcome by changes in technology.  We defer a more definitive resolution of these issues pending the development of a more fully-developed record because we recognize the need, when dealing with emerging services and technologies in environments as dynamic as today's Internet and telecommunications markets, to have as complete information and input as possible.
 -- -- In re Federal-State Joint Board on Universal Service, Report to Congress, FCC 98-67 (April 10, 1998).
 

Phone to Phone Long Distance

More recently, in the AT&T Order, the FCC held that AT&T’s interstate long distance service that is phone-to-phone with Internet in the middle is telecommunications service, not information service. The FCC stated:
We emphasize that our decision is limited to the type of service described by AT&T in this proceeding, i.e., an interexchange service that: (1) uses ordinary customer premises equipment (CPE) with no enhanced functionality; (2) originates and terminates on the switched public network (PSTN); and (3) undergoes no net protocol conversion and provides no enhanced functionality to the end user due to the provider’s use of IP technology. Our analysis in this order applies to services that meet these three criteria . . .29
Washington Exchange Carriers Association v. LocalDial Corporation, Docket UT-031472, Order, p. 23 (WUTC June 11, 2004)

The facts before us are closely similar in all material respects to those before the FCC in the AT&T matter.30 LocalDial’s customers use ordinary customer premises equipment—the same equipment they use to make other telephone calls—with no enhanced functionality. LocalDial’s customers’ calls originate and terminate on the public switched telephone network. Protocol conversions take place within LocalDial’s network, as in many other companies’ networks, but, insofar as LocalDial’s service is concerned, there is no net protocol conversion from an end-user perspective. LocalDial customers’ calls begin as voice on the PSTN and end as voice on the PSTN. 57

LocalDial does not contest that its service meets the first two criteria under the Steven’s Report and in the AT&T Order. LocalDial’s arguments concerning protocol conversion and enhanced functionality ignore the requirement for net protocol change from the customer perspective. We conclude that LocalDial’s service meets the definition of telecommunications under federal law.31 LocalDial does not provide information service or enhanced service.

Washington Exchange Carriers Association v. LocalDial Corporation, Docket UT-031472, Order, p. 24-5 (WUTC June 11, 2004)



We clarify that, under the current rules, the service that AT&T describes is a telecommunications service upon which interstate access charges may be assessed.  We emphasize that our decision is limited to the type of service described by AT&T in this proceeding, i.e., an interexchange service that:  (1) uses ordinary customer premises equipment (CPE) with no enhanced functionality; (2) originates and terminates on the public switched telephone network (PSTN); and (3) undergoes no net protocol conversion and provides no enhanced functionality to end users due to the provider's use of IP technology.  Our analysis in this order applies to services that meet these three criteria regardless of whether only one interexchange carrier uses IP transport or instead multiple service providers are involved in providing IP transport.
. . . . .
12. We clarify that AT&T's specific service is a telecommunications service as defined by the Act.  AT&T offers "telecommunications" because it provides "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."   And its offering constitutes a "telecommunications service" because it offers "telecommunications for a fee directly to the public."   Users of AT&T's specific service obtain only voice transmission with no net protocol conversion, rather than information services such as access to stored files.  More specifically, AT&T does not offer these customers a "capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information;" therefore, its service is not an information service under section 153(20) of the Act.   End-user customers do not order a different service, pay different rates, or place and receive calls any differently than they do through AT&T's traditional circuit-switched long distance service; the decision to use its Internet backbone to route certain calls is made internally by AT&T.  To the extent that protocol conversions associated with AT&T's specific service take place within its network, they appear to be "internetworking" conversions, which the Commission has found to be telecommunications services.   We clarify, therefore, that AT&T's specific service constitutes a telecommunications service.
. . . . .
17. Some commenters argue that AT&T's specific service should not be assessed interstate access charges because it utilizes the Internet rather than a private IP network.   These commenters cite the substantial investment AT&T and other providers have made in upgrading their common Internet backbone to allow for quality voice message transmission.   These commenters, however, fail to explain why using the Internet, as opposed to a private IP network or some other type of network, is at all relevant to our analysis of whether AT&T's specific service should be assessed interstate access charges, particularly here where AT&T merely uses the Internet as a transmission medium without harnessing the Internet's broader capabilities.  In the IP-Enabled Services rulemaking proceeding it is possible that we may draw such distinctions, but we have not done so under our current rules.  Commenters also argue that applying access charges to AT&T's specific service would constitute a tax on the Internet, contrary to Congress' decree in section 230(b)(2) of the Act that the Internet should be "unfettered by Federal or state regulation."   As discussed above, we must foster the growth of IP services through a "hands off" regulatory approach in a manner that is nonetheless consistent with our other statutory obligations, pending the resolution of intercarrier compensation issues in the rulemaking proceedings.   We do not believe that a service of the type described above - which provides no enhanced functionality to the end user due to the conversion to IP - is the kind of use of the "Internet or interactive services" that Congress sought to single out for exceptional treatment.  Certainly, AT&T's investment in Internet backbone facilities and the development of network technologies are important, as is the goal of designing a minimally regulatory approach to the Internet that will reduce, as far as possible, regulatory barriers to investment and technology and market entry.  On the other hand, we see no benefit in promoting one party's use of a specific technology to engage in arbitrage at the cost of what other parties are entitled to under the statute and our rules, particularly where, based on the record before us, end users have received no benefit in terms of additional functionality or reduced prices.  Pending resolution of these issues in the rulemaking proceedings, we conclude that it is reasonable to apply access charges to AT&T's specific service.
-- In re Petition for Declaratory Ruling that AT&T's Phone-to-Phone IP Telephony Services are Exempt from Access Charges, WC Docket No. 02-361, Order para 1, 12, 17 (April 21, 2004)


In the instant case, the Commission focused on an individual service offering. We reviewed all the submissions, the configuration of DataNet’s system, the nature of the service provided, and the FCC decisions. Based on that review the Commission finds that:
(a) DataNet holds itself out as providing voice telephony service.
(b) It does not provide enhanced functionality to its customers, such as storing, processing or retrieving information.
(c) Its customers are not required to use CPE different from the CPE used to place ordinary calls over the public switched telephone network.
(d) Its customers place calls to telephone numbers assigned in accordance with the North American Numbering Plan.
(e) Its use of Internet protocol is only incident to its own private network and does not result in any net protocol conversion to the end user.
(f) A substantial portion of its traffic uses no IP conversion at all and is handled by interexchange carriers (IXCs).
(g) It uses the same circuit-switched access as obtained by IXCs and imposes the same burdens on the local exchange as do IXCs.
Accordingly, we conclude that the service provided by DataNet is simple, transparent long distance telephone service, virtually identical to traditional circuit-switched carriers. Its service fits the definition of “telecommunications” contained in the 1996 Telecommunications Act and is not 'information service' or "enhanced service.' Thus, its traffic is access traffic just like any other IXC’s traffic. We also conclude that DataNet imposes the same burdens on the local exchange as do other interexchange carriers and should pay all applicable and appropriate charges paid by other long distance carriers, including access charges. In addition, we find that Frontier raised the issue of access charges in a timely manner, as soon as it discovered the nature of DataNet’s service, and did not intentionally delay its request for payment.
-- Complaint of Frontier Company of Rochester Against DataNet Corporation Concerning Alleged Refusal to Pay Intrastate Carrier Access Charges Case 01-C-1119, Order Requiring Payment of Intrastate Access Charges p. 7 (May 31, 2002) (according to the Order, Datanet is a dial-around service which permits users to call into a local phone number and then dial a second number to place a long distance call.  The call is routed over an IP network where available, or otherwise over an IXC.)

 Information Service

3         364.01  Powers of commission, legislative intent.--
24  telecommunications workforce. The Legislature further finds
25  that the provision of voice-over-internet protocol (VOIP) free
26  of unnecessary regulation, regardless of the provider, is in
27  the public interest.
28         Section 3.  Section 364.02, Florida Statutes, is
29  amended to read:
30         364.02  Definitions.--As used in this chapter:
20         (12)(11)  "Service" is to be construed in its broadest
21  and most inclusive sense. The term "service" does not include
22  voice-over-internet protocol service for purposes of
23  regulation by the commission. Nothing herein shall affect the
24  rights and obligations of any entity related to the payment of
25  switched network access rates or other intercarrier
26  compensation, if any, related to voice-over-internet protocol
27  service.
-- May 2003 SB 654 Tele-Competition Innovation and Infrastructure Enhancement Act.


    11. We conclude that FWD is an information service because FWD offers "a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications."36 Through its server accessible over the Internet, FWD makes available to its members information that enables them to determine whether other members are available to talk; information on how to contact other members; and an optional voicemail capability that enables members to leave messages for unavailable members who have chosen this feature.37 Specifically, FWD offers its members a number of "computing capabilities."38 First, FWD enables its members to "acquire" information about other members' online presence at any particular time (similar to an instant messaging service).39 Second, FWD "stores" both member information (e.g., assigned numbers) and, if a member optsin, voicemail messages on its server, that are accessible to other members.40 Third, Pulver
provides members with certain information (i.e., identifying numbers and passwords) that they "utilize" first to register for the FWD service and then to contact other members who are online.41 Fourth, the FWD service "processes" the "SIP invite" (i.e., the information an initiating member sends to the FWD server indicating it wishes to communicate with a recipient member)
by determining both the recipient member's Internet addresses and online availability.42 Once FWD determines that the recipient member is available online, it "makes available" the SIP invite to that recipient member.43 Making available the Internet addresses of the intended recipient member enables the initiating member to "retrieve" this information.44 Finally, if a member's equipment generates a private Internet address that interferes with the ability of the user's CPE to determine public Internet addresses, FWD will "transform" or repair the addressing information and will relay the "signaling and media stream via a protocol conversion
solution to facilitate delivery."45
    12. In the case of each of these specific functions, Pulver is offering FWD members the capability of generating, acquiring, storing, transforming, processing, retrieving, utilizing or making available information in a way contemplated by the Act to qualify as an information service. We also acknowledge that after performing these specific functions, Pulver no longer plays a role in the exchange of information between its members (except for relaying a "SIP bye" message generated by one of the users when the communication is terminated) - it merely facilitates peer-to-peer communication. The fact that the information service Pulver is offering happens to facilitate a direct disintermediated voice communication, among other types of communications, in a peer-to-peer exchange cannot and does not remove it from the statutory definition of information service and place it within, for example, the definition of telecommunications service. To find otherwise would not only ignore the fact that Pulver does not provide telecommunications, as explained above, but also ignore the capabilities described above that FWD makes available to its members.
    13. At least one commenter has suggested that FWD is not an "information service" because it falls within the definition's exception for the "management, control or operation of a telecommunications system or the management of a telecommunications service."46 We disagree. Examining the plain language of the definition dictates a finding that the exception could not apply to Pulver because Pulver is not managing a telecommunications system or telecommunications service. Examining the history of the text and Commission precedent supports the same result. The telecommunications management exception was initially included
in the definition of "information service" contained in the Modification of Final Judgment.47 That definition explained what services the BOCs were not permitted to offer while recognizing that certain computer processing capabilities were permitted within the provision of their regulated services. Thus, the telecommunications management exception permitted the BOCs to improve their telecommunications networks without running afoul of the restriction on providing information services.48 Prior to the MFJ and divestiture, the Commission had permitted certain computing capabilities to be incorporated into AT&T's telecommunications network to facilitate and modernize the provision and use of basic telephone service.49 This does not mean that when Pulver or another information services provider offers these capabilities on a stand-alone basis that they are transformed into telecommunications services.50
    14. We reject Pulver's reading of the definition of "information service." Pulver argues that FWD cannot be an "information service" as that term is defined in the Act because Pulver does not offer transmission to its members.51 However, the statutory definition of an information service speaks only to the offering of various types of computing capabilities via telecommunications, not the offering of telecommunications itself. The fact that FWD's computing capabilities, as described above, are available to its members via
"telecommunications" - i.e., the telecommunications underlying its members' Internet connectivity; the telecommunications connecting Pulver's FWD server to the Internet; and the telecommunications underlying the Internet backbone itself - is sufficient to meet the statutory definition of "information service."52 In explaining the difference between "enhanced services" and "information services," the Commission previously noted that the former are "limited to services 'offered over common carrier transmission facilities used in interstate communications,' whereas 'information services' may be provided, more broadly, 'via telecommunications.'"53
The Commission has never required  or even suggested that the information service provider must be the entity that provides or offers the telecommunications over which the information service is made available to its members.54 As described above, FWD members must separately acquire broadband service, as Pulver does not offer transmission to its members.
36 See 47 U.S.C. § 153(20). Commenters agree that FWD is an "information service." See, e.g., Qwest
Comments at 1-2, 6-9; MCI Dec. 12 Ex Parte Letter at 2.
37 See Pulver Petition at 4; Pulver Dec. 11 Ex Parte Letter at 2. We note that the Commission has previously
determined that voicemail is an information service and has exerted ancillary Title I jurisdiction over the provision
of such an information service. See, e.g., Implementation of Sections 255 and 251(a)(2) of the Communications Act
of 1934, as Enacted by the Telecommunications Act of 1996; Access to Telecommunications Service,
Telecommunications Equipment and Customer Premises Equipment by Persons with Disabilities, WT Docket No.
96-198, Report and Order and Further Notice of Inquiry, 16 FCC Rcd 6417, 6457, paras. 97-98 (1999) (Section 255
Order).
38 Pulver Dec. 11 Ex Parte Letter at 4.
39 Pulver Petition at 4.
40 Pulver Dec. 11 Ex Parte Letter at 2.
41 Pulver Petition at 3.
42 Electronic Frontier Foundation Reply at 2-3; see also Pulver Dec. 11 Ex Parte Letter at 2 (stating that
Electronic Frontier Foundation's Reply "accurately describe[s] FWD as it is currently available").
43 Electronic Frontier Foundation Reply at 2-3. Similarly, if the recipient member is not online, FWD "makes
available" that information to the initiating member as well. Pulver Dec. 11 Ex Parte Letter at 2.
44 Qwest Comments at 4; Electronic Frontier Foundation Reply at 7.
45 Pulver Dec. 11 Ex Parte Letter at 2.
46 See Letter from Kathleen M. Grillo, Verizon, to Marlene H. Dortch, Secretary, Federal Communications
Commission, WC Docket No. 03-45 & 03-211 at 5 (filed Feb. 5, 2004) (Verizon Feb. 5 Ex Parte Letter); see also
supra para. 3 and n.6. In the Non-Accounting Safeguards Order, the Commission recognized that certain
capabilities previously treated as basic services when provided by a carrier fell within the telecommunications
management exception: adjunct-to-basic services and "no net" protocol processing. Implementation of the Non-
Accounting Safeguards of Sections 27 and 272 of the Communications Act of 1934, as amended, First Report and
Order and Further Notice of Proposed Rulemaking, 11 FCC Rcd 21905, 21957-58, paras. 106-07 (1996) (Non-
Accounting Safeguards Order), clarified in Order on Reconsideration, 12 FCC Rcd 2297, 2298-99, para. 2 (1997).
47 See United States v. American Tel. & Tel. Co., 552 F. Supp. 131, 229 (DDC 1982) (subsequent history
omitted); Joint Managers' Statement, S. Conf. Rep. No. 104-230, 104th Cong., 2d Sess. (1996) at 114.
48 See American Tel. & Tel., 552 F. Supp. at 227, 229.
49 See Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry),
Docket No. 20828, Final Decision, 77 FCC 2d 384, 419-428 (1980) (Computer II Final Decision) (noting those
computer processing capabilities directly related to the provision of the basic service that telephone companies were
able to provide as part of their tariffed basic service (later termed "adjunct-to basic" services, see North American
Telecommunications Association Petition For Declaratory Ruling Under Section 64.702 of the Commission's Rules
Regarding the Integration of Centrex, Enhanced Services, and Customer Premises Equipment, ENF 84-2,
Memorandum Opinion And Order, 101 FCC 2d 349, 358-61 (1985) (NATA Centrex)); Amendment of Section
64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Memorandum
Opinion And Order, 84 FCC 2d 50, 60-61 (1980) (Computer II Reconsideration Order) (recognizing certain
protocol conversion capabilities may occur internal to a carrier's network); Computer II Final Decision, 77 FCC 2d
at 421; Communications Protocols under Section 64.702 of the Commission's Rules and Regulations, Gen. Docket
No. 80-756, 95 FCC 2d 584, para. 29 (1983) (Protocols Order).
50 Indeed, in discussing various types of signaling that occurs within a basic service, the Commission noted that
certain protocol processing network functions intrinsic therein "may be properly associated with basic service
without changing its nature, or with an enhanced service without changing the classification of the latter as
unregulated under Title II of the Act." Protocols Order, 95 FCC 2d at para. 15. We note that FWD is different from
signaling networks. While FWD does provide information that members use to initiate communications among
themselves, FWD does not manage the resulting disintermediated communication. That is managed by the
members themselves. In addition, FWD provides many features not offered by signaling networks (e.g., directory
look-up, voice mail, emailed responses, conferencing capabilities, and address repair).
51 Pulver Dec. 11 Ex Parte Letter at 3-4 (arguing that an "information service" provider must offer data transport).
-- 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)


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 Holding Company v. Minnesota PUC, Civil No 03-5287, Sec. I (DMinn Oct 16, 2003)


    Examining the statutory language of the Communications Act, the Court concludes that the VoIP service provided by Vonage constitutes an information service because it offers the "capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications." 47 U.S.C. § 153(20). The process of transmitting customer calls over the Internet requires Vonage to "act on" the format and protocol of the information. 47 C.F.R. § 64.702(a). For calls originating with one of Vonage's customers, calls in the VoIP format must be transformed into the format of the
PSTN before a POTS user can receive the call. For calls originating from a POTS user, the process of acting on the format and protocol is reversed. The Court concludes that Vonage's activities fit within the definition of information services. Vonage's services are closely tied to the provision of telecommunications services as defined by Congress, the courts and the FCC, but this Court finds that Vonage uses telecommunications services, rather than provides them.
. . . . .
In applying the FCC's four phone-to-phone IP telephony conditions to Vonage, it is clear that Vonage does not provide  hone-to-phone IP telephony service. Vonage's services do not meet the second and fourth requirements. Use of Vonage's service requires CPE different than what a person connected to the PSTN uses to make a touch-tone call. Further, a net change in form and content occurs when Vonage's customers place a call. If the end user is connected to the PSTN, the information transmitted over the Internet is converted from IP into a format compatible with the PSTN. Vonage's service is not a telecommunications service because "from the user's standpoint" the form of a transmission undergoes a "net change." Id. ¶ 89, at 11544.
. . . . .
Vonage is unlike the first two classes of providers discussed by the FCC; it does more than merely provide software and hardware, and is not an ISP. Vonage does, however, provide gateways that translate IP format into a format compatible with the PSTN. Because Vonage never provides phone-to-phone IP telephony (it only provides computer-to-phone or phone-to-computer IP telephony), from a "functional standpoint," Vonage's service is distinguishable from the scenario the FCC considered to be telecommunications services.
- Vonage Holding Company v. Minnesota PUC, Civil No 03-5287, Sec. IV.A. (DMinn Oct 16, 2003)

            Telecom Service

The information transmitted by the LocalDial service is simply the called and calling parties’ digitized voice. Mr. Williamson testifies that virtually all PSTN services digitize, mathematically create filters (such as echo cancellation via ITU G.711), and use complex real-time computing processes in both transmission and switching equipment that effect the perception of the speaker’s individual voice. The business of telecommunications is to provide intelligible voice communication to both parties. Yet LocalDial claims that because the G.723.1 technology makes the human voice signal intelligible to the listener, it somehow provides “additional, different, or restructured information.” As Mr. Williamson testifies, if somehow the provision of intelligible voice through the use of computer processing was considered an “information service,” then virtually all PSTN voice services would have to be reclassified as “information services.”
-- Washington Exchange Carriers Association v. LocalDial Corporation, Docket UT-031472, Order, p. 22 (WUTC June 11, 2004)


    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.
-- 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)

   9. First, we conclude that FWD is not "telecommunications."25 Under the statute, the heart of "telecommunications" is transmission.26 As explained above, Pulver neither offers nor provides transmission to its members. Rather, FWD members "bring their own broadband" transmission to interact with the FWD server.27 At least one commenter has argued that FWD is telecommunications because FWD does not change the form or content of the information as sent and received.28 We disagree. FWD acts as a type of directory service, informing its members when fellow members are online or "present."29 Thus, even if FWD were providing transmission (which it is not), the information that FWD provides is not "information of the user's choosing, without change in the form or content of the information as sent and received."30 Instead, FWD provides new information: whether other FWD members are present; at what IP address a member may be reached; or, in some cases, a voicemail or an email response.31
Finally, the fact that Pulver's server is connected to the Internet via some form of transmission is not in and of itself, as some commenters argue, relevant to the definition of telecommunications.32 Pulver may "use" some telecommunications to provide its FWD directory service but that does not make FWD itself telecommunications.
    10. We also conclude that FWD is not a "telecommunications service."33 Section 153(46), the definition of telecommunications service, refers to an "offering of telecommunications." As discussed above, however, FWD does not offer "telecommunications."
Therefore, it cannot be a "telecommunications service." In addition, as its name suggests, FWD is free of charge to users and, in order to be a telecommunications service, the service provider must assess a fee for its service.34 Accordingly, because we determine that FWD is not a "telecommunications service," the common carriage obligations applicable to the provision of such service as set forth in Title II do not apply.35
25 We note that most commenters agree with this conclusion. See, e.g., Cisco Comments at 1; Global Crossing
Comments at 2; VON Coalition Comments at 1; Electronic Frontier Foundation Reply at 1. But see Qwest
Comments at 8-9 (arguing that Pulver "utilizes" telecommunications as the "delivery vehicle" when it provides the
information service described in its petition).
26 See supra para. 3.
27 Pulver Petition at 7.
28 See Verizon Comments at 2-3.
29 Electronic Frontier Foundation Reply at 2; Pulver Dec. 11 Ex Parte Letter at 2.
30 See 47 U.S.C. § 153(43) (definition of "telecommunications"); see also Pulver Reply at 3 (explaining that FWD
does not transmit information of the user's choosing without change in the form or content of the information as
sent and received).
31 See Pulver Dec. 11 Ex Parte Letter at 2; Letter from Glenn S. Richards, Counsel, pulver.com, to Marlene H.
Dortch, Secretary, Federal Communications Commission, WC Docket No. 03-45, Attach. at 16 (filed Jan. 15, 2004)
(Pulver Jan. 15 Ex Parte Letter).
32 See SBC Comments at 3.
33 We note that commenters agree with this conclusion. See, e.g., Cisco Comments at 1; Global Crossing
Comments at 2; Qwest Comments at 1; Verizon Comments at 3; VON Coalition Comments at 1; AT&T Reply at 3.
34 See 47 U.S.C. § 153(46) (definition of "telecommunications service").
35 See generally 47 U.S.C. §§ 201 et seq.
-- -- 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)
.

            Layered Approach

(uncoupling of applications from physical network)

    4. FWD is an Internet application. The Internet is a distributed packet-switched network of interconnected computers enabling people around the world to communicate with one another, invoke multiple Internet services simultaneously and access information with no knowledge of the physical location of the server where that information resides.7 The Internet represents a paradigmatic shift in network technology: intelligence in the system no longer resides, as it did in the legacy circuit-switched network, primarily in the network itself, but has instead migrated to the edge of a vastly different type of network - to the end user's CPE. FWD is an example of this migration because, as explained below, Pulver's service bears no geographic correlation to any particular underlying physical transmission facilities. FWD depends on whether a user can establish a presence on the network at some point, not whether
the user can access the network from a specific geographically defined end point. Internet applications like FWD thus separate the user from geography and the application enabling voice or other types of communication from the network over which the communication occurs.
    5. As described by Pulver, FWD offers users of broadband Internet access the opportunity to join other such users worldwide in talking with one another directly over the Internet as well as communicating directly via video or text.8 FWD facilitates this interactive
communication capability by offering such users the ability to become FWD members through an initial registration process followed by the new member complying with other requirements specified by FWD that are necessary to enable communications to be made.9 Specifically, members must have an existing broadband Internet access service as Pulver does not offer any transmission service or transmission capability.10 In addition, members must acquire and appropriately configure Session Initiation Protocol (SIP) phones or download software that enables their personal computers to function as "soft phones."11 Once these criteria are met,
anyone anywhere in the world can obtain a Pulver-assigned five- or six-digit FWD number (not a North American Numbering Plan (NANP) number)12 to facilitate using the member's broadband service to make free voice over Internet Protocol (VoIP) or other types of peer-to-peer communications to other FWD members.13 According to Pulver, it neither knows nor needs to know where its members are geographically located in order for its members to use FWD.14 In addition, Pulver indicates it can not determine its members' geographic location.15 Once an FWD member obtains its FWD number, that number is completely portable to any broadbandaccessible location to which that member may go.16 Moreover, FWD members may not even know where other members are physically located during any given communication session with another member as FWD enables members to register up to 25 different locations for potential receipt of communications from other members, any one of which locations may end up being
the Internet address from where the communication is actually answered.17
    6. According to Pulver, FWD acts as a directory or translation service, informing its members when other members are online or "present," thus available to receive a call, as well as informing them of the Internet address necessary to reach other members during their on-line presence.18 Moreover, Pulver indicates that FWD: offers voice mail capabilities to those members who opt-in to this function; offers conference bridging capabilities to members; and performs limited Internet address repair for its members.19 Although FWD facilitates VoIP or other types of communications over the Internet between its members, Pulver indicates that FWD is merely an Internet application that provides its members information that those members use to communicate with other members.20 Pulver states that it is the members' end-user devices, not Pulver, that establish the actual connections and manage the calls.21

7 See, e.g., GTE Telephone Operating Cos., GTE Tariff No. 1, GTOC Transmittal No. 1148, CC Docket No. 98-
79, Memorandum Opinion and Order, 13 FCC Rcd 22466, 22468, para. 5 (1998) (GTE ADSL Order).
8 Pulver Petition at 3; Pulver Reply at 2-3 & n.2.
9 Id. Pulver indicates it does not verify the identifying information members submit on the FWD registration
screen such as name, address, state or country. See Letter from Susan M. Hafeli, Counsel, pulver.com, to Marlene
H. Dortch, Secretary, Federal Communications Commission, WC Docket No. 03-45, at 1 (filed Dec. 16, 2003)
(Pulver Dec. 16 Ex Parte Letter).
10 Pulver Petition at 3. According to Pulver, its service operates with any type of broadband connection (e.g.,
cable modem, digital subscriber line, satellite, or wireless). Id. As noted above, we do not address FWD to the
extent it may be usable via dial-up access. See supra note 3.
11 Pulver Petition at 3-4. Session Initiation Protocol is an application-layer control (signaling) protocol for
creating, modifying, and terminating sessions with one or more participants. These sessions include Internet
telephone calls, multimedia distribution, and multimedia conferences. See J. Rosenberg et al, "SIP: Session
Initiation Protocol" RFC 3261, June 2002; see also Letter from A. Renee Callahan, Counsel, to Marlene Dortch,
Secretary, Federal Communications Commission, WC Docket No. 03-45, at n.5 (filed Dec. 12, 2003) (MCI Dec. 12
Ex Parte Letter).
12 Pulver Petition at 3; Pulver Dec. 11 Ex Parte Letter at 2-3.
13 "Peer-to-peer" is a communications model in which each party has the same capabilities and either party can
initiate a communication session. In recent usage, peer-to-peer has come to describe applications in which users can
use the Internet to, for example, exchange files with each other directly or through a mediating server. See
http://searchnetworking.techtarget.com/sDefinition/0,sid7_gci212769,00.html.
14 See Pulver Dec. 16 Ex Parte Letter at 1-2.
15 Id. In fact, the record shows that it is impractical or impossible for Pulver to obtain member location
information (i.e., the originating and terminating points) for any given communication between its members.
According to Pulver, since it "manages only the signaling component of the call," it has access only to the
application layer of the network and, thus, the information available to it is "inadequate to determine the actual
physical location of an underlying IP address." Id.
16 Id; see also Letter from Scott Blake Harris, Counsel, Cisco, to Marlene Dortch, Secretary, Federal
Communications Commission, WC Docket No. 03-45, at 3-4 (filed Dec. 11, 2003) (Cisco Dec. 11 Ex Parte Letter).
17 See Letter from Glenn S. Richards, Counsel, pulver.com, to Marlene H. Dortch, Secretary, Federal
Communications Commission, WC Docket No. 03-45, at 1 (filed Jan. 20, 2004) (Pulver Jan. 20 Ex Parte Letter).
18 Pulver Dec. 11 Ex Parte Letter at 2.
19 Pulver Dec. 11 Ex Parte Letter at 2; Pulver Jan. 15 Ex Parte Letter.
20 Pulver Dec. 11 Ex Parte Letter at 2.
21 Pulver Dec. 11 Ex Parte Letter at 2-3 (noting with support Electronic Frontier Foundation's statement that
"FWD simply allows FWD subscribers to use telephone-like 5- or 6-digit numbers to locate and call other FWD
subscribers, much as DNS translation allows Internet users to use http://www.eff.org instead of
http://209.237.229.14.").
-- -- 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)

            Market Approach

            Legacy Regulations on Nascent / New Network

6. Despite the efforts of some states, it is my view that VoIP should not be regulated like traditional telephone service.   Existing regulations - including rate caps, tariff filings, and service quality obligations - were promulgated to police the behavior of monopoly telephone providers.  It makes no sense to impose price or service quality controls on fledgling competitors who will get few customers if they offer high prices or bad service quality.
7. We should not doom a nascent competitive industry via regulatory overkill.  If there is an attempt at heavy-handed regulation, those companies who obey - by paying taxes, subsidies, and intercarrier charges - will quickly be undercut by a netherworld of entrepreneurs who do not.  Companies who do not obey will locate in more friendly states or, failing that, other countries.
....
9. In my view, we should treat VoIP not as a problem, but a new opportunity for regulators to look at changing how the use of wireline infrastructure is compensated - through subsidies, intercarrier charges, and regulated rates.  These traditional regulatory devices distort the market and cause inefficiency, lack of competition, and net consumer harm.  Instead of trying to impose anachronistic rules on new innovative technologies, we should reform anti-free-market state regulations to allow traditional companies to compete with new entrants on a more level playing field.  This serves yet another purpose: new entrants will not have much incentive to avoid playing by the rules if the rules are less costly.  If we do nothing, it is only a matter of time before a great exodus from traditional telephone service occurs, endangering the existing telephone network.
--In The Matter Of The Investigation Into Voice Over Internet Protocol (Voip) Services, Docket No. 03M-220T, Order Closing Docket ¶ 6 ( Colorado PUC Dec. 17, 2003) (Chairman Gregory E. Sopkin Specially Concurring)
 

                    Unfettered

At the outset, the Court must note that the backbone of Vonage's service is the Internet. Congress has spoken with unmistakable clarity on the issue of regulating the Internet: "It is the policy of the United States . . . 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." 47
U.S.C. § 230(b); see also Southwestern Bell Tel. Co. v. FCC, 153 F.3d 523, 544 (8th Cir. 1998) (concluding that, based on Congress's intent to leave Internet unregulated, ISPs should be excluded from the imposition of interstate access charges); Zeran v. America Online, Inc., 129 F.3d 327, 330 (4th Cir. 1997) (recognizing that "Congress acted to keep government regulation of the Internet to a minimum").
- Vonage Holding Company v. Minnesota PUC, Civil No 03-5287, Sec. IV.A. (DMinn Oct 16, 2003)



8. One should not approach regulation of the Internet - that job-producing, life-enhancing giant - lightly.  Indeed, it is United States 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."   The unintended effects of state regulation of VoIP on the Internet are unknown, and counsel extreme caution.  Further, as a practical matter, since few advocate big government intercepting our transmissions, the Internet most likely will remain unfettered.  This makes regulating VoIP, even if one wants to, difficult.
--In The Matter Of The Investigation Into Voice Over Internet Protocol (Voip) Services, Docket No. 03M-220T, Order Closing Docket ¶ 8 ( Colorado PUC Dec. 17, 2003) (Chairman Gregory E. Sopkin Specially Concurring)

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