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Federal Internet Law & Policy
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VoIP: IP - in - the - Middle Dont be a FOOL; The Law is Not DIY


The FCC IP - in - the - Middle cases are cases long distance VoIP cases where the call starts on the PSTN, is routed onto an IP network for long distance transmission, and then terminated back on the PSTN. Consistently at both the FCC and the state level, these services have been held to be regulated telecommunications service not unregulated information services.

Prepaid Calling Card Services

In the IP-in-the-Middle Order, the Commission addressed AT&T’s use of IP technology to transport interexchange telephone calls dialed on a 1+ basis. The Commission found that “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” is a telecommunications service. The Commission limited its ruling in the IP-in-the-Middle Order to calls that meet all of the above criteria and are placed using 1+ dialing.

In its November 2004 filing, AT&T stated that it had developed a new prepaid calling card that uses IP technology to transport part or all of the call. AT&T requested a ruling that this service was not a telecommunications service because it did not use 1+ dialing and therefore was not like the service addressed in the IP-in-the-Middle Order. In the Calling Card Order and NPRM, the Commission did not decide the appropriate classification of this new calling card variant, but instead requested comment on how such an offering should be classified. AT&T reiterated its position that these cards should be treated as information services. Other parties, however, argue that the Commission’s analysis in the IP-in-the-Middle Order applies equally to the card described by AT&T and other cards that use IP transport. Other commenters state that the absence of 1+ dialing is inconsequential to the regulatory status of a prepaid calling card.

Other than the use of 8YY dialing instead of 1+ dialing, prepaid calling cards that use IP transport appear to be identical to the services addressed by the Commission in the IP-in-the-Middle Order. We see no reason why the use of a different dialing pattern to make calls, without more, should result in a different regulatory classification. These cards are used to originate calls on the circuit-switched network using standard customer premises equipment, factors that the Commission previously has used to distinguish telecommunications services from information services. Consequently, we find that the use of IP transport in the provision of a prepaid calling card service does not alone convert that service from a telecommunications service to an information service.

  • Regulation of Prepaid Calling Card Services, WC Docket No. 05-68 Declaratory Ruling and Order, June 30, 2006 Word

    • APCC IP Enabled Dial Around Payphone Petition

    WC Docket No. 05-176: On March 23, 2005, the American Public Communications Council (APCC) filed a petition for a declaratory ruling and rulemaking to establish that payphone-originated Internet Protocol-enabled (IP-enabled) communications are subject to payphone compensation. APCC also requests that its petition be consolidated with, and made part of the record of, the Commission’s ongoing IP-Enabled services rulemaking proceeding in WC Docket No. 04-36 and seeks expedited treatment of the petition.

    In its Petition, APCC asks the Commission to issue a declaratory ruling and initiate a rulemaking proceeding to address payphone compensation for dial-around calls involving an IP-enabled component. In its declaratory ruling request, APCC asks the Commission to: (1) affirm its prior rulings and make explicit that PSTN-originated dial-around calls from payphones are subject to the Commission’s existing dial-around compensation rules, regardless of whether there is an IP-enabled service provider in the transmission path; and (2) make clear that IP-enabled service providers must comply with the compensation rules to the same extent as any other entity in the transmission path. In its petition for rulemaking, APCC asks the Commission to initiate a rulemaking to amend the compensation rule to ensure that it applies to IP-originated calls. APCC contends that a rulemaking is necessary because, while Section 276 clearly requires that payphone service providers be compensated for the use of their phone regardless of how the payphone happens to be connected to the network, the Commission’s evolving framework for IP-enabled communications has not yet addressed the regulatory status of IP-enabled calls.

    The Petition for Declaratory Ruling and Rulemaking Regarding IP-Enabled Dial-Around Calls from Payphones (filed Mar. 23, 2005) (Petition).

    In the Matter of IP-Enabled Services, Motion to Consolidate and to Expedite, WC Docket No. 04-36 (filed Mar. 23, 2005) (Motion to Consolidate). We do not rule on the Motion to Consolidate at this time.

    Petition at 3.

    Id.

    AT&T IP Telephone Petition

    WC Docket No.02-361 "On October 18, 2002, AT&T filed a petition for declaratory ruling that its phone-to-phone” Internet  protocol (IP) telephony services are exempt from the access charges applicable to circuit-switched  interexchange calls. The service at issue in AT&T’s petition consists of an interexchange call that is  initiated in the same manner as traditional interexchange calls by an end user who dials 1 + the  called number from a regular telephone. When the call reaches AT&T's network, AT&T converts it from its existing format into an IP format and transports it over AT&T's Internet backbone. AT&T then converts  the call back from the IP format and delivers it to the called party through local exchange carrier (LEC)  local business lines. 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.

    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, 19 FCC Rcd 7457 (2004)

    Steven's Report

    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 

    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.  

    - 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, 19 FCC Rcd 7457, para. 8 (2004)

    State IP in the Middle Cases

    From State Regulatory Approaches to VoIP: Policy, Implementation, and Outcome, FCLJ 10/2/2004

    Several of the headline VoIP confrontations involved "dial around" services. In this scenario, the subscriber dials a local access number 64 in order to access the dial around service provider. After a tone, the subscriber dials the number of the phone the subscriber is seeking to reach. The call is now on the dial-around service provider's network, who arranges to have the call transmitted long distance. At the destination, the call is placed on a LEC network that services the number of the phone the subscriber is seeking to reach. The VoIP version of dial-around utilizes VoIP somewhere in the long distance transmission.65

    Five states have considered dial around VoIP services; two have found that the service is a telecommunications service and three have reached no conclusion.66 New York 67 and Washington 68 faced complaints filed by LECs that VoIP dial-around services were not certified to provide service and were failing to pay access charges. Applying the Steven's Report four criteria, 69 New York and Washington found:

    Both states concluded that the VoIP dial around services were functionally identical to traditional long distance service72 and imposed identical burdens on the PSTN as other IXC services.73 Therefore both states concluded that the dial around services were telecommunications services that, specifically, owe access charges.

    New York considers and concludes that the Functional approach is the proper approach to apply. New York stated

    The FCC stated that this functional approach is consistent with Congress’s direction that the classification of a provider should not depend on the type of facilities used. A telecommunications service is a telecommunications service regardless of whether it is provided using wireline, wireless, cable, satellite, or some other infrastructure. Its classification depends rather on the nature of the service being offered to customers.74

    The affirmation of the Functional Approach is achieved by reference to Congressional intent. Of course, the Congressional intent here is a negative postulation: policy outcome should not depend on facility type. Okay, this begs the question of what it should depend upon; the Congressional intent cited does not inform us.

    The dial-around cases are the edge cases that do not cause much policy consternation. The functional approach and the market approach are in alignment. Functionally, VoIP dial services are largely indistinguishable from other dial around services on the market. In terms of the market, the entrance of the VoIP dial around services causes no alternation in the competitive market and neither the current players nor the entrants exhibit significant market power. In these easy question cases, one would not expect the decision maker to exhibit anxiety concerning the proper approach leading to a rigorous review of policy and approaches. All analytical roads lead to the same destination.

    64. Dial-around services also utilize "10-10" dialing. See FEDERAL COMMUNICATIONS COMMISSION, TELECOMMUNICATIONS GLOSSARY 8 (1998), at http://hraunfoss.fcc.gov/edocs-public/attachmatch/DOC-247863A2.pdf. 

    65. But see Washington Exch. Carrier Ass'n v. LocalDial Corp., Final Order Granting Motions for Summary Determination, Dkt. No. UT-031472 at 11 (Wash. Utils. & Transp. Comm'n, June 11, 2004), at http://www.wutc.wa.gov/rms2.nsf/ [hereinafter LocalDial]. "For a call from Seattle to Spokane or from Olympia to Bellingham, this whole process of converting the call from TDM [time-division multiplexing] to IP and back to TDM again occurs in the room at the Westin Building." Id.

    66. See Petition of CNM Networks, Inc. for declaratory statement that CNM's phoneto-phone IP telephony is not "telecommunications" and that CNM is not a "telecommunications company" subject to Florida Public Service Commission jurisdiction, Order Denying Petition for Declaratory Statement, Dkt. No. 021061-TP (Fla. Pub. Serv. Comm'n, Dec. 31, 2002), at http://www.psc.state.fl.us/psc/dockets/index.cfm?event= transferFile&fileSize=328312&fileName=02%5C 14104%2D02%5C 14104%2D02%2EPDF &fileTimeStamp=01062003 [hereinafter CNM]; BEK Comm. Coop. v. SmartNET, Inc., Notice of Hearing, Case No. PU-2967-03-666 (N.D. PSC Jan. 28, 2004) (investigation pending), at http://www.psc.state.nd.us/jurisdiction/pud/telecom/notices/03-666a.pdf; Or. Exch. Carrier Ass'n v. LocalDial Corp., Order, Order No. 04-358 (Or. PUC June 25, 2004), at http://www.puc.state.or.us/orders/2004ords/04%2D35 8 .pdf (dismissing as moot because Washington proceeding against LocalDial was resolved).

    67. Compl. of Frontier Co. of Rochester Against DataNet Corp. Concerning Alleged Refusal to Pay Intrastate Carrier Access Charges, Order Requiring Payment of Intrastate Access Charges, Case No. 01-C-1119 (N.Y. Pub. Serv. Comm'n, May 31, 2002), at http://www3.dps.state.ny.us/pscweb/WebFileRoom.nsf/Web/4B 14A963E31B 14FE85256D F 1007568D2/$File/doc 1 1729.pdf [hereinafter DataNet]. 

    68. LocalDial, supra note 66.

    69. Both state jurisdictions make substantial reference to federal precedent. DataNet, supra note 67, at 6-9 (referring to the Steven's Report four criteria as a "functional approach"); LocalDial, supra note 66, at 19-24 (reviewing the Computer Inquiries to the more recent FCC AT&T VolP decision).

    70. See the LocalDial Web site, at http://www.bluee5.com/localdial/ (accessed Apr. 1, 2005). "LocalDial provides unlimited long distance calling for a low flat rate. With LocalDial you can talk as long as you want, anytime you want, anywhere in the 48 continental United States. LocalDial is an easy-to-use, supplemental phone service for domestic long distance calling." Id.

    71. DataNet, supra note 67, at 8.

    72. Id.; LocalDial, supra note 66, at 27.

    73. LocalDial, supra note 66, at 27.

    74. DataNet, supra note 67, at 7.

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