FCC Deems pulver.com VoIP Service Unregulated; Adopts Notice of Proposed Rulemakeing Regarding VoIP

As widely anticipated in the press over the last several weeks, today the FCC ruled that pulver.com’s free computer-to-computer “Free World Dialup” voice-over-Internet-protocol (“VoIP”) service is not a “telecommunications service” under the Communications Act. The FCC also found that pulver.com’s service is an interstate “information service” under the Act—thus removing it from state-level regulation. The key factors underlying the decision were (a) that pulver.com itself does not provide any “transmission” functionality, but rather only a directory function so that end users can link up with each other, so the service is not “telecommunications;” and (b) the service is free, so it cannot be a “telecommunications service.”

The FCC also voted to adopt a Notice of Proposed Rulemaking (“NPRM”) that does not propose any specific treatment for any particular VoIP service, but instead asks a number of questions regarding: regulatory classification; application of access charges; and how to preserve key public policy objectives such as universal service, 911/emergency services, law enforcement surveillance requirements, and the needs of persons with disabilities.

As is customary, the FCC did not immediately release the actual text of either order. Instead, these will be released later. Consequently, this Update is based on the discussion of these items at the FCC’s open meeting at which the vote was taken. We will supplement this update with more detail, as required, when the actual text of the orders becomes available.

1. Declaratory Ruling Regarding Free World Dialup.

pulver.com’s Free World Dialup (“FWD”) service is declared to be an unregulated, jurisdictionally interstate information service. According to the Wireline Competition Bureau’s presentation today, the ruling will formalize the FCC policy of non-regulation to ensure that “Internet applications remain free from burdensome regulation at both the federal and state levels.”

The ruling is based on a precise technical understanding of how FWD works. Specifically, FWD offers membership in a directory look-up service that permits members to engage in peer-to-peer communication, similar to instant messaging and email, by means of a separately obtained broadband connection, and with specialized hardware and/or software as well. In addition, FWD includes voice mail, email response and an “address repair” (presumably a reference to an IP address) service. Given this technical understanding, the key findings are:

• FWD is not “telecommunications” as defined by the Act. pulver.com does not provide transmission functionality to its members; instead, it uses transmission independently provided by others. It provides information — addressing information regarding which other members are on line, which is new information.
• FWD is also not a telecommunications service as defined by the Act. In order to be a telecommunications “service,” the service must, at a minimum, be offered for a fee. FWD not only is not “telecommunications,” it’s free.
• FWD is an information service as defined by the Act. The addressing information that identifies who is actually on line and available for peer-to-peer communication is new information, not merely information embodied in a preexisting communications network.
• The FCC alone occupies this field. State attempts to impose economic regulation on FWD would almost certainly conflict with the national policy, embodied in the Act, that the Internet should remain unfettered by state or federal regulation.

In their individual statements, the commissioners supporting the item all noted that questions regarding lawful surveillance, universal service, etc. remained open within the broader context of VoIP in general. The sole dissent was Commissioner Copps, who referenced his earlier objection to the FCC ruling classifying cable modem service as an “information service,” and to the earlier NPRM in which the FCC suggests that telephone company DSL-plus-Internet-access service was also properly viewed as an “information service.” He objected to making abstract decisions about how a service should be classified without first fully considering the practical consequences of such a classification.

Commissioner Martin clarified that today’s ruling applies only to the version of FWD that was addressed in the formal petition to the FCC, and does not deal with new and different versions of the service (which might involve connection with the PSTN).

2. The VoIP NPRM.

The FCC introduces a new term — “IP-enabled communications” — to embrace the various forms of services that provide “communications capabilities making use of the Internet Protocol,” as well as software making use of those capabilities.
The NPRM asks a number of questions without expressly proposing answers to them (although Commissioner Copps expressed concern that some of the language in the actual ruling seemed to prejudge those answers). According to the presentation by the Wireline Competition Bureau, the NPRM does the following:

• It describes the technical developments that have given rise to the current variety of “VoIP”-type services. These include the fact that end users can connect from anywhere via broadband, WiFi, etc., and the fact that “intelligence” is being pushed to the edges of the network.
• It asks a number of questions regarding what framework the Commission should apply to how IP-enabled services should be classified. These include:
  • Do consumers view the service as a substitute for traditional telephone service?
  • Does the service interconnect with the public network?
  • Are there any other criteria that should be used to classify a service?
• It asks about whether the jurisdictional conclusion in the pulver.com matter should apply to other services.
• It asks how each particular type of IP-enabled service should be classified, and which regulatory requirements should apply to it. The requirements to be addressed include:
  • Universal service payment obligations and/or entitlements to receive funding;
  • Whether the service should be made available to all (i.e., whether it should be a
    part of “universal service);
  • When access charges are payable in connection with the service;
  • How to accommodate public safety issues (911);
  • How to accommodate persons with disabilities.
• It asks whether any other regulation, such as consumer protection rules, should apply to IP-enabled services.

Note that while the Commission plainly views the issue of cooperating with law enforcement on authorized surveillance matters as important, the FCC will in the near future initiate an entirely separate rulemaking opened to deal with the application of the Communications Assistance for Law Enforcement Act (“CALEA”) to IP-enabled services.

All commissioners supported this item, although Commissioner Copps merely “concurred” due to his concerns that the language of the NPRM goes too far in suggesting particular answers to the questions it asks.

The FCC’s actions today make clear that the precise regulatory obligations and opportunities that will apply to any particular IP-enabled communications offering will be influenced not only by broad policy or legal concerns, but also, to a great degree, by the specific technical arrangements used. If you have any questions about the significance of today’s rulings to your actual or potential operations, please do not hesitate to call us.