Telecom Lawyers Wary of FCC Proposals

The Federal Communications Commission (FCC) has quietly released proposed rules for regulating IP-enabled services that may elicit howls from Voice on Internet Protocol (VoIP) telephony firms and Internet service providers (ISPs) alike.

Last month, the five commissioners agreed to launch a regulatory proceeding to determine if federal jurisdiction extends to Internet telephony to the extent it intersects with the public switched telephone network (PSTN). On Wednesday, the agency expanded the scope of the inquiry to all applications and services making use of Internet Protocol and touching the PSTN.

According to telecommunications lawyers in the Washington office of Chadbourne & Parke, an international corporate law firm reviewing the complex set of questions and statements that comprise the FCC’s Notice of Proposed Rulemaking (NPRM), the proposals could cause short-term problems for Internet telephony and ISPs paying access fees to legacy network owners.

“It is clear that the FCC intends to impose access charges or comparable charges on VoIP that traverses the PSTN,” according to the firm. “It is also likely that most of the social obligations imposed on common carrier telephony will be imposed on VoIP that traverses the PSTN.”

Currently, the FCC mandates access fees be paid to incumbent carriers for use of their systems. ISPs are exempt from the access fees, having been classified by the FCC as an information service, which is not subject to traditional telecommunications carrier rules, fees and tariffs.

Preliminarily, the FCC says Internet telephony services that do not use the PSTN are also information services and exempt from access fees, but may be subject to public safety, law enforcement and other regulations.

According to Chadbourne & Park, NPRM states that “the traditional telecommunications/information services distinction may not be useful or appropriate in the context of IP-enabled services, and stated that from a policy perspective it believes that any provider that sends traffic to the PSTN should be subject to . . . compensation obligations.”

That would include ISPs, the lawyers said.

“The FCC said that any provider whose traffic traverses the PSTN should pay [access fees],” the report states. “We presume that this means that traditional Internet service providers may be subjected to access charges or similar charges, and will no longer be subject to the ISP Exemption.”

The NPRM also calls for comments on IP-enabled services provided over wireless systems and cable platforms, although it laid out no specific proposed rules.

“The clear tenor of the NPRM is that providers of similar services should be regulated similarly, which leads us to believe that IP-enabled services provided over cable and wireless platforms will be subjected to regulations that are similar to those imposed on telecommunications service providers offering IP-enabled services,” the analysts stated.

Congress is closely watching the VoIP proceedings at the FCC. In January, U.S. Sen. John E. Sununu said he was drafting a bill to keep Internet telephony beyond the reach of state and federal regulations that govern traditional telecoms.

“Congress must establish pre-eminence of federal authority in this area and provide major direction for any action by the FCC,” the New Hampshire Republican said at the time. “I’m afraid the benefits of VoIP will be smothered by state and federal regulators. A clear pre-emptive remedy is needed now.”

VoIP technology presents problems for regulators because the new industry doesn’t fit traditional telecom regulatory models. While it clearly provides telephone service, it does it by turning voice packets into data packets and does so over the virtually unregulated Internet, both public and private, instead of the heavily taxed and regulated PSTN.

The Internet telephone industry claims it is not a telecom since it does not deal in voice traffic. As the major telecoms and cable companies join start-up VoIP ventures in moving voice traffic over the Internet, the issue becomes critical for cash-starved states that raise hundreds of millions in revenues by taxing traditional telephone services.

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