Comcast, Phase II: FCC Opens Inquiry into Broadband Classification Options

Posted on June 18, 2010 by Steve Augustino

The FCC today adopted and released its highly anticipated Notice of Inquiry (“NOI”) regarding the potential regulatory reclassification of facilities-based broadband Internet access services.  This proceeding will explore the "third way" toward regulation that Chairman Genachowski suggested in response to the recent decision issued by the U.S. Court of Appeals for the D.C. Circuit in the Comcast case.  In Comcast, the D.C. Circuit rejected the FCC's attempt to rely upon its "ancillary authority" to enjoin a cable operator from degrading its customers' lawful Internet services.  This sparked a concern that similar decisions could cause the Commission to lose regulatory authority over time in connection with most, if not all, Internet access services.  The heart of the problem is that the FCC made a series of decisions over the past decade that have classified wireline broadband Internet access services as "information services" that are exempt from Title II common carrier regulation, and this classification was upheld by the U.S. Supreme Court in its Brand X decision.   If the Commission cannot exert "ancillary authority" to regulate them, then the FCC could be left with virtually no control over services provided over a broadband platform. 

The NOI seeks comment in three areas.  First, the FCC seeks input on whether the current "information service" classification remains adequate for the Commission to perform its mission.  Second, it seeks comment on the legal and practical consequences of "reclassifying Internet services used to communicate with others that have Internet connections" as "telecommunications service" and then applying all of the regulatory requirements of Title II.   Finally, and most importantly, the Commission seeks comment on the "third way" position by which so-called "Internet connectivity service" that is offered as part of a wired broadband Internet service would be reclassified as a "telecommunications service", but that the Commission would forbear from applying all Title II regulatory authority over it except such as necessary to implement a set of discrete rules applicable to universal service, consumer protection, competition and small business opportunity. 

The Commission has fast-tracked the comment cycle in this case.  Comments will be due by July 15, with replies due August 12. 

 

 

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Strange Coalition Petitions Court of Appeals to Bypass FCC on VoIP Access Charges

Posted on May 24, 2010 by Danny Adams

A diverse group of telecom companies and trade groups have jointly submitted a supporting brief to the U.S. Court of Appeals in the Paetec v. CommPartners appeal.  The Joint Brief includes ILECS like AT&T and Verizon, CLECs like Neutral Tandem, and normally contrary trade associations like USTA and the VON Coalition. Although these parties have wildly divergent views on how the VoIP access charge dispute should be resolved, they all agree that the Court of Appeals should decide the issue now.  The Joint Brief states that the parties submitting  "have differing views about the merits" of the district court ruling, "but all agree that a decision from" the Court of Appeals is desirable to clarify the situation for all concerned.  

No one knows for sure, but the many pending cases and disputes on VoIP access charges collectively probably have hundreds of millions of dollars at stake.   The FCC has exerted much effort to avoid making a decision on the court referrals and various petitions that it has received on the subject since 2005. 

Always hopeful that it will moot the question with a comprehensive reform of "intercarrier compensation" within the next 12 months, the FCC has allowed the issue to stay undecided for five years and counting.  Paetec and the 14 organizations on the Joint Brief, believe things have dragged on long enough and want the Court of Appeals to rule where the FCC is apparently afraid to tread.

As described in our February 19 posting on the Paetec case, Paetec sued CommPartners in federal district court seeking to collect terminating access charges on interconnected VoIP traffic sent to Paetec by CommPartners.  The district court ruled against Paetec, concluding that "the access charge regime is inapplicable to VoIP-originated traffic" because such transmissions qualify for the FCC's "information services" exemption from access on the basis that IP-to-TDM calls involve "net protocol conversion."  The district court went on to deny Paetec's claims on unjust enrichment and quantum meruit as well, concluding that the Telecom Act's access charge regime creates a statutory bar to those equitable legal arguments.  This ruling, if allowed to stand, would be a huge policy victory for VoIP providers and ISPs and a very expensive defeat for ILECs.

Paetec sought and was granted permission to file an immediate appeal of the Court's rulings.  Because the case is not complete, the appeal is "interlocutory" and may be heard only if the district court allows it (it did) and the Court of Appeals agrees to hear it.  Paetec has filed its request with the Court of Appeals in D.C.  The Joint Brief in support was filed May 20. 
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FCC's Genachowski Proclaims a "Third Way" to Apply Net Neutrality

Posted on May 6, 2010 by Steve Augustino

A month after the Court of Appeals reversed the FCC's Comcast decision, FCC Chairman Genachowski announced a "third way" to regulate broadband transmission lawfully.  The Chairman released a statement describing his "third way" along with a memo from the General Counsel asserting its legality.  Commissioner Copps, who publicly advocated reclassification of braodband internet access services to Title II, praised Genachowski's solution (though he still prefers reclassification).  Meanwhile, Commissioners McDowell and Baker, the two Republicans on the Commission, declared the proposal "disappointing" and "deeply concern[ing]." 

The battle has only begun.

The key to Genachowski's view is to classify the transmission component of broadband internet access as a telecom service, while leaving the internet access functionalities unregulated.  (This is similar to an approach I suggested in my post on the Comcast decision). 

Genachowski proposes "light touch" regulation of the transmission component using Sections 201, 202, 208, 222, 254 and 255 of the Communications Act.  Notably, these sections encompass most of the key obligations of telecom carriers, including non-discrimination, "just and reasonable" rates and practices, customer privacy (CPNI), universal service contributions and access by customers with disabilities.  He also proposes to forbear from other obligations that might apply -- principally section 251 unbundling obligations.

In other reports, Genachowski is said to plan to present an order for Commission review within the next 30 days.
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Breaking News: Court vacates FCC's Comcast Decision

Posted on April 6, 2010 by Steve Augustino

The US Court of Appeals for the DC Circuit vacated the FCC's decision declaring illegal Comcast's 2007 blocking of P2P internet traffic.  This decision is not surprising, given how poorly the oral argument went for the FCC.  (see our post here). 

Click here to download the Court's decision.  We will post a discussion of the jurisdictional issue later.

UPDATE 4/6/10:  The Court of Appeals vacated the FCC Order because the Commission had not adequately justified its exercise of Title I "ancillary" authority over Comcast's network management practices.  Discussing at length appellate Title I jurisdiction cases over the last 40 years, the Court in essence held that the FCC failed to relate Internet network management to common carrier telephone service (Title II), broadcast service (Title II) or cable TV service (Title VI).  One quote from the decision sums up the conclusion:  "On the record before us, we see 'no relationship whatever' between the Order and services subject to Commission regulation."  In other words, the FCC must connect its assertion of authority to something that it indisputably can regulate.

Since the decision was released, there has been much discussion about whether the FCC will reclassify Internet access services as Title II common carrier services.  While it is premature to predict these issues with any confidence, one alternative not being discussed is to accept the Court's invitation to connect regulation of Internet access service with regulation of pure transmission services.  In the Wireline Broadband Order, the Martin Commission concluded that Internet access did not have a separate transmission component.  The decision today may lead the Commission to reverse that determination -- and find that a separate transmission component is inherent in the offering -- so that it may then regulate bundled Internet access due to its impact on stand alone transmission services. 

Finally, I note that the Court did not address the enforceability of the Policy Statement itself.  As a result, the potential impact on the Universal Service Fund's Form 499-A instructions did not come to pass.  Maybe next time.

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Court of Appeals Upholds FCC on ISP-Bound Calls

Posted on January 13, 2010 by Danny Adams

The U.S. Court of Appeals for the D.C. Circuit has upheld the FCC's November 5, 2008 ruling continuing the rate cap on CLEC intercarrier charges for dial-up Internet calls.  In Core Communications v. FCC, decided January 12, 2009, the Court found "no legal error in the Commission's analysis" and thus affirmed the agency's decision.  This ruling presumably ends a protracted set of challenges and judicial examinations of the FCC's efforts to limit CLEC charges for receiving ISP bound calls.

The D.C. Circuit has examined the issue several times since 1999, including a 2002 decision that the FCC rate cap could not be justified on the basis of 47 USC 251(g).  WorldCom, Inc. v. FCC, 288 F.3d 429 (D.C. Cir. 2002). In that case, the Court rejected and remanded the FCC's rationale for the rate cap but did not vacate it, recognizing that there might be other legitimate bases for the policy.  Subsequently, in June 2004, Core Communications asked the Court to order the FCC to respond to the remand, which remained pending.  The Court declined, but in 2007 granted a renewed request for mandamus from Core. The FCC followed that order with the November 5, 2008 ruling which was the subject of the recent Court affirmation. The key legal discussion in the new decision is Court agreement that the FCC is legally empowered to rely on Section 201 of the Communications Act as the supporting basis for the rate cap. 

The January 12 opinion reviews and rejects each of the Core Communications challenges to the FCC action.  First, the Court finds that Section 201 is not a "general" provision superceded by the more specific Sections 251 and 252 in the area of compensation for ISP bound traffic (which has been found to be interstate, not local in nature).  It also rejected arguments that the calls are "local" rather than interstate because they terminate at the ISP. The Court found that it has already been established and accepted that dial up internet calls do not stop at the ISP interface, but instead continue on to the websites being contacted.  Similarly, the Court rejected a claim that the FCC was impermissibly discriminating against ISP bound calls by treating them differently from other calls.  Finally, the Court rejected other arguments without discussion because they had been improperly raised before the Court. 

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