Commission to Vote on IP Transition Item at March Open Meeting

In a March 4 blog post, FCC Chairman Brendan Carr announced that at its March 26 open meeting the Commission will vote on a draft notice of proposed rulemaking (NPRM) "that builds on our prior efforts to streamline copper retirement and reduce outdated regulatory burdens that force providers to maintain aging networks instead of investing in modern, high‑speed ones." In a news release released the same day, he highlighted the fact that "[t]his FCC decision will free up billions of dollars in private capital so that Americans in communities across the country can go from old and slow copper lines to modern, high-speed ones."

Among other things, the draft item would eliminate filing requirements; simplify the technology transitions discontinuance application process; and provide carriers with blanket authority to grandfather legacy services delivered via copper wire. It also would preempt state and local requirements that "have the effect of continuing to require carriers to provide legacy voice services" even after the Commission has authorized them to stop doing so.

In a companion proceeding that remains pending, the Commission proposed to exercise its Section 10 forbearance authority and relieve incumbent local exchange carriers (ILECs) from a statutory obligation to offer interconnection via legacy time-division multiplexing (TDM) equipment. Free State Foundation President Randolph May and I filed supportive comments in response to that NPRM, emphasizing that "[t]his is yet another key regulatory reform proposal that is crucial to advancing the implementation of the FCC's 'Build America' program by spurring the deployment and use of advanced broadband IP networks."

Restoring Internet Freedom Order Bolsters VoIP Freedom

In a blog post from October 2017, I wrote about "The Case for Keeping VoIP Free from Legacy Regulation." The blog discussed Charter Advanced Services (MN) v. Lange, a case with important implications as to whether VoIP services will remain largely free from state legacy regulation. The U.S. District Court decision under review rightly concluded that the VoIP offering at issue "engages in net protocol conversion, and that this feature renders it an 'information service' under applicable legal and administrative precedent." 

On January 10, counsel for Charter Communications filed a letter with U.S. Court of Appeals for the Eighth Circuit, outlining ways in which the Restoring Internet Freedom Order supports the conclusion that Charter's Spectrum Voice VoIP service is, in fact, a Title I information service. Among other things, the letter points out that the Restoring Internet Freedom Order:

• [E]mphasizes the "narrow scope" of the [telecommunications management] exception [to Title I] and reiterates that features "designed to be useful to end-users rather than providers" do not fall within it.

• Reiterates that information services can "include[] a transmission component," and that this "does not render broadband Internet access services telecommunications services; if it did, the entire category of information services would be narrowed drastically."


• Applies the FCC's standards for assessing when information and telecommunications components are functionally integrated and what the provider "offers"… [and] …finds that "relevant classification precedent focuses on the nature of the service offering the provider makes, rather than being limited to the functions within that offering that particular subscribers do, in fact, use."

• Expressly preempts the states from public utility regulation of broadband Internet services, reiterating to the "longstanding federal policy of nonregulation for information services" and emphasizing "Congress's approval" of that "preemptive federal
 policy." 


Certainly, broadband Internet access services offer much more transforming, processing, and other functional capabilities to end user subscribers than VoIP services. Yet, the highlighted analytical aspects of the Restoring Internet Freedom Order surely strengthen the conclusion that Charter's Spectrum Voice services are information services under Title I. In sum, the Restoring Internet Freedom Order bolsters VoIP freedom from state legacy regulation. 

Supreme Court Denies Review of Narrow Ruling on State VoIP Regulation

On January 8, the U.S. Supreme Court denied a petition to review the 8th Circuit Court of Appeals' decision in Sprint Communications v. Lozier (2017). This leaves standing the 8th Circuit’s conclusion, based on Section 251(g) of the Telecommunications Act of 1996, that federal law did not preempt state authority to regulate nonnomadic, intrastate long-distance VoIP calls. The overall import of the case is decidedly narrow. As the 8th Circuit recognized in Lozier, the FCC's Connect American Fund Order (2011) explicitly superseded the pre-1996 Act access charge regime that was at issue in the case. Thus, the decision in Lozier was essentially limited to the matter of intrastate access charges incurred by Sprint between 2009 and 2011 – when the CAF Order was adopted.

My October 2017 blog post, "The Case for Keeping VoIP Free from Legacy Regulation" discusses a pending decision by the 8th Circuit that could be far more consequential for the future of IP-based services. For further background and insight, also see the April 2013 Perspectives from FSF Scholars paper by Professor and FSF Board of Academic Advisors member Daniel Lyons: "The Challenge of VoIP to Legacy Federal and State Regulatory Regimes."

The Case for Keeping VoIP Free from Legacy Regulation

Successful transitions to IP-based communications technologies depend on innovative services remaining unburdened by regulatory restrictions. Before the U.S. Court of Appeals for the Eighth Circuit is the question of whether VoIP services will remain largely free from state legacy regulation.

Back in May, the U.S. District Court for the District of Minnesota sensibly concluded that Charter’s Spectrum Voice – a VoIP offering – “engages in net protocol conversion, and that this feature renders it an ‘information service’ under applicable legal and administrative precedent.” Minnesota regulators appealed the decision in Charter Advanced Services (MN) v. Lange to the Eighth Circuit.

In a prior blog post, I described how the District Court’s reasoning bolsters the FCC’s Restoring Internet Freedom proposal to reclassify broadband Internet access services as “information services” under Title I of the Communications Act. As the District Court ruled, “transforming” functional capabilities bring an offering within the scope of Title I’s information service definition. Comments filed by the Free State Foundation in the Restoring Internet Freedom proceeding explained that broadband Internet access services involve even more transforming, processing, and other functional capabilities to end user subscribers, consistent with Title I classification.

Aside from its implications for FCC broadband Internet policy, the District Court was surely correct in deciding the question squarely at issue in Charter Advanced. VoIP offerings that alter the protocol by which subscriber information is transmitted in order to provide additional functionality to subscribers transform and process that information – and thereby come within Title I’s definition of “information services.”

The merits of the District Court’s decision are ably defended in a legal brief that Charter filed at the Eighth Circuit on October 19. As Charter’s brief points out, court precedents support a Title I conclusion regarding VoIP. Four prior District Courts similarly concluded that IP-to-TDM network protocol conversion transforms and processes information within the meaning of Title I.

And because Spectrum Voice is an information service, Minnesota’s regulation is preempted. Charter’s brief rightly references the 8th Circuit’s holding in Minnesota Public Utilities Commission v. FCC (2007) that “any state regulation of an information service conflicts with the federal policy of nonregulation.” State legacy regulation of VoIP services would frustrate federal policy behind Title I, which the Eighth Circuit previously described as: “[A]llowing providers of information services to burgeon and flourish in an environment of free give-and-take of the market place without the need for and possible burden of rules, regulations and licensing requirements.”

Next-generation technology transitions have benefitted from the overwhelming movement in the states toward non-regulation of VoIP. Charter’s brief cited Dr. Sherry Lichtenberg’s findings that, as of July 2015, “44 states had specifically eliminated oversight of VoIP and other IP-enabled services.” The Minnesota regulators’ power grab is an outlier that ought to be rebuffed, not repeated. Hopefully, the Eighth Circuit will vindicate the non-regulatory Title I information services holding in Charter Advanced Services (MN) v. Lange and help preserve a pro-innovation environment for VoIP services.