Based on “anonymous sources”, the New York Times is reporting that the FCC will reclassify cable broadband today as a hybrid beast, part information and part telecommunications service. This is based on the well known principle that voice (a transmission that doesn’t involve a change in format) can infect the information part (a format changing transmission) and… forget it, it’s too painful to go into.
So you would think that information and content providers would uniformly welcome the FCC’s new classification scheme as a way to preserve net neutrality? Not so fast.
As I had argued in an earlier post, facility-less VoIP carrier are not going to be very excited about having the legacy telecommunications legal superstructure of Title II placed over them.
If you dig into recent FCC filings, you’ll see that at least one major VoIP provider, Vonage, has concerns about the FCC’s helping hand.
Updated: With the decision to reclassify cable modem transmission as Title II common carrier telecommunications and forbearing many of its provisions , it does appear that facility-less VoIP providers are safe from state regulators. The reason: in the legal analysis by the FCC’s general counsel, the law (section 10e of the Communications Act) specifically denies states from applying provisions that have been nullified by forbearance.
Not all information and content providers are going to be happy with the FCC’s planned re-classification scheme. For those that offer voice-flavored information, there’s the issue of Universal Service Fund contributions, both at the state and federal level.
The USF state and federal pools help to subsidize phone service in rural and other high-cost areas.
The good intentions of the USFs, though, have been superseded by technology: monies are going towards maintaining aging copper loops (of the incumbents) when it should be invested in newer technologies, including wireless delivery of voice and data.
The FCC’s universal service policy has been a sore point between the old carriers and the facility-less VoIP providers.
In the case of Vonage, USF obligations led to a battle with Nebraska’s Public Service Commission over whether this VoIP provider had to pay into a state-run USF. In 2009, Vonage’s suit found its way to the 8th Circuit Court of Appeals in St. Louis.
The federal court ruled in Vonage’s favor saying that as a data service provider it doesn’t have to contribute directly to that state’s (or any state’s ) USF fund.
A big win for Vonage and others VoIP providers.
And at the federal level, in 2006 the FCC extended USF obligations to VoIP carriers. However, the agency left some wiggle room and allowed VoIP carriers, such as Vonage, to assume a safe harbor percentage of their revenue (around 64%) to apply towards the USF fund.
It’s up to carriers whether to charge customer for USF payments. For the record, my Verizon bill shows a $.77 USF charge.
For Vonage, every penny they charge customers is giving ground to Verizon and other incumbents. This is a contentious issue.
I checked one of Vonage’s April ex part filings, and sure enough there was one directly related to the upcoming FCC reclassification and the USF. The gist of their keep-it-as-it-is argument can be found in the beginning of their letter:
Vonage’s regulatory counsel, who wrote this thing, went on to argue that the FCC already has all the powers it needs to regulate cable broadband! He claimed the FCC’s recent ancillary argument to the Court of Appeals in the Comcast case should have been tweaked to request authority under a different statute then the one the FCC had used.
Damn! If only. As they say, go tell it to the judge.
The Vonage letter then makes an interesting argument (and one I agree with) that the FCC should just distinguish between broadband transmission and broadband applications: reclassify the former and leave applications alone.
The Vonage attorney explains how common carrier obligations would hurt innovation and thwart Congress’s intentions to “preserve the vibrant and competitive market that presently exists for the Internet…”
My take: Yes, there should be a distinction between the regulatory requirements for different parts of the communications stack. No, there can be some common carrier obligations for information services.
Finally, the smoking guns are buried is the third section, where the author finally gets to the part about the Universal Service Fund.
It’s a sneaky argument, but the Vonage attorney tells the FCC that they already have the authority to extend USF obligations to broadband providers even for stand-alone data (no voice, no video).
Actually, that is one of the goals of the National Broadband Plan in its Connect America Program: charge data broadband services to pay for universal high-speed broadband throughout the US. The Plan went to Congress, which will ultimately decide (through new laws, if need be), how to accomplish the NBP.
I agree the FCC can assess VoIP carriers for the USF , but they don’t have the power, as far as I can see, to charge broadband ISPs.
Bottom line: Vonage doesn’t want cable broadband reclassified because then its voice service would be subject to state USF charges and higher federal ones, as well as other common carrier rules.
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