FCC

Cable Wants To Be in FCC’s VoIP Ruling

10/31/2004 7:00 PM Eastern

Washington— The cable industry is ramping up its campaign for inclusion in a pending FCC ruling that would bar states from regulating a class of voice-over-Internet-protocol providers.

The Federal Communications Commission’s plan is to pre-empt, for legal and technical reasons, state regulation of VoIP providers like Vonage Holdings Corp., but not cable’s VoIP services. The ruling could come at the agency’s Nov. 9 public meeting.

NCTA, TIME WARNER LOBBY

Representatives of the National Cable & Telecommunications Association and Time Warner Inc. have visited FCC officials in recent days to argue that cable VoIP should receive the same pre-emption protections the agency has planned for Vonage.

As previously reported, the agency is planning to limit pre-emption to a narrow class of VoIP providers that includes Vonage, partly because the agency wants its own rules established before a court decides that the FCC can’t assert jurisdiction over VoIP services.

But cable and FCC sources have indicated that the five commissioners appear willing to consider expanding the ruling to include cable VoIP, which could explain Time Warner’s and the NCTA’s recent lobbying efforts at the agency.

Cable may also be applying pressure now for a favorable ruling based on concerns that if Sen. John Kerry (D-Mass.) becomes president, he would name FCC commissioners who would oppose granting it exclusive jurisdiction over VoIP services.

“They definitely want to get in while the getting is good,” said Scott Cleland, a media and telecom analyst with Precursor in Washington, D.C.

Unlike cable VoIP, Vonage uses the public Internet and offers a nomadic service, which allows a consumer to activate it by plugging into any broadband connection, using the same phone number.

'TECHNICAL’ ISSUES

The NCTA is trying to convince the FCC that technical differences should not leave cable VoIP beyond the scope of the ruling.

“Basing pre-emption decisions on whether a particular VoIP service uses the public Internet or a managed IP network would unfairly favor certain business models,” the NCTA said in a letter that summarized an Oct. 25 meeting with Christopher Libertelli, FCC chairman Michael Powell’s top telecommunications-policy adviser.

Time Warner lobbyists made the same point at a recent FCC meeting.

“The [FCC] need not rely on service characteristics that do not meaningfully distinguish different providers from each other, including a provider’s offering of 'nomadic’ service and its use of the 'public Internet,’ ” Time Warner said.

A failure to include cable VoIP might actually encourage states to apply traditional forms of telephone regulation, said the NCTA, adding that cable VoIP could be exposed to state regulation on the basis that cable routes VoIP traffic over its own and third-party managed networks.

That would result in an exploitable regulatory advantage for Vonage, the NCTA said.

“Limiting the benefits of pre-emption to Vonage and other non-facilities-based VoIP providers would disadvantage the very companies that have invested more than $85 billion in the broadband networks that make VoIP possible,” NCTA said.

In February, the FCC ruled that Pulver.com’s Free World Dialup VoIP service was an information service subject to FCC jurisdiction. FWD is a Web-based service provided for free, but users of the service cannot call nonusers.

Pre-empting state jurisdiction over Vonage would go beyond Pulver, because Vonage users may call anyone with a phone number and it does charge a monthly fee.

“The Pulver decision was a leap forward, but the Vonage petition would be as well, for making the Internet a less-regulated space,” Cleland said.

State regulators oppose pre-emption now for Vonage because the VoIP carrier wouldn’t be required to pay intrastate access charges, a $1.9 billion revenue source for states to promote affordable phone service in high-cost areas.

“The ramifications of what the commission is doing are just huge,” said Brad Ramsey, an attorney with the National Association of Regulatory Utility Commissioners (NARUC). “I would be surprised if one of NARUC’s members didn’t take the FCC to court. I would expect a state commission to appeal this.”

REVENUE HIT

Eighteen states support universal service by assessing intrastate-access revenue. As VoIP continues to grow, and intrastate access revenue declines, universal-service programs are put at risk, Ramsey said.

But FCC Wireline Competition Bureau chief Jeffrey Carlisle said that even though the migration to VoIP is inevitable, it is occurring at a pace that will give the FCC time to reform universal service to ensure that its goals are protected.

“It is going to happen. It’s an inevitable progression, but I think it is going to take a while. But that gives us time to figure out how to do that, and how to do it at a federal level and how to do it at the state level,” Carlisle said.

On Capitol Hill, dozens of lawmakers sent the FCC a letter urging broad pre-emption of the states to ensure the absence of economic regulation of all VoIP providers. However, House and Senate bills that would have done precisely that stalled in Congress this year.

But Rep. Edward Markey (D-Mass.), a senior member of House Energy and Commerce Committee, has argued that the most important policy goal was not deciding who regulates VoIP. Instead, he said the critical issue was whether broadband network owners degraded the VoIP service of competitors.

“The issue of state pre-emption, or taxes or fees or regulatory requirements, pales in comparison to the issue of whether VoIP providers have equal, nondiscriminatory access to consumers,” Markey said in a speech two weeks ago.

September