By a 2-1 vote, the 8th
Circuit Court of Appeals upheld a lower court’s determination that Voice over
the Internet Protocol (“VoIP”) telephone service constitutes an information
service subject to FCC preemption of state regulation. [1]
The court decided to make an explicit determination considering the FCC’s decades
long disinclination to do, because an explicit information service
classification would jeopardize the Commission’s ability to regulate VoIP service
and perhaps also the lawfulness of requiring subscribers to contribute to
universal service funding. On the other
hand, the decision bolsters the FCC’s selective assertion of federal preemption
to prevent inconsistent and “balkanized” policies when state establish their
own regulations.
The court determined
that VoIP falls within the information service classification, because a
protocol conversion occurs when calls originate, or terminate on the
conventional public switched telephone network, but are transmitted via
broadband networks:
We
conclude that the VoIP technology used by Charter Spectrum is an “information
service” under the Act. As the district court put it, “the touchstone of the
information services inquiry is whether Spectrum Voice acts on the consumer’s
information—here a phone call—in such a way as to ‘transform’ that
information.” 259 F.Supp.3d at 987; see 47 U.S.C. § 153(24). IP-TDM calls
involve just such a transformation. For those calls, because information enters
Charter’s network “in one format (either IP or TDM, depending on who originated
the call) and leaves in another, its system offers ‘net’ protocol conversion,
which the FCC has defined as occurring when ‘an end-user [can] send information
into a network in one protocol and have it exit the network in a different
protocol.’” [2]
The court majority opted to consider the explicit
language in the definitions of telecommunications service and information
service rather than consider the functional equivalency of VoIP with earlier
vintage circuit-switched telephony, even though they use different technical
protocols. The court considered the
information service category as applicable because VoIP service providers must
use software to convert the format of calls from and to legacy wired and
wireless telephone networks even though both telecommunications services and
information services use telecommunications networks to transmit and deliver
traffic:
Spectrum
Voice’s service is an information service because it “mak[es] available
information via telecommunications” by providing the capability to transform
that information through net protocol conversion. Cf. Nat’l Cable &
Telecommunications Ass’n v. Brand X Internet Servs., 545 U.S. 967, 988 (2005)
(explaining that “all information-service providers . . . use
‘telecommunications’ to provide consumers with [their] service”). [3]
The court
did not consider VoIP protocol conversion as fitting within three categories
where some processing takes place, but not in a significant way that
fundamentally changes the nature and composition of the composite service. [4] This view parallels
the analysis contained in the FCC’s Restoring Internet Freedom order which
reclassified broadband access as an information service thereby removing common
carrier regulatory oversight.
The court
quickly rejected as inapplicable each of the three carve-outs that the FCC uses
to allow some degree of information processing without converting a basic
telecommunications service into information service. The court rejected the
first exception, because VoIP connects users of a service and not users with a
network. The second exception was
considered inapplicable, because the court emphasized that protocol conversions
are necessary for new equipment that VoIP subscribers must use even though more
broadly the conversions also promote compatibility and interconnection between
users of legacy voice telephone services and newer VoIP options.
The third
exception also was considered inapplicable, but some stakeholder may dispute
the court’s rationale that emphasizes the need for protocol conversions to make
the required new equipment function on customers’ premises. The court briefly stated that the required
customer premises equipment is not physically a part of the VoIP provider’s
network, nor does its protocol conversion occur within a network. By
emphasizing the location of the device performing the protocol conversion, the
court could ignore that the device provides internetworking between two types
of networks that consumers consider functionally equivalent.
Judge Grasz,
in dissent, rejected the majority’s rationale noting that the court
overemphasized the location where protocol conversions take place and in so
doing possibly provided a way for telecommunications service providers to evade
most of the FCC’s regulatory oversight for any service where a device can be
installed on consumer premises:
If performing the conversion from
TDM to IP inside a customer’s home is sufficient to convert a telecommunications
service into an information service, then AT&T, or any similarly situated
provider, could greatly reduce its regulatory burden simply by moving converter
boxes inside customers’ homes. A simple change of physical location would
transform what used to be telecommunications services to information services.
This may explain why the FCC has yet to make categorical pronouncements
on protocol conversions. An overarching category for all net protocol
conversions would create a potential pathway for every company to escape the
heavier telecommunications service regulations. [5]
Judge Grasz also noted language in the definition of
telecommunication service that deemphasizes the type and location of facilities
used to provide a telecommunications service. [6]
He even rejects the possibility that VoIP protocol conversions can trigger the
information service classification, because the broadband service venture
provides a telecommunication transmission link and the protocol conversion does
not change the nature of voice communications between the caller and call
recipient:
If we assume that
interconnected VoIP services “provide” “telecommunications” as defined in
statute, then we must presume that no “change” occurs between the two phone
sets on either end of the interconnected VoIP line. . . . As a result, when
addressing the question of whether Charter’s media gateway transforms
information, in order to rule in favor of Charter, we would have to conclude
that a device that does not change the form or content of information (because
it is part of telecommunications) is also a device that transforms information
(because it is an information service). See id. § 153(24), (50). The first
conclusion forecloses the second one. In short, if Charter’s service provides
telecommunications (as defined in statute), then its net protocol conversion
cannot be part of an information service, but instead must be part of a
telecommunications service. [7]
[1] Charter
Advanced Services(MN), LLC v. Lang, No. 17-2290, slip op. (8th Cir.
Sep. 7, 2018); available at: http://media.ca8.uscourts.gov/opndir/18/09/172290P.pdf.
[4]
“The
definition of ‘information service’ excludes services that comprise a ‘capability
for the management, control, or operation of a telecommunications system or the
management of a telecommunications service.’ 47 U.S.C. § 153(24). The FCC has
further defined this exception to include ‘(1) services ‘involving
communications between an end user and the network itself (e.g., for
initiation, routing, and termination of calls) rather than between or among
users;’ (2) protocol processing ‘in connection with the introduction of a new
basic network technology (which requires protocol conversion to maintain
compatibility with existing [CPE])’ and (3) services ‘involving internetworking
(conversions taking place solely within the carrier’s network to facilitate
provision of a basic network service, that result in no net conversion to the
end user).’” Id. at 7-8.
[6] “The
statute contemplates such transitions because it defines a telecommunications
service as ‘offering [] telecommunications for a fee directly to the public . .
. regardless of the facilities used.” Id.
at 10 citing 47 U.S.C. § 153(53).
