Acting at today’s open meeting, the FCC has decided to apply its rules for discontinuance of service by competitive local telephone companies to interconnected voice over IP providers. This action continues the FCC’s efforts to apply its consumer protection requirements to voice over IP. The FCC’s press release is available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-290712A1.pdf and the commissioners’ statements on the order are available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-290712A2.pdf (Copps), at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-290712A3.pdf (Adelstein) and at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-290712A4.pdf (McDowell).

OVERVIEW

The thrust of today’s order is very simple: Interconnected voice over IP providers that wish to stop providing service to their customers must follow the procedures that already are in place for competitive providers of traditional telephone service. As the press release explains, “[i]nterconnected VoIP providers can no longer close shop without notice[.]”

It was apparent from the commissioners’ statements that they consider this to be a basic consumer protection requirement, and that they believe that applying the discontinuance rules to interconnected voice over IP providers also will protect public safety by reducing the likelihood that consumers will be left without access to 911 service.

THE NEW REQUIREMENTS  

Based on the discussion of this decision at the meeting, the press release and the commissioners’ written statements, the rules, like all of the FCC’s voice over IP rules, will apply only to interconnected voice over IP providers. Thus, only those providers whose services allow customers to make and receive telephone calls with the standard switched telephone network should be subject to the new requirements.

The commissioners and staff described the new rules as identical to the rules for competitive providers of traditional telephone services. Under those rules, a carrier that wishes to discontinue service to a group of customers or a geographic area must take the following steps:

  • Provide written notice to all affected customers at least 31 days before discontinuing service.
  • Submit an application to the FCC for permission to discontinue service.
  • Provide copies of the application to the Department of Defense, the governor of each affected state and the state public utility commission of each affected state.

The FCC gives interested parties an opportunity to comment, and the application is granted automatically 31 days after filing unless the FCC affirmatively decides not to grant it. While it is rare for the FCC to act, there have been some instances in which action has been delayed because of customer complaints.

RATIONALE FOR THE FCC ACTION

The press release and the commissioners’ statements are quite explicit about the reasons for today’s decision. As Acting Chairman Copps explained:

Over the past several years, we have seen widespread adoption by the American public of dynamic new telecommunications technologies and services, and we are going to see even more dramatic deployments in the new age of broadband. We welcome, we encourage this growth. As change occurs, however, we have the continuing obligation always to protect consumers.

Commissioners Adelstein and McDowell echoed these thoughts. Commissioner Adelstein noted that the decision “reaffirms the Commission’s commitment to consumer protection and public safety as consumers continue to migrate to new and innovative technologies like VoIP.” Similarly, Commissioner McDowell said that “[c]onsumers increasingly are finding that interconnected VoIP services are a substitute for traditional telephone service.”

In this context, all three commissioners concluded that it was appropriate to extend the discontinuance requirement for regular telephone service to voice over IP. Commissioner Adelstein was most explicit, as described above, in linking the new requirements to public safety, while the other two commissioners treated this more as a matter of basic consumer protection. In his oral statement, Commissioner McDowell also mentioned that three years ago he had experienced the impact of being cut off from voice over IP service without notice. While he did not indicate that this was a significant factor in his decision, it is likely it played some role in moving this item forward.

In addition, Acting Chairman Copps indicated that he did not believe that the requirements would be burdensome. Commissioner Adelstein, who had the longest statement, also suggested that the decision was “a victory for competition” because “giving interconnected VoIP users the same protections as users of traditional telephone” helps to “position this exciting technology as a direct competitor against more established services.”

IMPOSING PARITY

While consumer protection and public safety were important concerns for the commissioners, it also was apparent that regulatory parity was a factor in the analysis underlying this decision. In particular, both Acting Chairman Copps (in his oral comments) and Commissioner Adelstein mentioned the significance of bringing voice over IP regulation in line with traditional telephone regulation.

Concerns about regulatory parity are not new at the FCC, and in that respect it is not a surprise that they were part of this decision. However, previous voice over IP decisions have focused more directly on consumer protection, and not the question of whether parity was, in and of itself, an appropriate goal. Indeed, Commissioner Adelstein’s statement that parity would help promote competition tied the idea of parity to one of the FCC’s basic regulatory principles of the last twenty years.

It is difficult to predict whether the FCC will continue to rely on a parity analysis going forward, especially because there will be significant change in the makeup of the agency once President Obama’s nominees are seated. Nevertheless, the invocation of parity suggests that in future decisions the FCC may look towards creating a more level playing field for all voice services, whether offered via traditional circuit-switched technologies, voice over IP or other mechanisms.

In the current environment, this likely would mean more regulation for voice over IP services, not less regulation for traditional carriers. The most likely areas for such additional regulation would include the carrier change rules, which are intended to prevent slamming, and the truth in billing rules.

WHAT WAS NOT SAID

The discussion at today’s meeting and the statements of the commissioners also were notable for what they omitted: Any discussion of the legal basis for imposing these rules. While it is likely that the FCC will rely on theories similar to those used to support its E911, number portability and customer privacy rules for voice over IP service, the discontinuance rules have a somewhat different character than those rules, and consequently may not fit neatly into the rationales that supported those earlier decisions.

This is significant because the FCC’s rules governing discontinuance of service by traditional carriers are based on the FCC’s explicit jurisdiction over market entry and exit under Section 214 of the Communications Act. The FCC has been avoiding deciding whether Section 214 applies to voice over IP service (and, in fact, the FCC staff specifically refuses to process applications under Section 214 if they involve voice over IP providers). If the FCC takes the same approach here, it will be required to explain why it can extend the rationale used in the earlier cases to cover not just the service provided by voice over IP providers, but their decisions to exit the market entirely.

IMPACT OF THE DECISION

The most important effects of this decision almost certainly will have little to do with the actual discontinuance of service by voice over IP providers. In practical terms, and as Acting Chairman Copps suggested, the discontinuance requirements are not very burdensome. Moreover, there is not much that the FCC can do about companies that simply go out of business, regardless of the rules that are in place.

The more significant impact is likely to come from the FCC’s continuing extension of its regulatory authority over voice over IP service. If this decision is not challenged in court, or if it is upheld in an appeal, it could provide the basis for the FCC to take further action, including applying the slamming rules, truth-in-billing and even transfer of control application requirements to voice over IP service.

This decision also, for the first time, gives state regulators a specific role in regulation of voice over IP service. While state regulators rarely intervene in discontinuance proceedings, that is in large part because they have jurisdiction over the in-state operations of traditional telephone companies. It is possible that state regulators will be more active in discontinuance applications filed by voice over IP providers because they currently have no other recourse. Finally, this decision continues the longterm trend towards substantially equal regulation of voice over IP service and traditional telephone service at the FCC. Important differences still remain, but the

gap is getting smaller and smaller.