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1 Control Number : Item Number : 29 Addendum StartPage: 0

2 PROJECT NO cz * s; ^^1^,jA lt RULEMAKING PROCEEDING PUBLIC UTILITY COMNIISj^; RELATED TO VOICE OVER INTERNET PROTOCOL (VoIP) OF TEXAS SERVICES AND TEXAS UNIVERSAL SERVICE FUND REPLY COMMENTS OF TEXAS STATEWIDE TELEPHONE GOOPERA,TIVE, INC. TO THE PUBLIC UTILITY CONIlVIISSION OF TEXAS: Texas Statewide Telephone Cooperative, Inc. ("TSTCI") files these comments in reply to the comments filed on May 29, 2012 in the above referenced project. 1. Introduction As stated in its letter filing in this proceeding, TSTCI supports the staff efforts to implement a rule which requires all telecommunications providers, including VoIP providers, to contribute to the TUSF. This rule is both technology and competitively neutral, and by ensuring that all providers contribute to the TUSF, it lessens the burden on the consumers by spreading the contribution over a larger base. TSTCI only filed brief comments supporting Staff's proposed rule, and there are a few issues that have been raised in comments that TSTCI would like to address. H. Comments Several parties have commented that state law prohibits imposing TUSF assessment obligations on VoIP providers because VoIP providers are not clearly defined as telecommunications providers. TSTCI contends that the Commission clearly has the authority to determine that telecommunications services are being provided by VoIP providers to customers in the state and that the Commission has a duty to include VoIP providers in the assessment base. Project 39717; Reply Comments of Texas Statewide Telephone Cooperative, Inc. Page 1 a^

3 The Commission's authority in this rulemaking is borne primarily out of Public Utility Regulatory Act ("PURA") , and PURA Uniform Charge. First, as has been discussed by all parties to this proceeding, "the universal service fund is funded by a statewide uniform charge payable by each telecommunications provider that has access to the customer base."' With regard to , TSTCI also believes that an affirmative duty is placed on the Commission to make a determination with regard to whether VoIP providers are telecommunications providers for the purposes of TUSF contribution. Subsections (c)(1) and (c)(3) state that the Commission may not grant an unreasonable preference or advantage to a telecommunications provider or subject a telecommunications provider to unreasonable prejudice or disadvantage. TSTCI has been consistent in its position that VoIP providers are telecommunications providers? Under that assumption, if VoIP providers are determined by the Commission to be telecommunications providers and yet are not subject to the uniform charge, then they are granted unreasonable preference or advantage? Alternatively, if the Commission does not make a determination regarding VoIP providers when it could be determined that they are providing telecommunications services, other telecommunications providers, who would benefit from a larger contribution base for the uniform charge, are being made subject to unreasonable prejudice or disadvantage! 'PURA (a). Emphasis added. 2See Comments of TSTCI in P.U.C. Project No 'PURA (c)(1). 41d at (c)(3). Project 39717; Reply Comments of Texas Statewide Telephone Cooperative, Inc. Page 2

4 Is the Commission's Authority to make a Determination Limited? With the charge and duties of PURA in mind, the Commission must then determine if VoIP providers are "telecommunications providers" for the purposes of the TUSF assessment. Other parties have stated that the Commission does not have authority to make this determination. While the Commission's authority to regulate rates, service, contract terms, and market entry requirements were restricted by the recently passed provisions of PURA, the provisions specifically state that the legislature did not require or prohibit assessment of enhanced 9-1-1, relay access service, or universal service fund fees on VoIP.S Clearly, the legislature left it to the Commission to make a determination with regard to each of those assessments, and thus gave the Commission the authority to determine whether a VoIP provider is a telecommunications provider for the purposes of the TUSF assessment. Telecommunications Provider. TSTCI supports Staff's position that VoIP providers are telecommunications providers for the purposes of the TUSF assessment under PURA (1 0)(A)(xi) as entities determined by the Commission to provide telecommunications services to customers in this state. Both AT&T and Verizon claim that provision is not applicable under the exemption of (1 0)(B)(i), regarding information services,' however, neither of them address the fact that the exemption only applies to providers of information services that do not also provide telecommunications services. The only determination the Commission must make in order to classify VoIP providers as telecommunications SPURA (d)(3). 6TSTCI recognizes there are ongoing arguments as to the regulatory classification of all types of VoIP services on the Federal level; however, for purposes of this rule, that determination is irrelevant. Project 39717; Reply Comments of Texas Statewide Telephone Cooperative, Inc. Page 3

5 providers, for the purposes of this rule, is whether VoIP providers provide "telecommunications services" to customers in this state. While there is no specific definition of telecommunications services in PURA, there are several sources the Commission can draw from to make the reasonable determination that VoIP providers are providing telecommunications services. First, we look to the definition of VoIP services in PURA. VoIP service is defined as a service that (A) uses Internet Protocol or a successor protocol to enable a real-time. two way voice communication that originates or terminates to the user's location in Internet Protocol or a successor protocol: (B) requires a broadband connection from the user's location; and (C) permits a user generally to receive a call that originates on the public switched telephone network and terminate a call to the public switched telephone network' On the State level, it is also important to recognize that the State Comptroller's office amended its rules to define Vol? services as telecommunications service for the purposes of determining state and local tax responsibilities! The State Comptroller added VoIP Services to the definitions of "basic tlecommunciations service" and "telecommunications service" in the definitions applicable to the sales tax. TSTCI would also point out the Commission's rule on the assessment for the TUSF (f)(a)(E) refers to Chapter 152 of the Texas Tax Code. While the Comptrollers determination is not controlling on the Commission, it certainly supports the Commission's reasonable determination that VoIP providers are providing telecommunications services. The Commission can also look to the federal level for support of their determination. While it is true that the FCC has never made a determination that VoIP providers are telecommunications 'PURA (13). Emphasis added. 834 TAC Project 39717; Reply Comments of Texas Statewide Telephone Cooperative, Inc. Page 4

6 providers for regulatory purposes, its discussions and decisions with regard to its authority regarding VoIP services and imposition of certain consumer protections thereon leave little doubt that there are telecommunications services being provided. In fact, The FCC has considered the regulation of VoIP providers, and the questions of their regulatory authority over VoIP providers in several proceedings,' concluding that interconnected VoIP providers should be subject to many of the same regulatory responsibilities and obligations of regulated telecommunications carriers. The FCC has cited VoIP providers' actions in the market place as being similar to existing telecommunications providers and that their consumers should benefit from the same regulatory consumer protection obligations required of existing providers. In the April 2004 IP in the Middle Order," the FCC concluded that service provided by AT&T, and later defined as interconnected VoIP service, was a telecommunications service under the Act rather than an information service" and as such was subject to interstate access charges.12 In the May 2005 VoIP 911 Order," the FCC required interconnected VoIP providers to supply enhanced 911 emergency calling capabilities to their customers and to provide E911 service as a condition of providing that service to a consumer. In that Order, the FCC defines "interconnected VoIP Services" as services that (1) enable real-time, two-way voice communication; (2) require a 9 In the Matter of Telephone Number Requirements for JP-Enabled Services Providers; Local Number Portability Porting Interval and Validation Requirements; Report and Order and Further Notice of Proposed Rulemaking, WC Docket Nos ,07-244,04-36, CC Docket Nos ,99-200, October 31, 2007 (2007 Number Portability Order), In the Matter of Petition for Declaratory Ruling that AT&T's Phone-to-Phone IP Telephony Services are Exempt from Access Charges, WC Docket No , April 14, 2004 (IP in the Middle Order). Id, 12. 'Z Id., In the Matters of IP-Enabled Services, E911 Requirements for IP-Enabled Service Providers, WS Docket No , WC Docket No (VoIP E911 Order), May 19, Project 39717; Reply Comments of Texas Statewide Telephone Cooperative, Inc. Page 5

7 broadband connection from the end user's location; (3) require IP-compatible customer premises equipment; and (4) permit users to receive calls from and terminate calls to the PSTN.14 Later that year, the FCC also found providers of interconnected VoIP services to satisfy the Communications Assistance for Law Enforcement Act ("CALEA") definition of "telecommunications carrier" and that CALEA's Information Services Exclusion does not apply to interconnected VoIP services.15 In the June 2006 Interim Contribution Methodology Order,16 the FCC established universal service contribution obligations for interconnected VoIP providers stating "that to the extent interconnected VoIP services are telecommunications services, they are of course subject to the mandatory contribution requirement."" In that Order, the FCC determined that interconnected VoIP providers provide "telecommunications" and that by definition interconnected VoIP services permit users to receive calls from and terminate calls to the PSTN.18 Not only did the FCC determine that VoIP providers are providing telecommunications service, but are providers of interstate telecommunications service.19 'a Id, 124. "Communications Assistance for Law Enforcement Act and Broadband Access and Services, ET Docket No , RM-10865, First Report and Order and Further Notice of Proposed Rulemaking, August 5, 2005, para n the Matter of Universal Service Contribution Methodology and Universal Service Support Mechanisms, WC Docket No , NSD File No. L-00-72, CC Docket Nos , , , ,99-200,95-116,98-170, WC Docket No , Report and Order and Notice of Further Rulemaking, June 21, 2006 (Contribution Methodology Order), 46. "Id., d Id.,.42. Project 39717; Reply Comments of Texas Statewide Telephone Cooperative, Inc. Page 6

8 In the March 2007 Customer Proprietary Network Information ("CPNI") Order, the FCC extended section 222 CPNI obligations to interconnected VoIP providers." In the June 2007 Telecommunications Relay Services ("TRS") Order, the FCC extended disability access requirements and the TRS requirements to providers of interconnected VoIP services." In the 2007 Local Number Portability Order, the FCC extended porting obligations to interconnected VoIP providers, and also extended the obligation to contribute to shared numbering administration costs ZZ The FCC required interconnected VoIP providers to pay Fiscal Year 2007 regulatory fees based on revenues reported on the FCC Form 499-A at the same rate as other interstate telecommunications service providers." In May 2009, the FCC issued an order requiring interconnected VoIP providers to notify their customers before they discontinue, reduce or impair service.24 The FCC determined that because interconnected VoIP service is increasingly used as a replacement for traditional voice service, consumers expect the same type of regulatory protections they would receive with traditional 20 Implementation of the Telecommunications Act of 1996: Telecommunications Carriers' Use of Customer Proprietary Network Information and Other Customer Information; [P-Enabled Services, CC Docket No , WC Docket No , Report and Order and Further Notice of Proposed Rulemaking, March 13, 2007 (2007 CPNI Order). Z` IP-Enabled Services, WC Docket No , WT Docket No , CG Docket No , CC Docket No , Report and Order, (2007) (TRS Order). 2Z 2007 Number Portability Order, 1. "Assessment and Collection of Regulatory Fees for Fiscal Year 2007, MD Docket No , Report and Order and Further Notice of Proposed Rulemaking, FCC , (rel. Aug. 6, 2007) In the Matter ofip-enabledservices, WC Docket No , Report and Order, Adopted May 13, 2009, FCC Project 39717; Reply Comments of Texas Statewide Telephone Cooperative, Inc. Page 7

9 telephone service. Accordingly, the FCC extended the same streamlined discontinuance obligations to interconnected VoIP providers that apply to domestic non-dominant telecommunications carriers. Even more recently, in the USF/ICC Transformation Order, the FCC recognized that VoIP providers have intrastate as well as interstate traffic and required that VoIP providers pay intrastate access charges at the interstate rate levels." Specifically, the Order brought VoIP=PSTN traffic within the 521(b)(5) framework; provided that default charges for VoIP-PSTN traffic will be equal to interstate access rates applicable to non-voip traffic, both in terms of rate level and rate structure; provided that default charges for other VoIP-PSTN traffic will be the otherwise-applicable reciprocal compensation rates; and LECs are permitted to tariffthese default charges for toll VoIP-PSTN traffic in relevant federal and state tariffs in the absence of an agreement for different intercarrier compensation. It is clear that FCC precedent also supports that VoIP providers are providing telecommunications services and that VoIP providers should pay their fair share of the costs associated with terminating traffic on the PSTN By proposing and publishing this rule, it is clear that the Commission believes it is reasonable to determine that VoIP providers are indeed providing telecommunications services and are thus telecommunications providers. TSTCI believes that this is a reasonable decision which can be supported by precedent at both the state and federal levels. "See In the Matter of Connect America Fund; A national Broadband Plan for Our Future; Establishing Just and Reasonable Rates for Local Exchange Carriers; High-Cost Universal Service Support; Developing a Unified Intercarrier Compensation Regime; Federal-State Joint Board on Universal Service; Lifeline and Link Up; Universal Service Reform -Mobility Fund; Report and Order and Further Notice of Proposed Rulemaking, WC Dockets No.10-90, , , ; CC Dockets No , 96-45; GN Docket No ; WT Docket No , released November 18, 2011 (USF/ICC Transformation Order). Project , Replv Comments of Texas Statewide Telephone Cooperative, Inc. Page 8

10 M. Conclusion TSTCI supports the proposed rule concerning the treatment of VoIP with regard to the TUSF assessment. The legislature clearly gave the Commission the authority to determine whether to apply the TUSF assessment to VoIP services, and the Commission is charged with the duty of making sure the uniform charge is not applied preferentially or prejudicially to telecommunications providers. While regulatory treatment of VoIP services in Texas are limited and not up for debate in this rulemaking, the Texas statutory definition of VoIP services, the recent Comptroller designation of VoIP services as telecommunications services, and FCC Precedent, all allow the Commission to reach the reasonable determination that VoIP providers are indeed telecommunications providers, for the purposes of the TUSF assessment, in that they are providing telecommunications services to customers in this state. TSTCI supports the Commission's proposed rule and determination that VoIP providers are telecommunications providers for the purposes of TUSF assessment and appreciates the Commission's efforts to broaden the TUSF contribution base by applying the uniform charge in a technology and competitively neutral manner. Respectfully submitted, Richards, Elder & Greens L.L.P South Loop 289, Suite 424 (79423) P.O. Box Lubbock, Texas Telephone: (806) Facsimile: (806) drichards@regllp.com dgibson@regl.com A./1 /r^,.,l Don R. Richards, SBN D. Daniel Gibson, SBN Attorneys for Texas Statewide Telephone Cooperative, Inc. Project 39717; Reply Comments of Texas Statewide Telephone Cooperative, Inc. Page 9