C-OTYiAVtC/yvCd. '"-.rcservicv. Oito' M30C131 PH2--30
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- Katrina O’Brien’
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From this document you will learn the answers to the following questions:
What type of service does Frontier claim was providing?
How did the acting secretary of the New York State Public Service Commission describe the acting secretary?
Frontier claims that Vonage is providing VoIP services in violation of Public Service Law and Commission rules and regulations?
Transcription
1 Level (3) % COMMUNICATIONS C-OTYiAVtC/yvCd '"-.rcservicv. Oito' M30C131 PH2--30 Gregory L. Rogers Director, State Regulatory Affairs TEL: (720) FAX: (720) greg.rogers@level3.com [^ October 31, 2003 BY HAND DELIVERY Honorable Jaclyn A. Brilling Acting Secretary New York State Public Service Commission Three Empire State Plaza Albany, New York Re: Case No. 03-C Complaint of Frontier Telephone of Rochester, Inc. Against Vonage Holdings Corp. Concerning Provision of Local Exchange and Inter-Exchange Telephone Service In New York State in Violation of the Public Service Law Dear Secretary Brilling: In response to the New York State Public Service Commission's October 9, 2003 Notice Requesting Comments in the above-referenced case, enclosed for filing is an original and ten copies of the Initial Comments of Level 3 Communications. Should you have any questions regarding this filing, please do not hesitate to contact me. Sincerely, _X~~^ S^^-tS N- <:5 -^-~-9- cc: Active Party Service List Level 3 Communications, Inc Eldorado Boulevard, Broomfield. CO
2 nzceiveo, PUBLIC SERVICF. COHMiSSION iiv, BEFORE THE STATE OF NEW YORKEC FILES ALBAni. PUBLIC SERVICE COMMISSIO^ ^ 3, pm 2; 3,, Complaint of Frontier Telephone of Rochester, Inc. ) Case 03-C-1285 Against Vonage Holdings Corp. ) Concerning Provision of Local Exchange and ) Interexchange Telephone Service ) innew York State in Violation of the ) Public Service Law ) COMMENTS OF LEVEL 3 COMMUNICATIONS. LLC Level 3 Communications, LLC ("Level 3") submits the following comments pursuant to the State of New York Public Service Commission's ("Commission") Notice, released October 9, 2003, regarding the above-captioned complaint of Frontier Telephone of Rochester, Inc. ("Frontier") against Vonage Holdings Corp. ("Vonage"). 1 In its Complaint, Frontier claims that Vonage is providing Voice Over Internet Protocol ("VoIP") services, which Frontier argues are telephone services under New York law, in violation of Public Service Law and Commission rules and regulations. 2 Frontier requests that the Commission issue an order requiring Vonage to cease providing VoIP service in New York until it complies with state rules and regulations governing competitive local exchange carriers ("CLECs") and interexchange carriers ("IXCs"), including certification, tariffing, interconnection, and 911 requirements. 3 Complaint of Telephone of Rochester, Inc. Against Vonage Holding Corp. Concerning Provision of Local Exchange and Interexchange Telephone Service in New York State in Violation of the Public Service Law, CaSe'OS- C1285, Notice Requesting Comments (N.Y. P.S.C. Oct. 9, 2003). 2 Frontier Complaint at Mat 9-10.
3 Introduction and Summary Level 3 is a communications and information services company with an international network completely optimized, end-to-end, for Internet Protocol ("IP") technology. 4 Level 3 offers IP-based services, including broadband transport, submarine transmission, and softswitchbased services. Level 3 offers services primarily to other carriers, Internet Service Providers ("ISPs"), application service providers, and VoIP service providers including its subsidiary, Level 3 Enhanced Services. 5 Level 3's all-ip network contains no circuit switches. Instead, its network is designed with Softswitch architecture - a distributed set of hardware and software platforms used to seamlessly interconnect IP networks to the circuit switched network. With Softswitch architecture, core-switching functions are not handled in each single unit, such as in a circuit switch network. Rather, switching functions are more efficiently distributed throughout the network to handle traffic in multiple locations. The result is a pure IP network that interoperates with the existing circuit-switched public network. Since the filing of Frontier's Complaint, the United States District Court for the District of Minnesota ("Minnesota District Court" or "Court") permanently enjoined an order of the Minnesota Public Utilities Commission ("Minnesota Commission") that would have required Vonage to comply with state regulatory requirements similar to those specified in Frontier's Complaint. 6 In its decision, the Court made it clear that Vonage's VoIP service is an unregulated "information service" that must remain free from state regulation as mandated by federal law. 4 Level 3 is authorized to operate as a facilities-based common carrier and reseller of telephone services, including local exchange services (local dial-tone) within New York State pursuant to its certificate of public convenience and necessity issued by the Commission in Case No. 97-C-2183 on March 6, Following its acquisition of Telverse Communications, the company changed the Telverse name to Level 3 Enhanced Services.
4 Accordingly, while a case-by-case analysis of VoIP services is the correct approach concerning regulatory treatment of VoIP services, the issues raised by Frontier are federal in nature and this Commission may not classify Vonage's VoIP service as anything other than an "information service" not regulated under state law. I. BACKGROUND ON FCC REPORT TO CONGRESS AND FEDERAL REGULATORY TREATMENT OF VOIP SERVICES In its 1998 Report to Congress on Universal Service ^Report to Congress" or "Report"), the Federal Communications Commission ("FCC") concluded that the categories of "telecommunications service" and "information service" contained in the Telecommunications Act of 1996 ("1996 Act") are mutually exclusive and parallel the definitions of "basic service" and "enhanced service" developed in the FCC's Computer Proceedings. 7 The FCC decided that Congress intended to maintain a regime in which information service providers did not become common carriers by providing their service "via telecommunications." 8 In maintaining the regulatory distinction between "information service" and "telecommunications service," the FCC recognized that if information service providers could be considered providers of telecommunications service, then state commissions might be "encourage[d] to... impose common carrier regulation on such providers." 9 Instead, the regulatory distinctions prevented the imposition of disparate "state requirements for telecommunications [that] vary widely from jurisdiction to jurisdiction" on information services. 10 Otherwise, if state regulations were permitted, the FCC concluded that the "result 6 Vonage Holding Corporation v. Minn. Pub. Serv. Comm'n. et al., Civil No (MJD/JGL), Memorandum and Order (D. Minn. Oct. 16, 2003) ("Minnesota Vonage Permanent Injunction Order"). 7 Federal-State Joint Board on Universal Service, Report to Congress, 13 FCC Red ,139 (1998) ("Report to Congress"). i 9 Mat 1148.
5 # would inhibit the growth of these procompetitive services, to the detriment of consumers in the United States and abroad." 11 The Report to Congress presented the FCC with an opportunity to regulate VoIP services as telecommunications services under Title II of the Communications Act of 1934, but it refused to do so. The FCC's action is noteworthy given that concerns about the unregulated status of VoIP and other Internet services were some of the driving forces behind the congressional mandate for the Report. At the time, the Senators who pushed for the Report to Congress to be issued were urging the Commission to find that VoIP and other Internet services should be regulated as telecommunications services. 12 Instead, the FCC considered the existing technology for different types of VoIP services and tentatively determined that certain classes of "phone-to-phone" VoIP services appear to lack the characteristics of unregulated "information services." The FCC stated that the characteristics of these classes of "phone-to-phone" VoIP services include: '..,' : (1) the provider "holds itself out as providing voice telephony or facsimile transmission service"; (2) the provider "does not require the customer to use C[ustomer] P[remi$e] Equipment] different from that CPE necessary to place an ordiriaiy touch-tone call (or facsimile transmission) over the public switched telephone network"; ^ ;^ (3) the customer may "call telephone numbers assigned in accordance with the North American Numbering Plan and associated international agreements"; ' i (4) the provider "transmits customer information without net change in form or f content." 13 In its Report, the FCC refused to make any definitive regulatory determinations concerning any class of VoIP services due, in part, to a lack of details in the record regarding specific types of VoIP services. 14 This determination was consistent with the FCC's historical; approach of evaluating on a case-by-case basis whether a particular service is an information Mat , 49, 51,78,85. Mat1[88.
6 service or a telecommunications service. In coming to this decision, the Commission recognized that regulatory distinctions based on technological differences in VoIP services could quickly be "overcome by changes in technology." 15 Likewise, the FCC acknowledged that definitive regulatory classifications for VoIP services were not appropriate due to the "emerging" and "dynamic" nature of the market. 16 Importantly, although the FCC stated in its Report that any "phone-to-phone" VoIP services that are found to be "telecommunications services" may be subject to Title II regulations, nowhere did the FCC state that under those circumstances, such services must be subject to the same regulations as local exchange carriers and/or IXCs. 17 Rather, the FCC acknowledged the "difficult" and "contested" issues involved with imposing the circuit-switched regulatory regime on VoIP services, such as whether local exchange carriers even have the ability to determine whether particular VoIP calls are interstate or intrastate in nature. 18 Since the release of the Report to Congress, the FCC has declined on several occasions to change its deregulatory approach toward VoIP services. In one instance, US WEST petitioned the FCC for a declaratory ruling that local exchange carriers could impose access charges on VoIP service providers that met the four criteria for "phone-to-phone" VoIP services. The FCC however, has not ruled on that petition (or even seek comment on it), which has been pending for almost five years. 19 In another instance, when the instructions to a new consolidated telecommunications reporting worksheet appeared to indicate that VoIP providers were required to contribute to various federal funds, the FCC refused to accept an assertion by one ILEC that 14 Report to Congress at ^ AT&T Petition for Declaratory Ruling That AT&T's Phone-to-Phone IP Telephony Services Are Exempt from Access Charges, WC Docket No , at 14 (filed Oct. 18, 2002) {"AT&T Petition") (chihg Report to : Congress at ^9\). 18 at 15 (citing Report to Congress at f 91).
7 # * VoIP providers were required to contribute, and deleted all language that appeared to change the FCC's existing regulatory treatment of VoIP services. 20 Additionally, despite pressure to the contrary, the FCC is steadfast in its international advocacy position that VoIP should remain unregulated due to the "significant downward pressure" VoIP services place on international settlement rates and consumer prices." 21 There are three declaratory ruling petitions concerning VoIP services pending before the FCC, 22 and the FCC recently announced its intention to initiate a rulemaking by the end of this year to consider the regulatory issues surrounding VoIP services. 23 In conjunction with this proceeding, the FCC also has indicated that it may hold public forums or hearings on VoIP regulatory issues. 24 In sum, the FCC refuses to regulate VoIP services, although it has had ample opportunity. Recognizing the inherent difficulty in establishing broad classifications for VoIP due to its rapidly evolving nature, the FCC follows a case-by-case approach in determining whether a particular type of VoIP service should be regulated as a telecommunications service. Petition of US WEST, Inc. for Declaratory Ruling Affirming Carrier's Carrier Charges on IP Telephony (filed Apr. 5, 1999) ("f/5 West Petition") Biennial Regulatory Review - Streamlined Contributor Reporting Requirements Associated with Administration of Telecommunications Relay Service, North American Numbering Plan, Local Number Portability, and Universal Service Support Mechanisms, Report and Order, 14 FCC Red 16602,122 (1999). 21 See Report to Congress at If 93 (citing Rules and Policies on Foreign Participation in the U.S. Telecommunications Market and Market Entry and Regulation of Foreign-Affiliated Entities, Report and Order and Order on Reconsideration, 12 FCC Red (1997)); see also Remarks of Commissioner Susan Ness (asprepafed for delivery), Information Session - WTFP (Mar. 7, 2001) ("Commissioner Ness Remarks") (emphasis added). 22 Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an Order of the Minnesota Public Utilities Commission, WC Docket No (filed Sept. 22, 2003);pulver.com Petition for.declaratory Ruling That pulver.com's Free World Dial Up Is Neither Telecommunications or a Telecommunications Service, WC Docket No (filed Feb. 5, 2003); AT&T Petition for Declaratory Ruling That AT&T's Phone-to-PhohelP Telephony Services Are Exempt from Access Charges, WC Docket No (filed Oct. 18, 2002). 23 Comm. Daily, Vol. 23, No. 200 (Oct. 16, 2003). 24 ; see also Comm. Daily, Vol. 23, No. 190 (Oct. 2, 2003).
8 II. # STATES ARE PREEMPTED FROM APPLYING STATE COMMON CARRIER REGULATIONS TO VONAGE'S VOIP SERVICE Frontier's Complaint asks the Commission to find that Vonage is a "telephone corporation" that owns, operates, and/or manages a "telephone line" under Sections 2(17) and 2(18) of the Public Service Law. 25 In support of its request, Frontier relies on the Minnesota Commission's decision to require Vonage to comply with state regulations for carrier services, stating that the Minnesota Commission and its staff considered the same issues raised in Frontier's Complaint in determining that Vonage's VoIP services should be regulated under state law. 26 However, since the filing of Frontier's Complaint, a federal court has permanently enjoined the Minnesota Commission's enforcement of that decision. As explained herein, the Court found serious flaws in Minnesota's legal analysis, including that its refusal to consider preemptive federal law. Because Frontier's Complaint rests on the same reasoning, this Commission should dismiss it. The Minnesota Commission based its decision to regulate Vonage's VoIP service on the "quacks like a duck" argument that also underlies Frontier's Complaint. In an Order released on September 11, 2003, the Minnesota Commission found that IP telephony provider Vonage was offering "two-way communication that is functionally no different than any other telephone service" and thus the company's service constituted "telephone service" as defined by Minnesota law. 27 Expressly declining to consider federal policy, including the FCC's Report to Congress, the Minnesota Commission based its decision on the state definition of "telephone service," considering two factors: (1) the functional similarity between Vonage's service and traditional telephone service; and (2) that Vonage's service "intersects the public switched telephone 25 Fronrier Complaint at Frontier Complaint at 5-6 (citing to the August 13, 2003 Minnesota Commission Staff Briefing Paper on Vonage's VoIP services and the Minnesota Commission Vonage Order that adopted the Minnesota Commission Staff Briefing Paper).
9 network." 28 As such, the Minnesota Commission determined that it had jurisdiction over Vonage's VoIP service offering, and ordered the company to comply with Minnesota statutes and rules applicable to common carriers, including certification requirements and E911/911 obligations. 29 On October 7, 2003, the Minnesota District Court permanently enjoined the Minnesota Commission from enforcing its order. Citing to the FCC's Report to Congress, the Court found that Congress and the FCC had made it clear that 1996 Act required that common carrier regulation be limited to "telecommunications service" providers instead of "information service" providers, and thus "information service" providers could not be subject to carrier regulation merely because they provide their services "via telecommunications." 30 The Court concluded that even though Vonage's VoIP service uses "telecommunication services," the company does not provide a "telecommunications service" because Vonage's VoIP service is not consistent with the second and third criteria set forth by the FCC in the Report to Congress for "phone-to-phone" VoIP services that bear the characteristics of telecommunications services. 31 Contrary to Frontier's description of Vonage's VoIP service, 32 the Court recognized that Vonage's service does not meet the second criteria for "phone-tophone" VoIP service because "rather than using [Plain Old Telephone Service] equipment, Vonage's customers use special Customer Premises Equipment ("CPE") that enables voice communications over the Internet." 33 Vonage customers must use both a modem and a Media Minnesota Commission Vonage Order at 5. Minnesota Vonage Preemption Order at at Frontier Complaint at 3. Minnesota Vonage Permanent Injunction Order at 4. 8
10 m Telephone Adaptor to make a Vonage VoIP call. 34 It cannot be disputed that this equipment is "different from that CPE necessary to place an ordinary touch-tone call." 35 Since this unique CPE that performs IP protocol conversion is required to use the Vonage VoIP service, Vonage's service does not satisfy the second prong of the phone-to-phone VoIP definition. Additionally, while Frontier erroneously describes Vonage's service as performing no net protocol conversion, 36 the Court concluded that Vonage's VoIP service performs a net protocol conversion that permits communications between the Internet and Public Switched Telephone Network ("PSTN") and thus does not meet the fourth criteria for "phone-to-phone" VoIP services. 37 As such, the Court found that Vonage's VoIP service was not a "telecommunications service," but rather an unregulated "information service" that offers "the capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications." 38 Level 3 agrees with Vonage, and the Court, that Vonage's VoIP service is properly classified as an information service. In finding that Vonage is an infonnation service provider, the Court agreed with the FCC that Congress has expressed its desire that information services such as those VoIP services provided by Vonage must not be regulated by state law, which would decimate Congress' mandate that the Internet remain unfettered by regulation. 39 Accordingly, because the Minnesota Commission sought to regulate Vonage's VoIP service - an unregulated information service' under federal law - the Court concluded that the Minnesota Commission's order conflicted with 34 Vonage Holding Corporation v. Minn. Pub. Serv. Comm'n, et a/.. Civil No (MJD/JGL), Memorandum in Support of Vonage Holding Corporation's Motion for Preliminary Injunction, at 3-5 (filed Sept. 24,2003). " ', 35 See Report to Congress at Frontier Complaint at Minnesota Vonage Permanent Injunction Order at at 18 (citing Report to Congress at 1f46).
11 federal law and preemption was required. 40 Given that this recent Court decision applied federal law to classify, and preempt all state common carrier regulation of, the service at issue in this proceeding, this Commission may not regulate Vonage's VoIP service under New York state law. Regardless of whether Vonage may be a "telephone corporation" under Public Service Law, federal law requires that Vonage's VoIP service remain an unregulated "information service" that is free from carrier regulation at the state level. Whether that state regulation is imposed by Minnesota or New York is irrelevant. States cannot require Vonage or any other provider of information services to obtain a certificate in order to provide information services within the state. The Minnesota case demonstrates that this Commission has no choice but to dismiss Frontier's Complaint as beyond the authority and jurisdiction of the Commission. IV. The Commission Should Work With the FCC to Develop National VoIP Policy In comments filed with the FCC on Vonage's Petition, the New York State Department of Public Service advocated that the FCC use a generic rulemaking to resolve the "larger issue of whether disparate regulatory treatment of different technologies is appropriate or sustainable in an increasingly competitive market." 41 Level 3 agrees that the FCC needs to develop a coherent national policy and address the myriad of issues concerning what, if any, regulation should apply to VoIP services. Because of the difficulties inherent in segregating intrastate from interstate VoIP services, Level 3 encourages this Commission to work with the FCC as it develops that national policy. However, this Commission should not use this docket as the basis for developing state views on VoIP issues. If the Commission is interested in exploring other aspects of VoIP services, it should open a separate workshop. This proceeding concerns a specific 40 at
12 complaint against a specific service. The Minnesota District Court has already resolved the question of whether Vonage's service is subject to state common carrier regulation. It is not. V. CONCLUSION Frontier's Complaint asks the Commission to do what federal law prohibits apply state common carrier regulation to Vonage's VoIP service. As the Minnesota District Court stated, Vonage's VoIP service is an "information service" under federal law and thus must remain free from burdensome state carrier regulation. The Commission has no choice but to dismiss Frontier's Complaint as any decision to the contrary is preempted by federal law. Respectfiilly submitted, LEVEL 3 COMMUNICATIONS, LLC Greg L. Rogers [J Director - State Regulatory Affairs 1025 Eldorado Boulevard Broomfield, CO (Tel.) (720) (Fax) (720) Dated: October 31, Vonage Holdings Corporation Petition for a Declaratory Ruling Concerning an Order of the Minnesota Public Utilities Commission, WC Docket No , New York State Department of Public Service, 2 (Oct: 27, 2003) vl 11
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