The Net Neutrality Decision And The IP Transition. What Happens When You Cant Make Phone Service Wor
The Net Neutrality Decision And The IP Transition. What Happens When You Cant Make Phone Service Wor
The Net Neutrality Decision And The IP Transition. What Happens When You Cant Make Phone Service Wor

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    As I noted in my first post-Verizon v. FCC blog
    , the Net
    Neutrality decision both dramatically expanded and dramatically limited the
    FCC’s authority. This has a large number of immediate implications for the
    FCC’s ability to conduct its work. While this ripples across just about every
    area of FCC jurisdiction, it has its most immediate impact on the transition of
    the phone system to all IP

    At a glance, the biggest losers are cable operators (except
    Comcast), CLECs, and anyone else that wants mandatory interconnection or cares
    about call completion. That means resolving the rural call completion problem
    just became harder, since VOIP providers cannot, now, be subject to the duty to
    complete calls. The most recent FCC Order, which imposes reporting
    requirements is still OK. But the original declaratory ruling requiring
    IP-based providers to actually complete calls is probably a dead letter.

    On the other hand, the decision potentially empowers the state
    Public Utility Commissions (“PUCs”), or gives the FCC power to delegate to
    state PUCs, the ability to override the laws passed in 27 states that prohibit
    any regulation of IP based services, and to override limits on municipal

    Immediate Impacts:
    Rural Call Completion, Service Blocking.

    As the Court explained in the Net Neutrality decision, when
    the FCC decides to put something in the “Title I” Information Services box, the
    one thing the FCC can absolutely never do is make it work like the phone

    Problem: What if it is the phone system?

    As regular readers know, we have spent a lot of time here at
    PK talking about [the transition of the phone system] to an all IP (Internet
    protocol) system. In particular, we have highlighted the fact that the FCC has
    declined to declare that “voice-over-IP” (VOIP) is a Title II telecom service. Instead,
    the FCC has pretty much regulated it through ancillary authority and hoped no
    one noticed.

    So what happens now? In certain ways, like privacy and other
    forms of consumer protection, the FCC has expanded authority. For example, the
    FCC now has clear authority to extend slamming and cramming rules to IP-based

    On the downside, however, the FCC can no longer require VOIP
    providers to complete phone calls, can no longer prohibit VOIP carriers from
    blocking calls, and can no longer impose “carrier of last resort” (COLR) on
    IP-based service providers.  I’m also
    somewhat doubtful that the FCC can regulate the inter-carrier compensation rate
    (ICC) of VOIP providers, so the ICC Reform Order of 2011 (especially its
    decision to zero out ICC and force carriers to use “bill-and-keep”) probably
    needs re-examination.

    Since all of these have already come up as potential
    problems, the inability of the FCC to solve them (other than by classifying
    VOIP as Title II) is problematic (unless the FCC classifies VOIP as Title II).

    Problems in Action

    Lets give a few examples of why this matters. In 2007,
    AT&T and several other carriers decided
    to block calls to
    over a dispute about the rates
    paid under the rather arcane rules of telephone call compensation. The FCC issued
    an Order
    saying that phone companies are not allowed to engage in such
    self-help and absolutely, positively MUST put calls through to whoever
    customers dial. Because—wait for it – they are Title II common carriers.

    Post IP transition (and absent reclassification as Title
    II), could the FCC issue such an Order? No. Because, according to the D.C.
    Circuit, requiring a provider to complete a call (aka “no blocking”) is “the
    essence of common carriage.”

    The FCC issued a similar
    order in 2012
    to address the problem
    of rural call completion
    . In fact, the FCC’s entire campaign to address the
    problem of rural call completion is grounded in Title II common carrier
    authority and the duty to serve everyone. As the Court explained in the Net
    Neutrality decision, this is precisely
    the kind of thing you CANNOT DO to a non-Title II common carrier service.

    So, post-IP transition, absent reclassification, the FCC
    would be unable to ensure that all calls go through when you dial your 10-digit
    phone number. They would not be helpless. They could – as they can with net
    neutrality – require companies to disclose if they are blocking calls or
    otherwise “managing” traffic in a way that degrades rural traffic. As everyone
    in rural America (and the folks at can tell you, this
    has been highly effective at curbing the problem.

    As always, I am struck by the number of people who insist
    that such things would never happen when they already happen. The usual
    response to evidence that the problem already does exist is to observe that it
    doesn’t happen often (i.e., it
    doesn’t bother me), and therefore we don’t need a rule – conveniently
    overlooking the fact that the reason these things don’t rage out of control is
    because we actually have a rule that deals with them effectively.

    Finally, as the fact that phone companies blocked the
    popular service in 2007 and that VOIP providers continue
    to use methods that degrade service to rural America, customer backlash is not
    a particularly good safeguard against this sort of behavior. Heck, we are
    talking about companies
    with the lowest customer satisfaction rating in America
    . As demonstrated
    graphically in
    this South Park episode
    , pissing off customers is practically their
    business model.

    No More Carrier of
    Last Resort

    Another casualty of the disappearance of Title II common
    carriage is the idea of “carrier of last resort” (COLR). For 100 years, we have
    considered phone system so basic that you have an absolute right to use it. As
    we noted back a few years ago when the BART messed with the cell system, this
    prevents anyone from just cutting you off because they don’t like you. More
    importantly, even if you live in an area that is geographically hard to serve,
    and therefore expensive to provide, the phone company has to bring you service.

    Right now, the FCC requires a phone operator to serve an
    entire area. As states eliminate their own COLR requirements (and about 15 have
    already done so), the ability of the FCC to require carriers to serve everyone
    whether or not they want to serve them becomes increasingly important.

    But this doesn’t apply to Title I services. To the contrary,
    the requirement to “serve the public indiscriminately” is one of the core
    obligations of common carriage. So after the IP transition, the FCC will have
    no authority to require carriers to provide COLR.

    Again, lets consider a real life example. The FCC has before
    it Verizon’s request to discontinue common carrier service in Mantoloking, NJ
    and replace it with an unclassified service called “Voice Link.” Verizon points
    to the presence of Comcast, which offers VOIP in Mantoloking, NJ, as a
    reasonable wireline alternative.

    But Comcast, as Title I provider, has no obligation to serve
    everyone who asks. If Comcast kicks you off its network for being a bandwidth
    , they have no obligation to give you phone service. If you build a new
    house somewhere too expensive for Comcast to pull a line, they have no
    obligation to build out to you just to give you phone service. If you cancel
    your Comcast cable and/or broadband, they have no obligation to sell you voice.
    And as a consequence of yesterday’s decision, the FCC cannot do anything about

    Yes, cell services are still common carriers. But if you
    don’t have good coverage in your home, that doesn’t help.

    If the FCC grants Verizon’s request to discontinue phone
    service in Mantoloking we would, for the first time in the United States for
    100 years, have a place where you have no legal guarantee of getting wireline phone
    service. This is, of course, only a problem if you happen to be the person
    denied service. For most people, this probably won’t be an issue.

    But to the extent the FCC takes seriously its responsibility
    to provide phone service “to all Americans,” it needs to recognize it will no
    longer have the authority to do that without reclassifying VOIP as Title II.

    State Laws Barring
    Regulation of IP-Based Services.

    On the bright side, it appears that the army of lobbyists
    pushing through laws actively preventing states from regulating IP-based
    services or prohibiting them from offering municipal broadband (or voice)
    wasted their money. As the decision explains, Section 706 delegates power both
    to the FCC and “to each State commission with regulatory jurisdiction over
    telephone service” the same broad powers to encourage broadband availability
    and infrastructure build out.

    Since Section 706 is a federal law, it preempts state law.
    Since the law delegates this power to the “state commission with regulatory
    jurisdiction over telephone service,” the delegation applies directly to the
    PUC and the state legislature and cannot remove it. At the very least, the FCC
    may delegate authority if it so chooses.

    Certainly this has limits, as noted above. State PUCs could
    not impose COLR obligations on IP-service providers or require IP-based service
    providers to complete calls – as noted above. But they can use this authority
    to impose quality of service requirements and other forms of consumer
    protection. Such mandates could extend not merely to VOIP, but to broadband
    access service as well.

    Where Does This Leave
    The Phone Transition?

    First, let me note that classifying VOIP as Title II is not
    the same as classifying broadband access as Title II. What the two have in
    common is a court decision that says “you are either information service or
    telecom service – choose.” In the case of VOIP, the FCC has hemmed and hawed
    and generally delayed making a choice for the last 10 years. Barring an appeal
    from someone that changes this opinion, the luxury of kicking this can down the
    road has ended.