WhyDom

On April 9, 2008, the FCC released an order, in an obscure enforcement bureau matter, declaring that a provider’s VoIP peering service was a “telecommunications service” subject to Title II regulation.   In the order, In the Matter of Compass Global Inc., the Commission used its rationale of the 2004 AT&T IP-in-the-Middle calling card decision to find that Compass Global’s offering of VoIP peering to other wholesale VoIP providers is a “telecommunications service.”    In an order lacking in clarity and short on facts, the FCC leapt beyond its decade-old position of not declaring VoIP to be either an information service or a “telecommunications service.”

The Compass Global web site indicates that the company offers a “Next generation VOIP Peering Center.”  VoIP peering is a service that allows VoIP providers to meet at the provider’s peering point and exchange VoIP and data traffic.   Companies such as Compass Global and Arbinet provide the service.   VoIP peering lowers the cost for VoIP companies by eliminating the need to access the public telephone network both domestically and internationally.  VoIP calls can be provided end-to-end over the Internet.   The call can start at a VoIP access device with the end-user, be carried by a VoIP provider to a VoIP peering provider, then be delivered to another VoIP provider at the peering point often with the peering provider converting the protocol to allow communication between the VoIP providers.  The call is then carried by the second VoIP provider either to it’s own end-user on a VoIP device or to a PSTN which delivers the call to a PSTN end-user.  The VoIP peering provider is generally unaware of the identity or location of the originating or terminating end-user or whether the terminating VoIP provider then terminates the call to a PSTN.    The Compass Global order describes the Compass VoIP peering as: “reselling network capacity to communications companies who transmit their international voice and data calls over the Compass Internet Protocol network” and which is “only offered wholesale and, as an exclusively IP-enabled service.”

As rationale for the Commission’s finding the Compass VoIP peering service to be a Title II “telecommunications service,” the Commission attempted to compare the VoIP peering service with the AT&T calling card service described in the 2004 and 2006 AT&T prepaid calling card “IP-in-the-Middle” orders – truly an effort to put a square peg in a round hole.  The 2004 prepaid calling card “IP-in-the-Middle” order described AT&T’s “IP-in-the-Middle”service:

AT&T’s specific service consists of a portion of its interexchange voice traffic routed over AT&T’s Internet backbone.   Customers using this service place and receive calls with the same telephones they use for all other circuit-switched calls.  The initiating caller dials 1 plus the called party’s number, just as in any other circuit-switched long distance call.  These calls are routed over Feature Group D trunks, and AT&T pays originating interstate access charges to the calling party’s LEC.   Once the call gets to AT&T’s network, AT&T routes it through a gateway where it is converted to IP format, then AT&T transports the call over its Internet backbone.  This is the only portion of the call that differs in any technical way from a traditional circuit-switched interexchange call, which AT&T would route over its circuit-switched long distance network.   To get the call to the called party’s LEC, AT&T changes the traffic back from IP format and terminates the call to the LEC’s switch through local business lines, rather than through Feature Group D trunks.

The 2004 AT&T “IP-in-the-Middle”order used a three prong test for determining that AT&T’s calling card service using VoIP in the middle was a “telecommunications service”:

The Commission found that “an interexchange service that:  (1) uses ordinary customer premises equipment (CPE) with no enhanced functionality; (2) originates and terminates on the public switched telephone network (PSTN); and (3) undergoes no net protocol conversion and provides no enhanced functionality to end users due to the provider’s use of IP technology” is a telecommunications service.

The “IP-in-the-Middle” three prong test originated from the 1998 Stevens Report which tentatively concluded that “phone to phone” IP service was a “telecommunications service” if the provider met the following:

1) it holds itself out as providing voice telephony or facsimile transmission service; (2) it does not require the customer to use CPE different from that CPE necessary to place an ordinary touch-tone call (or facsimile transmission) over the public switched telephone network; (3) it allows the customer to call telephone numbers assigned in accordance with the North American Numbering Plan, and associated international agreements; and (4) it transmits customer information without net change in form or content.

The Compass Global order also relied on the 2006 AT&T Calling Card Order where the Commission rejected AT&T’s claim that it was providing VoIP service merely because AT&T did not use 1+ dialing for its calling card service.  The Compass Global order injected confusion into the law by reading the 2006 AT&T calling card order as defining any VoIP computer-to-computer call as a “telecommunications service”:

[A] finding that the services Compass provides are telecommunications services regardless of the fact that IP is used for the entirety of the transmission service is consistent with the Commission’s prior ruling in the 2006 Prepaid Calling Card Order.

Yes, IP may be used for the entirety of a call but that alone would make VoIP Title II “telecommunications service” offerings .   There are two other factors that distinguish a Title I VoIP service from a Title II “telecommunications service.”  These factors were not   addressed by the Commission in the Compass Global order but were clearly discussed and applied by the 2004 and 2006 AT&T calling card orders:  The AT&T calls originated with end-users making calls on a PSTN providing “telecommunications services” and terminated the calls on a PSTN providing “telecommunications services.”  Also, the AT&T calling card orders are clear in their determination that the calling card end-users were using “ordinary CPE.”  Unlike the AT&T “IP-in-the-Middle” orders, the Compass Global order did not unequivocally find that an end-user accessing Compass’s wholesale VoIP peering call a) used ordinary CPE and b) originated the call on a PSTN and terminate the call on a PSTN.     In determining whether the transmission of a call is a “telecommunications service” ascertaining beyond any doubt that the call uses or does not use the PSTN is imperative.   The closest the Commission got to the PSTN issue was a statement, not a factual finding, that Compass did “not claim” that “end users place or receive voice calls any differently because of the IP portion of the service than they would if using traditional circuit-switched service.”   There was no discussion in the order regarding whether the VoIP calls actually originated from or terminated to a PSTN.   Also, the Compass Global order did not maintain that the “end-users” — who were VoIP wholesale providers interconnecting over the Internet with the Compass peering router or “router-to-router” — were using “ordinary CPE with no enhanced functionality.”  This CPE factor, one which every “unregulated” Title I VoIP provider using Internet ATA devices and VoIP phones is well aware of, was not discussed by the order.

Also troubling was that the Commission appeared to deliver the order without doing enough due diligence or gathering sufficient facts to determine what Compass Global was actually providing.   Reading the order gives the impression that the Commission does not even understand what VoIP peering is.   Sentences such as the following indicate that the Commission took a “opt-out” method of deducing the facts rather than actually understanding how the calls were being transmitted from one end-user to the other: “Compass also does not claim end users place or receive voice calls any differently because of the IP portion of the service than they would if using traditional circuit-switched service” and “Compass does not claim its service undergoes any net protocol conversion.”   Clearly, the Commission could have received affirmative or negative answers to these key factual questions before issuing such a order with broad reaching consequences.

Several questions arise from the issuance of the Compass Global decision.   Did the Commission intend to use Compass Global  to bring Title II regulatory regime to the VoIP peering industry?   What distinguishes VoIP peering from Tier 1 or 2 Internet peering of VoIP providers on  the “public” Internet?   Clearly the Commission did not intend that the Compass Global order would cover Tier 1 or 2 Internet peering providers routing the VoIP calls of VoIP companies interconnecting at the Internet’s major peering points.

As to why the Commission would release an order that could have a wide impact upon the nacesent VoIP peering industry or, feasibly, an impact on Internet providers routing VoIP calls through their routers’ is anyone’s guess.    It is possible  that the order was released without being seriously vetted through the Commission.  On the other hand, if the Commission staff carefully reviewed the Compass Global order and intended to send a message to any Internet peering providers focused carrying VoIP traffic, the Commission would have better served the industry by providing clear logic and definitive facts.