Posted by Barlow Keener

In its first order after the resignation of Chairman Martin and departure of Commissioner Tate, the three remaining commissioners at the FCC, Copps, Adelstein, and McDowell, denied on January 21, 2009, a Petition for Forbearance filed by Feature Group IP.   Feature Group IP requested in its October 23, 2007 Petition that the FCC forbear from applying access charges on  “voice-embedded Internet communications.”   One may ask what is the difference between “voice-embedded Internet communications” and VoIP.  Also, what is the significance of the FCC’s denial of Feature Group IP’s forbearance request? 

Feature Group IP’s Petition appears to attempt to create a new VoIP niche category called “voice-embedded Internet communications.”  These are communications, or Internet voice calls, that originate somewhere on Internet such as from Skype client or an X-Box, then terminate to a CLEC from an Internet provider without assigned 10-digit telephone numbers. The Internet provider pays the CLEC to terminate the communications. These communications are then delivered from the CLEC to the local ILEC, like AT&T.  “Voice-embedded Internet communications” are distinguished in the Petition from VoIP calls, as VoIP calls are those Internet originated calls that have assigned 10-digit numbers and are associated with fixed geographical locations.  

Feature Group IP asserts that ILECs, in particular AT&T, are charging the CLECs intrastate access, typically the highest intercarrier compensation rate, for these calls even though there is no information regarding the originating geographical location of the “communication.”   The terminating “communication” could have originated in the same ILEC local wire center in which it terminated or it could have originated in Germany.   The only information the CLEC has, and can deliver to the ILEC, is that the communication/call was delivered to the CLEC by an Internet provider like Skype and that the call is intended to be delivered to the ILEC’s local subscriber.  Feature Group IP claims that imposing intrastate access fees on these communications not containing originating 10-digit numbers is improper because the “voice-embedded” communication is actually an “Enhanced Service” subject to the FCC’s Enhanced Service Exemption which exempts Enhanced Services from access charges.

The FCC, in its rationale for denying the request, explained that the FCC denied on July 26, 2007, a similar forbearance request filed by Core Communications, Inc.  The Commission explained that in Core, the FCC found

that section 251(g) ‘explicitly contemplates affirmative Commission action in the form of new regulation’ before the access regulation preserved by section 251(g) could be eliminated or replaced and, as a result, ‘the section 251(b)(5) reciprocal compensation regime would not automatically, and by default, govern traffic that was previously subject to section 251(g).’ The Commission concluded [in Core] therefore that forbearance from section 251(g) would result in no regulation and that the petition failed to meet the statutory forbearance criteria..

The Commission  applied, in the Feature Group IP order, the same rationale as in Core by finding that if the FCC granted forbearance, the result would be “a regulatory void.”   The Commission explained that the Feature Group IP request was in the form of a request for a declaratory order.  The FCC determined that it is not obligated to issue a declaratory order to find that “voice-embedded Internet communication” calls are subject to the ESP Exemption from access charges and, as a result, automatically subject all these niche VoIP calls  to a lower-priced reciprocal compensation rate  which is imposed on all local calls between the CLEC and ILEC.   Most significantly, the new Commission pointed back to the November 5, 2008 (remember the day-after-the-election FCC drama?) Notice of Proposed Rule Making for comprehensive Intercarrier Compensation as the appropriate proceeding for resolving the VoIP access issues raised by Feature Group IP. 

What is the significance of the Commission’s first order? 

First the Commission is required to act timely on a forbearance request or the request is deemed granted as a matter of law.  Recall that the request by Verizon for forbearance was deemed granted (a good blog by Susan Crawford on the Verizon and AT&T forbearance) on March 19, 2006, by law (Section 10(c)) without a decision, vote, or public discussion by the Commission. 

In addition, the FCC’s first order of the new regime may be a prognostication that this FCC’s first big house-keeping task will be to do the tough work of reforming intercarrier compensation.  By addressing the VoIP issues raised by Feature Group IP  in a comprehensive intercarrier compensation reform order, the FCC will not be issuing orders that are piecemeal.  The future comprehensive reform order may not satisfy every carrier and constituency but with the right amount of transparency and fairness, a well-crafted and well-thought through order has the potential to deliver to the rural ILECs, RBOCs, CLECs, and VoIP providers an access system that will work for all and, I am sure the FCC hopes, can be upheld on appeal.  

Feature Group IP may in the end also get what it is seeking, but it may not happen this month.