VoIP Regulatory Update

2. VoIP Regulatory Update Ronald W. Del Sesto, Jr. Senior Associate Swidler Berlin LLP (202) 945-6923 rwdelsesto@swidlaw.com

3. Outline • The Voice over Internet Protocol E911 Order • The Communications Assistance for Law Enforcement Act Order • Fees, Surcharges and Taxation • Access to Networks • Proposed Federal Legislation

4. VoIP E911 Order • Applies to “interconnected VoIP providers”: • Real-time two-way voice communications; • Requires a broadband Internet connection; • Requires specialized CPE • Permits users to originate and terminate calls to and from the PSTN

5. VoIP E911 Order (cont’d) • Three Distinct Requirements: • July 29: “interconnected VoIP Providers” Must Meet Customer Notification Requirements (i.e., provide customer notifications, obtain affirmative acknowledgments, distribute warning labels). • November 28: IVPs Must Meet E911 Service Requirements (911 calls must be routed through selective routers to the appropriate PSAPs, transmit ANI and “registered” location information). • November 28: IVPs Providers Must File an E911 Compliance Report • Motion for Emergency Stay of E911 Service Denied • Appeal is Continuing, final briefs due April 13, 2006

6. VoIP E911 Order (cont’d) • Petitions for Reconsideration • CompTel’s Petition focuses on enterprise VoIP providers, specifically requesting clarification that interconnected VoIP providers providing non-nomadic T1 equivalent services that already include E911 need not comply with the obligations set out in the FCC's VoIP E-911 Order. • The NENA/VON Coalition Petition requested clarification on a variety of issues including, (1) Master Street Address Guide validation, and (2) the use of contractual limitations disallowing the customer from moving their VoIP service. • T-Mobile’s Petition focuses on obtaining ALI information automatically, as opposed to the requirement that customers provide such information.

7. CALEA Order • The Communications Assistance for Law Enforcement Act (CALEA) does not enhance law enforcement’s ability to eavesdrop; purpose is for law enforcement to maintain its ability to engage in lawful intercepts • September 23, 2005, FCC releases CALEA Order and NPRM, effective November 14, 2005. VoIP providers and facilities-based broadband Internet access providers must comply with CALEA requirements by May 14, 2007. • Facilities-based providers of broadband Internet access must comply with CALEA regardless of their classification as an “information” service under the Telecommunications Act.

8. CALEA Order (cont’d) • The FCC determined that CALEA applies to “interconnected VoIP services” meaning those VoIP services that: (1) enable real-time, two-way voice communications; (2) require a broadband connection from the user’s location; (3) require IP-compatible customer premises equipment; and (4) permit users to receive calls from and terminate calls to the PSTN. Also, a VoIP provider is subject to CALEA if it offers the capability for users to receive calls from and terminate calls to the PSTN, even those VoIP services that do not involve the PSTN regardless of how the interconnected VoIP provider facilitates access to and from the PSTN, whether directly or through arrangements with a third party.

9. CALEA (cont’d) • Three separate appeals filed: • ACE (Colleges and Universities) • Industry & Public Interest Groups (led by CDT) • American Civil Liberties Union • Motion for Stay Filed with the FCC pending review by the U.S. Court of Appeals for the D.C. Circuit • Motion for Stay abandoned and the appellants and the FCC agreed to an expedited briefing schedule

10. CALEA (cont’d) • The appeal does not challenge the right of law enforcement to intercept Internet communications; rather, challenges the extension of CALEA to VoIP and facilities-based broadband Internet access services. • Appellants believe that Congress should step in and craft a different approach for Internet communications.

11. Fees, Surcharges and Taxation • 911 Fees and Surcharges • Relevant jurisdiction (state or municipality) may assess 911 fees or surcharges on providers of telephone service • Fees are not insubstantial – can exceed $1 per month per “line” • Query – are these 911 fees and surcharges applicable to VoIP? • State / Local Taxes • If nexus established, VoIP provider will have to collect and remit taxes in all jurisdictions where nexus exists Telecom taxes arguably inapplicable to VoIP. Certain taxing authorities have taken the position that telecom taxes are applicable to VoIP (e.g., Illinois) or are amending statutes to include VoIP (e.g., Pennsylvania). • Amendments being made to extend telecom taxes to VoIP, so may have to pay in the future where nexus exists

12. Fees, Surcharges and Taxation (cont’d) • Universal Service Fund (USF) • State Universal Service Fund • Federal Universal Service Fund • VoIP providers contribute indirectly, i.e., as end users • Some states, like New Mexico, seek to extend state USF to VoIP • FCC considering new metric to calculate USF. Currently based on revenues from telecommunications services. May transition to system linked to telephone numbers.

13. Access to Networks • Port Blocking • February, 2005, Vonage filed an informal complaint concerning “port blocking” with Madison River. • March 3, 2005, the FCC entered into a “Consent Decree” with Madison River. • Query whether FCC would have same authority over a cable or wireless provider. • Net Neutrality Policy Statement • September 23, 2005, the FCC released a policy statement expressing its position that consumers should have access to the Internet and Internet-based services. • Consumers should be able to access content, connect equipment and run applications of their choice. • Does not have the force of law.

14. Access to Networks (cont’d) • Brand X Decision – July, 2005, Supreme Court finds that cable modem service is an information service. • Wireline Broadband Internet Access Service Proceeding -- September, 2005 – FCC finds that DSL service is an information service subject to lighter regulation. • DSL Preemption Order • March, 2005, FCC declares states cannot force ILECs to untie DSL services from telecommunications services. • Opens a proceeding to determine whether this is a discriminatory practice. Meantime, tying is allowed.

15. Access to Networks (cont’d) • Merger Conditions Imposed on SBC/AT&T and Verizon/MCI • On October 31, 2005, the FCC approved the mergers of SBCwith AT&T and Verizon with MCI. • Within one year, the merged companies will be required to offer “naked” DSL. Naked DSL condition sunsets 2 years from the “implementation” date (i.e., the date from when the merged entities can offer naked DSL in 80% of their ADSL-capable premises within a particular state) • The merged companies committed, for two years, to conduct business in a manner that comports with the FCC’s September 23, 2005 net neutrality policy statement on the Internet and Internet-based services. • FCC will require the merged companies, for three years, to continue settlement-free peering with as many providers of Internet backbone services as they currently peer with. • California will require SBC to offer stand-alone DSL as of February 28, 2006 and Verizon must offer beginning January 31, 2006.

16. Proposed Federal Legislation • Overview • House: Broadband Internet Transmission Service, or “BITS” • Broadband Investment and Consumer Choice Act (Ensign Bill) • Senate: IP- Enabled Voice Communications and Public Safety Act of 2005

17. Proposed Federal Legislation (cont’d) • House Broadband Internet Transmission Service (“BITS”) bill • Registration – Would require VoIP providers to file registration statement “within 30 days after commencing to offer BITS,” • Net Neutrality – Would require providers to not block, impair, or interfere with the access to, or use of any lawful content, application or service. • Interconnection – Would require parties to negotiate rates, terms, and conditions of exchange of traffic shall be negotiated by the parties, subject to the remedies provided by the Act. • 911 and E911 - Would bifurcate treatment of VoIP services depending on whether the service is a “send and receive provider” (must provide E911) or a “receive-only” provider (must provide only basic 911, notify subscribers of unavailability of E911). • Number Portability - VoIP providers would get direct access to numbers, must provide number portability in accordance with FCC regulations.

18. Proposed Federal Legislation (cont’d) • Broadband Investment and Consumer Choice Act (Ensign Bill) • Preempt state and local regulation of telecom and cable, and eliminate many of the requirements in Title I (general), Title II (common carrier), and Title VI (cable systems) of the existing Telecom Act. • Would retain provisions dealing with enforcement, CALEA, and access for the disabled, among other provisions. • It would be unlawful to deny a consumer access to any content provided over broadband facilities unless the content is illegal, denial is authorized by Federal or state law, or such content is inconsistent with the service plan. A broadband service provider would not be able to prevent a customer form using VoIP provided by a competitor. • All communications service providers using telephone numbers would be required to provide number portability within 5 days of the request. • The FCC would be prohibited from taking any action to impede the development of seamless mobility, which is defined as the ability of a consumer to move easily and smoothly among Internet-protocol enabled technology platforms, facilities and networks.

19. Proposed Federal Legislation (cont’d) • Senate IP- Enabled Voice Communications and Public Safety Act • Would codify VoIP E911 requirements, however would require such requirements to be “technologically and operationally feasible” and to have an appropriate transition period. • Would provide for waivers of up to 12 months (per waiver period) of E911 requirements in certain circumstances for a period of 4 years • Would mandate that VoIP providers have access to ILEC 911 components • Subject to certain conditions, would permit states to impose 911 fees on VoIP providers. • Would allow for grandfathering of current VoIP subscribers. • Would provide liability protection similar to those granted to telecom providers in the provision of 911 services.

20. Glossary • ANI – Automatic Number Identification (call-back information) • ALI – Automatic Location Information • CALEA – Communications Assistance for Law Enforcement Act • Enhanced 911 – emergency service where the caller’s telephone number and location information are automatically delivered to the emergency operator. • ILEC – Incumbent Local Exchange Carrier • Interconnected VoIP Provider (IVP) – term used by the FCC to define what kind of VoIP provider is subject to E911 obligations. Also used by the FCC to define which type of VoIP providers are subject to CALEA. An IVP is a VoIP service that (1) allows real-time two-way voice communications; (2) requires a broadband Internet connection;(3) requires specialized CPE; and (4) permits users to originate and terminate calls to and from the PSTN. • PSAP – Public Safety Answering Point • PSTN – Public Switched Telephone Network • VoIP – Voice over Internet Protocol