Public Utility Commission s15

PENNSYLVANIA PUBLIC UTILITY COMMISSION Harrisburg PA 17105-3265

Public Meeting held April 15, 2004 Commissioners Present:

Terrance J. Fitzpatrick, Chairman Robert K. Bloom, Vice Chairman Glen R. Thomas Kim Pizzingrilli Wendell F. Holland

Investigation into Voice over Internet Docket No. M-00031707 Protocol as a Jurisdictional Service

BY THE COMMISSION:

Before the Commission for disposition are the Comments and Reply Comments to a Commission-initiated investigation into the legal and policy concerns involving Voice over Internet Protocol (VoIP) in Pennsylvania. VoIP is a term of art that refers to a technology that provides an instantaneous or slightly-delayed real-time transmission of voice, data, and audio, or a combination thereof, in a digital format using Internet Protocol (IP) data packet transmission.1

1A packet is the fundamental unit of information transmitted over a digital network or over a digital communication link. With data packets, data is broken up in small and uniform packets, numbered, and transmitted. Because each packet is numbered, each packet can travel different paths through the network. Once the packets arrive at the receiving end, the packets are realigned in numerical order, and the original data is extracted in the original format. With VoIP, human voice and data are digitalized before the data packets are formed and sent. Then, at the destination, the VoIP packets are unpacketized, and the digital data stream is reconverted into voice and data. VoIP data packets use transmission control protocol or IP, like the Internet, as the transport mechanism to reach their destination. VoIP is digitized although VoIP can be reduced to analog transmission, the predominant technology used for voice communication over the telephone, using Digital-to-Analog Conversion equipment and technology. Conversely, analog transmission can be reformulated to digital transmission using Analog Digital Converter (“A to D” Converter) equipment and technology. See Newton’s Telecommunications Dictionary, (14th Ed: 1998), pp. 49 and 220. INTRODUCTION AND SUMMARY

In our May 5, 2003 Investigation Order (May Order), we stated that the development of VoIP raised numerous issues for regulators. The issues identified for consideration in the May Order included, but were not limited to, the definition of VoIP, the provider and end user experience with VoIP, the Commission’s jurisdiction to regulate VoIP, the extent of Commission jurisdiction over VoIP and the Federal Communications Commission’s authority to regulate VoIP. The Commission asked for Comments and Reply Comments from all interested parties. The Commission received filings from public interest advocates2, private trade associations3, incumbent local exchange carriers (ILECs)4, competitive local exchange providers (CLECs)5, Interexchange carriers (IXCs)6 and VoIP providers.7 The Commission thanks all of the participants for their input. At this time, however, we conclude that it is more prudent for the Commission to refrain from making jurisdictional conclusions regarding VoIP and to not impose any regulatory burdens on VoIP providers.

VoIP is an emerging technology that allows real-time audio (i.e., voice, data or voice and data), instantaneously or slightly-delayed, to be transmitted and received in a digital format using Internet Protocol (IP) data packet transmission. A packet is the fundamental unit of information transmitted over a digital network or over a digital communication link. IP is standard describing software that keeps track of the Internet

2 Office of Small Business Advocate (OSBA) and Office of Consumer Advocate (OCA).

3 Pennsylvania Telephone Association (PTA), Pennsylvania Cable and Telecommunications Association (PCTA) and the Voice on the Net Coalition (VoIPNET).

4 Verizon and Verizon North (collectively North), North Pittsburgh and Sprint Communications-United Telecommunications (Sprint-United).

5 AT&T Wireless and Level 3 Communications.

6 MCI WorldCom and AT&T Telecommunications.

7 Vonage Holdings, Inc. (Vonage), Net2Phone, Inc. (Net) and Comcast Cable (Comcast).

2 work addresses for different nodes, routes outgoing messages, recognizes incoming messages and allows a packet to traverse multiple networks on the way to its final destination.8

We must determine whether it is appropriate at this time to decide jurisdictional and policy issues. The policy issues include: (1) the definition of VoIP; (2) the end-user and provider’s experience with VoIP; and (3) a VoIP provider’s obligations under state law. State law obligations include Telecommunications Relay Service (TRS), 911 Service, state Universal Service Fund obligations, taxes, assessments, numbering, and other obligations.

On the threshold question of jurisdiction, there are two views. The opponents of state jurisdiction claim that VoIP is not a “message or communication” under Section 102 of the Public Utility Code. 66 Pa.C.S. §102. They claim that VoIP is an “enhanced” service and cite Second Computer Inquiry, Final Decision, 77 F.C.C.2d 384 (1980); modified on reconsideration, 84 F.C.C.2d 50 (1980); further modified on reconsideration, 88 F.C.C.2d 512 (1981); aff’d sub. Nom Computer and Communications Industries Association v. FCC, 693 F.2d 198 (D.C. Cir. 1982), cert denied 461 U.S. 938 (1983) and Third Computer Inquiry, Phase II, Memorandum and Opinion on Reconsideration, 3 F.C.C. Rcd. 1150 (1988)(Computer Cases) in support of that proposition.9 They also

8 Newton’s Telecommunications Dictionary, (14th Ed: 1998), p. 383.

9The Computer Cases refers to a series of FCC and federal court decisions on telecommunications matters that preceded enactment of the Telecommunications Act of 1996 (TA-96). The two court decisions are Computer I and Computer II. In Computer I, the FCC divided federal interstate communications into two categories. The categories were “data processing,” which was deregulated as an ancillary service under Title I of the 1934 Act, and “communications” which was subject to regulation as a common carrier under Title II of the 1934 Act. The federal court affirmed the rules but the FCC’s subsequent undertaking of Computer II superceded the FCC’s implementation because the categories were deemed obsolete by the time the court issued its legal determination. In Computer II, the FCC re-divided federal interstate jurisdiction into “Basic” service, which remains subject to regulation under Title II of the 1934 Act, and “Enhanced” service, which was deregulated as an ancillary service under Title I of the 1934 Act. Basic services were subject to common carrier regulation under Title II of the Federal Communications Act of 1934 (the 1934 Act) whereas “enhanced” services were classified as ancillary services under Title I of the 1934 Act and deregulated because of the competitive marketplace. The federal court affirmed the FCC’s Computer II decision. See Notice of Inquiry, In re Regulatory and Policy Problems Presented by the Interdependence of Computer and Communication Services and Facilities, 7 F.C.C.2d 11 (1966); In Re Regulatory and Policy Problems Presented by Interdependence of Computer and Communication Services and Facilities, 28

3 state that VoIP is an “information service” and not “telecommunications” or “telecommunications service” under TA-96.

The proponents of state jurisdiction argue that VoIP is a “message or communication” service under Section 102 of the Public Utility Code. 66 Pa.C.S. §102. The proponents also claim that VoIP is a “basic” service under the Computer Cases and that VoIP is “telecommunications” or “telecommunications service” under TA-96.

On the issue of public policy obligations under state law, there is considerable dispute. The parties do not agree on whether a VoIP provider must provide TRS, 911 or if contributions to our state Universal Service Fund, or other obligations are required. The parties’ disagree over the VoIP providers' access and use of scarce Public Switched Telecommunications Network (PSTN) resources or facilities, particularly telephone numbers, that are obtained from other LECs. VoIP providers, unlike the LECs, apparently do not obtain their telephone numbers from the North American Numbering Plan Administrator (NANPA). That is because NANPA gives numbers only to state and federal certificated carriers to ensure their efficient use.

Finally, we note that there are several cases underway at the FCC, including a Notice of Proposed Rulemaking involving VoIP.

For the reasons set forth in more detail below, we determine that it is premature to make conclusive jurisdictional or policy determinations or to take action until the FCC provides guidance.

HISTORY OF THE PROCEEDING

F.C.C.2d 291 (1970); GTE Service Corp. v. F.C.C.,, 474 F.2d 724 (2nd Cir. 1973(Computer I); Second Computer Inquiry, Final Decision, 77 F.C.C.2d 384 (1980); modified on reconsideration, 84 F.C.C.2d 50 (1980); further modified on reconsideration, 88 F.C.C.2d 512 (1981); aff’d sub. nom Computer and Communications Industries Association v. FCC, 693 F.2d 198 (D.C. Cir. 1982), cert denied 461 U.S. 938 (1983); Third Computer Inquiry, Phase II, Memorandum and Opinion on Reconsideration, 3 F.C.C. Rcd. 1150 (1988)(Computer Cases).

4 On May 5, 2003, the Commission entered an Opinion and Order at M-00031707 soliciting public comment on the issues identified with VoIP under state and federal law (the May Order).

On May 13, 2004, the Commission published Notice of the May Order at 33 Pa.Bulletin. 2449. The Commission sought comments within 45 days of publication and reply comments were due no later than 30 days thereafter. The issues identified for consideration in the May Order included, but were not limited to, the definition of VoIP, the provider and end user experience with VoIP, the Commission’s jurisdiction to regulate VoIP service, the extent of Commission jurisdiction over VoIP, and the Federal Communications Commission’s (FCC) authority to regulate VoIP.

Public interest advocates, private trade associations, competitive local exchange providers (CLECs), incumbent local exchange carriers (ILECs), interexchange carriers (IXCs), and VoIP providers submitted comments. The public interest advocates submitting comments were the Office of Small Business Advocate (OSBA) and the Office of Consumer Advocate (OCA). The private trade associations submitting comments were the Pennsylvania Telephone Association (PTA), the Pennsylvania Cable and Telecommunications Association (PCTA), and the Voice on the Net Coalition (VoIPNET). The CLECs submitting comments were AT&T Wireless and Level 3 Communications. The ILECs submitting comments were Verizon Pennsylvania, Inc. and Verizon North Pennsylvania, Inc. (collectively Verizon), North Pittsburgh, and Sprint Communications-United Telecommunications (Sprint-United). The IXCs submitting comments were MCI WorldCom and AT&T Telecommunications. The VoIP providers submitting comments were Vonage Holdings, Inc. (Vonage), Net2Phone, Inc. (Net), and Comcast Cable (Comcast).

On July 31, 2003, the Commission received reply comments from public interest

5 advocates, private trade associations, CLECs, ILECs, IXCs, and VoIP providers. OCA and OSBA filed as public interest advocates. PTA, PCTA, and VoIPNET filed reply comments as private trade associations. XO Communications and Level 3 Communications submitted reply comments as CLECs. Verizon and Sprint-United filed reply comments as ILECs. AT&T and MCI WorldCom filed reply comments as IXCs. Vonage, Net, and Comcast filed reply comments as VoIP providers.

BACKGROUND VoIP Technology

VoIP technology uses digitized packets to provide message and communication services between a calling and called party. Previously, the public switched communications network (PSTN), maintained by local exchange carriers (LECs) or interexchange carriers (IXCs), provided message and communication services under Section 102 of the Public Utility Code, 66 Pa.C.S. §102. In addition, private networks such as wide area networks (WAN), local area networks (LAN), or private branch exchanges (PBXs) also provided message and communication services. The PSTN and private networks provided local communication, intrastate long distance communication, and interstate long distance communication.

Other States’ Decisions on VoIP

Several states have made decisions on whether or not VoIP constitutes a “telecommunications service” subject to regulation. The states making those determinations are Alabama, Colorado, Florida, Idaho, California, Minnesota, Nebraska, New York, Washington, Ohio, Georgia, Kentucky, North Carolina, and Wisconsin.

6 Of these states, California,10 Minnesota,11 New York,12 and Wisconsin13 classify VoIP as a “telecommunications service” under state law. California, Minnesota, and Wisconsin require certification. New York requires the payment of access charges.

Six of the remaining states did not exercise jurisdiction, are currently examining the issue, or decided to await future FCC action. These states include Alabama,14 Ohio,15 Nebraska,16 Georgia,17 Kentucky,18 and North Carolina.19

10Telecommunications Daily, October 2, 2003, “California PUC Says VoIP Providers Need to Obtain State Certificates.” 11 In the Matter of the Complaint of the Minnesota Department of Commerce Against Vonage Holding Corp. Regarding Lack of Authority to Operate in Minnesota, Docket No. P-6214/C-03-108 (September 11, 2003). A federal court decision voided this decision with a Preliminary Injunction on October 16, 2003. Vonage Holdings Corporation v. Minnesota Public Utilities Commission, Civil No. 03-5287 (October 16, 2003). Minnesota. 12 Complaint of Frontier Telephone of Rochester Against US DataNET Corp. Concerning Alleged Refusal to Pay Intrastate Carrier Access Charges, Case 01-C-1119, Order Requiring Payment of Intrastate Carrier Access Charges issued May 31, 2002 at 8-9. 13 See note 10, which included Wisconsin in the article. 14 In Re Petition for Arbitration of the Interconnection Agreement between BellSouth Telecommunications, inc. and Intermedia Communications, Inc. Pursuant to Section 252(b) of the Telecommunications Act of 1996, Arbitration Panel Recommendation and Proposed Order Regarding Interconnection Agreement, 2001 Ala. PUC Lexis 27, at *83 (AL PUC March 2, 2001). The Alabama Commission declined to rule on VoIP because the FCC has not addressed the classification of such service.

15In Re the Commission’s Investigation Into Voice Services Using Internet Protocol, Entry Case No. 03-950-TP- COI. 16 In Re the Commission, On its Own Motion, to Conduct an Investigation of the Interstate or Local Characteristics Internet Service Providers Traffic, Opinion and Findings, 1999 Neb. PUC Lexis 50, at *1 (NB PSC 1999). The Commission determined that the Commission had authority over intrastate VoIP services but declined to exercise its authority at this time for technical and other reasons. 17 In Re Petition of Sprint Communications Co. L.P. for Arbitration with BellSouth Telecommunications, Inc. Pursuant to Section 252(b) of the Telecommunications Act of 1996, Order, 2001 Ga.PUC Lexis 55, at *9 (Ga. PSC 2001). The Commission declined to make a determination until the Commission had time to consider the issue adequately. 18 In Re Petition by AT&T Communications of the South Central States, Inc. and TCG Ohio for Arbitration of Certain Terms and Conditions of a Proposed Agreement with BellSouth Telecommunications, Inc. Pursuant to 47 U.S.C. §252, Order, 2001 Ky. PUC Lexis 823, at Issue 13 (KY PUC 2001). The PUC declined to address the issue because the parties were not exchanging VoIP traffic and they needed more time to consider the matter on a more complete record. 19 In Re Petition of MCIMetro Access Transmission Services, LLC for Arbitration of Certain Terms and Conditions of Proposed Agreement with BellSouth Telecommunications, Inc. Concerning Interconnection and Resale Under the Telecommunications Act of 1996, 2001 N.C. PUC Lexis 821, Paragraph 14 (N.C. PUC 2001). The Commission declined to classify VoIP for purposes of an interconnection agreement as well as the appropriate Intercarrier

FCC Proceedings on VoIP

In addition to these state proceedings, there are several pending proceedings at the FCC concerning VoIP.20 Additionally, the FCC subsequently convened a public hearing on VoIP and issued a Notice of Proposed Rulemaking.21

The first proceeding at the FCC involving VoIP began in September 1999. In that case, the FCC sought comments on the steps needed to ensure that persons with disabilities have access to emerging IP telephony services.22 The Commission incorporated this matter into the pending IP-telephony rulemaking and seeks comments to refresh the record.23

The second proceeding began in October 2002. AT&T asked the FCC for a ruling that its phone-to-phone IP telephony services are exempt from the access charges assessed on traditional circuit-switched long distance calls. AT&T wants the FCC to resolve the question of whether access charges should apply to IP telephony24including, as noted earlier, the popular phone-to-phone VoIP.25 Phone-to-phone VoIP does not compensation due to uncertainty surrounding the issue. 20 The Commission has not actively participated in these proceedings. However, the Commission did file a Reply Comment in the pending Vonage Preemption proceeding.

21FCC Will Take Major Look at VoIP Regulation, Telecommunications Reporter Daily, October 1, 2003. Chairman Powell said the FCC was preparing a major examination of the regulation of VoIP services. A hearing was scheduled and held in Washington on December 1, 2003; Pleading Cycle Established For Comments in IP-Enabled Services Rulemaking Proceeding, WC Docket No. 04-36 (March 29, 2004). 22 In re Implementation of Sections 255 and 251(A)(2) of the Communications Act, WT Dkt. 96-198, Report and Order and Further Notice of Inquiry at ¶ 175 (released September 29, 1999).

23 FCC Notice of Proposed Rulemaking on IP-Telephony Services, WC Docket No. 04-36, paragraph 58. 24 WC Docket No. 02-361, In the Matter of Petition for Declaratory Ruling that AT&T’s Phone-to-Phone IP Telephony Services are Exempt from Access Charges. 25 Verizon Comments, p. 4.

8 change the form of protocol for providing message or communication service.26 AT&T claimed that VoIP should not pay access charges under current law.27 In April 2004, the FCC issued an opinion and order denying AT&T’s Petition and determining that phone- to-phone VoIP was subject to access charges.28

On February 5, 2003, pulver.com requested the FCC to issue a declaratory ruling that pulver.com’s VoIP service “which facilitates point-to-point broadband Internet protocol voice communications,” is neither “telecommunications” nor a “telecommunications service” as defined in Section 153 of the TA-96.29 Pulver.com also wants the FCC to declare that its “broadband Internet protocol voice communications” service is neither telecommunications nor a telecommunications service under the Telecommunications Act of 1996 (pulver.com Petition).30

On February 19, 2004, the Federal Communications Commission (FCC) issued an Opinion and Order in the pulver.com proceeding (February Order). In the February Order, the FCC declared pulver.com’s Free World Dialup (FWD) service to be an unregulated information service. The holding was limited to pulver.com's present free

26 The proponents of state jurisdiction claim that the lack of change in form or protocol, such as altering a message or communication from analog to digital or vice versa, brings this class of VoIP within a state’s authority even if other forms of VoIP, which do change protocol, may be subject to federal jurisdiction. They also claim that changes in a message or communication’s form or code that is for the service provider’s management of their network does not exempt VoIP from state jurisdiction as an “information service” under TA-96. That is because changes in protocol for a provider’s network management come within the exclusion from information services in TA-96. 27 See Wireline Competition Bureau Seeks Comment on AT&T’s Petition For Declaratory Ruling That AT&T’s Phone-To-Phone IP Telephony Services Are Exempt From Access Charges, Public Notice, 17 FCC Rcd 23556 (WCB rel. Nov. 18, 2002).

28In the Matter of Petition for a Declaratory Ruling that AT&T’s Phone-to-Phone IP Telephony Services are Exempt from Access Charges, WC Docket No. 02-361 (April 14, 2004, released April 21, 2004). 29 Petition for Declaratory Ruling that Pulver.com’s Free World Dialup is Neither Telecommunications Nor a Telecommunications Service, WC Dkt. 03-45 (filed February 5, 2003). See FCC Public Notice, DA 03-439 (Feb. 14, 2003). 30 See Pleading Cycle Established for Comments on pulver.com Petition for Declaratory Ruling, Public Notice, DA 03-439, 2003 FCC LEXIS 809 (WCB Feb. 14, 2003).

9 service between on-line FWD members that do not involve communications originating or terminating on the PSTN or are made using dial-up access. 31

On June 3, 2003, the FCC issued a public notice on another AT&T Petition for Declaratory Ruling on Enhanced Prepaid Calling Card Services.32 In its Petition, AT&T wants the FCC to determine that enhanced pre-paid calling card services are interstate communications. AT&T also asks the Commission to rule that interstate access charges should apply, and that intrastate access charges should not apply, when an enhanced services platform that provides stored, non-call information to end users is not located in the state in which the calling or called parties are located.33 The hybrid form of VoIP technology discussed above could transmit and store non-call data using a combination of PSTN and private networks from a payphone. The FCC decision in this matter could have implications for VoIP generally.

On September 22, 2003, Vonage petitioned the FCC to preempt the Minnesota Public Utilities Commission from requiring Vonage to comply with state laws on providers of telephone services. Vonage claims that VoIP is not a telecommunications carrier nor is VoIP a common carrier subject to Title II of the Communications Act of 1934. Vonage believes that VoIP is information service.34 This Commission filed a

31Pulver.com’s Petition for Declaration that pulver.com’s Free World Dialup is Neither Telecommunications nor a Telecommunications Service, WC Docket No. 03-45, Opinion and Order released February 19, 2004, p. 1-2 and n. 3. The FCC subsequently established a Comment Deadline of May 28, 2004 and Reply Comment deadline of June 28, 2004. See note 29 above.

32 See FCC Public Notice, DA 03-1896 (June 5, 2003). Apparently, the essence of the claim is that pre-paid calling service requires access to stored information sufficient to make it an information service. 33 Pleading Cycle Established for AT&T Petition for Declaratory Ruling on Enhanced Prepaid Calling Card Services, WC Docket No. 03-133, DA 03-1896 (June 5, 2003). 34 In the Matter of Vonage Holdings Corporation, Petition for Declaratory Ruling Concerning an Order of the Minnesota Public Utilities Commission, WC Docket No. 03-211, DA-03-2952, Petition for Declaratory Ruling, p. 1. The FCC published notice of the proceeding on September 26, 2003. The FCC established a Comment Deadline of October 27, 2003 and a Reply Comment Deadline of November 24, 2003. Chairman Powell of the FCC subsequently announced a “Major Examination” of VoIP likely starting with a hearing this fall and a Notice of Inquiry (NOI). Telecommunications Daily Reporter, October 1, 2003. The FCC set a hearing date of December 1, 2003 and then issued an IP Notice of Proposed Rulemaking (IP-NOPR).

10 Reply Comment stating that it would subsequently file a comment reflecting any determination made in its pending VoIP investigation.

Finally, on March 10, 2004, the FCC issued a Notice of Proposed Rulemaking (March NOPR) soliciting comment on how, if at all, the FCC should differentiate among various IP-enabled services to ensure that any regulations applied to such services are limited to those cases in which they are appropriate. The FCC’s limited conclusion in the February Order, that determined that the pulver.com service as currently configured should be unregulated, is also the subject of comment in the pending NOPR.35

DISCUSSION

The Opponents of State Jurisdiction

The PCTA, VoIPNET, IXCs, CLECs, and VoIP providers (hereafter collectively the “opponents of state jurisdiction”) rely on the definitions in Section 153 of the Telecommunications Act of 1996 (TA-96) and the FCC’s prior distinction between basic and enhanced services first developed in the Computer Cases.

35 In the Matter of IP-Enabled Services, WC Docket No. 04-36 (March 10, 2004), p. 24, paragraph 35 and pp. 30-31, paragraphs 42-43.

11 The opponents of state jurisdiction claim that: (1) the definitions of “basic” and “enhanced” services” in the Second Computer Inquiry in 1980 (“Computer II”)36 makes VoIP an “enhanced” service exempt from regulation; (2) VoIP is an “information service” under 47 U.S.C.A. §153 and exempt from regulation; (3) The FCC retained and affirmed the basic/enhanced services dichotomy of the Computer Cases in subsequent proceedings before enactment of TA-9637 and applies each clause of the definition against the specific functionalities of the service;38 (4) TA-96’s definitions of “telecommunications,” “telecommunications service,” and “information service” in 47 U.S.C.A. §153 are dispositive and co- terminus with the “basic” and “enhanced” services dichotomy of the Computer Cases;39 and that (5) VoIP is an enhanced service not subject to state jurisdiction based on the FCC’s 1998 Universal Service Report.40

The Proponents of State Jurisdiction

The ILECs, PTA, and the OCA, (hereafter collectively the “proponents of state jurisdiction”) review the same language and precedent in conjunction with Section 102 of the Public Utility Code, 66 P.C.S. §102. They reach an opposite legal view. They believe that the Commission has, and should exercise, jurisdiction over VoIP.

36 Second Computer Inquiry, Final Decision, 77 F.C.C.2d 384 (1980); modified on recon. 84 F.C.C.2d 50 (1980); further modified on recon. 88 F.C.C.2d 512 (1981); aff'd. sub nom. Computer and Communications Industries Ass'n v. FCC, 693 F.2d 198 (D.C. Cir. 1982), cert. denied 461 U.S. 938 (1983) (“Computer II”).

37 See Third Computer Inquiry, Phase II, Memorandum Opinion and Order on Reconsideration, 3 FCC Rcd. 1150 (1988) (“Computer III”).

38 See, e.g., U S West Communications, Inc. Petition for Computer III Waiver, Order, 11 FCC Rcd. 1195 (1995); AT & T 900 Dial-It Services and Third Party Billing and Collection Services, Memorandum Opinion and Order, 4 FCC Rcd. 3429 (1989). The service is “enhanced” if it meets the language of one of the three clauses.

39 In their view, Telecommunications and “telecommunications service” is equivalent to “basic” service and “information service” is equivalent to “enhanced” service.

40 In the Matter of Federal-State Joint Board on Universal Service, FCC 98-67 (April 10, 1998).

12 The proponents of state jurisdiction claim that (1) VoIP providers convey or transmit messages or communications by telephone for the public for compensation under 66 Pa.C.S. §102;41 (2) VoIP providers come within the alternate definition of “public utility” at 66 Pa.C.S. §2901;42 (3) VoIP providers, and Vonage in particular, are actively marketing VoIP telephone service to the public for a fee; (4) VoIP is the real- time transmission and reception of voice messages and communications; (5) a traditional “telephone” is delivering VoIP providers' services under the Public Utility Code; (6) VoIP consumers continue to use VoIP telephony in a manner virtually identical to their traditional telephone service; (7) while the term “telephone” is undefined in the statute, standard industry parlance defines it to be “a device which converts human voice into electronic signals for transmission by line, radio or fiber to a distant point where the signals are reconverted into sound waves;43 and (8) VoIP is not an information service under federal law and conclude that VoIP is a “message or communication” or “telecommunications service” within the jurisdiction of the Pennsylvania Commission.

41 The relevant provisions of Section 102 state as follows:

“Public Utility.” (1) Any person or corporations now or hereafter owning or operating in this Commonwealth equipment or facilities for: * * * * (vi) Conveying or transmitting messages or communications, except as set forth in (2)(iv), by telephone or telegraph or domestic public land mobile radio service including, but not limited to, point-to-point microwave radio service for the public for compensation. * * * * (2) The term does not include: * * * * (iv) Any person or corporation, not otherwise a public utility, who or which furnishes mobile domestic cellular radio telecommunications service.

42 66 Pa.C.S. §2901. 43

Telephony’s Dictionary, 2d ed. at 310. See also Newton’s Telecom Dictionary, 14th ed. (“changes…speech into electrical signals for transmission to someone distant.”)

13 Disposition

VoIP presents a world of opportunities for Pennsylvania’s consumers. The technology will allow for different options and applications that will ultimately give consumers more control. VoIP also changes the competitive complexion of the market place in a way that might bring more choices for consumers. Furthermore, this hybrid technology raises significant issues for regulators including, but not limited to, jurisdiction, universal service, 911, law enforcement, consumer protection and disability access.

However, the federal jurisdictional and regulatory framework remains uncertain, as the FCC has just issued a notice of proposed rulemaking for IP-enabled services, including VoIP. As noted earlier, on March 11, 2004, the FCC issued a Notice of Proposed Rulemaking (NOPR)44 to determine the appropriate regulatory treatment of IP- enabled services. Specifically, the NOPR asks which regulatory requirements - such as those relating to E911, disability accessibility, access charges, and universal service- should be extended to different types of IP-enabled services. In addition, the FCC's NOPR asks broad questions covering a wide range of services and applications to differentiate between IP-enabled services and traditional telephony services and to distinguish among different classes of IP-enabled services. In doing so, the FCC asks further questions on the legal and regulatory framework for each type of IP-enabled service and relevant jurisdictional considerations for each category, including whether VoIP is subject to exclusive federal jurisdiction.45 Under these circumstances, it would be premature for the Commission to act until the FCC provides guidance on the issues.

44 The FCC will examine various issues relating to services and applications utilizing the Internet Protocol (IP), including VoIP services. In the Matter of IP-Enabled Services, WC Docket No. 04-36, Notice of Proposed Rulemaking, FCC 04-28 (rel. March 10, 2004). 45Moreover, there are several other pending cases before the FCC related to VoIP. See discussion on pages 6-11 infra.

14 Furthermore, in order to render an informed decision about how to proceed with the various issues surrounding VoIP technology, we need to understand better the technology and its various applications. In addition, the “Nascent Service Doctrine” suggested by one FCC Commissioner is instructive. The Commissioner suggests that regulators should exercise restraint when faced with new technologies and services. 46 If regulation is too oppressive while a technology is still developing, it could result in a dampening of the introduction or growth of that technology. Although there are instances where regulatory intervention is proper (such as market failure or consumer abuse), regulatory restraint is more prudent until the technology is understood and viable. This Commission should not leap into a regulatory scheme until we understand its full impact on this technology.

Having reviewed the Comments and Reply Comments it appears as if the Commission might have grounds under which it could assert jurisdiction and regulation. Indeed, as this technology is better understood and as the FCC clarifies its jurisdictional and regulatory approach, it might be appropriate for this Commission to define a regulatory role. However, at this time, such determinations are premature.

Finally, the dialogue on VoIP is just beginning. The most prudent course of action for this Commission is to refrain from reaching any conclusions regarding jurisdictional and policy issues at this time.

These considerations lead us to conclude that it is premature to make conclusive jurisdictional or policy determinations or to take action until the FCC provides guidance. The Commission also directs Staff to continue to monitor this issue at the state and federal levels and to make ongoing recommendations to the Commission; THEREFORE,

46 The Nascent Services Doctrine, Remarks of FCC Commissioner Kathleen Q. Abernathy Before the Federal Communications Bar Association, New York Chapter, New York, NY, July 11, 2002.

15 IT IS ORDERED:

1. That the Commission concludes that it is premature to make conclusive jurisdictional or policy determinations or to take action until the FCC provides guidance;

2. That the Commission staffs continue to monitor the VoIP issue at the state and federal levels and to make ongoing recommendations to the Commission;

3. That the record in Docket M-00031707 be marked closed.

BY THE COMMISSION,

James J. McNulty Secretary (SEAL)

ORDER ADOPTED: April 15, 2004 ORDER ENTERED: May 24, 2004