MEMORANDUM

TO: Judy Harkins

Gregg Vanderheiden

RERC on Telecommunications Access
Karen Peltz Strauss

KPS Consulting
Re: Summary of FCC Proceeding on Broadband

In the Matter of Appropriate Framework for Broadband Access to the

Internet Over Wireline Facilities, CC Dockets 02-33; 95-20, 98-10

Comments due April 15, 2002

Reply Comments due May 15, 2002

DATE: March 22, 2002

I. Introduction and Background

The Federal Communications Commission has released a Notice of Proposed Rulemaking (NPRM) on how to classify broadband services that are provided through the traditional telephone infrastructure. More specifically, the Commission is seeking to determine the "appropriate legal and policy framework that it will use to oversee high speed access to the Internet when such access is provided over domestic wireline access services." [1] In addition to classifying wireline broadband Internet access service, the NPRM is designed to consider the legal, regulatory and policy implications of that classification, with the understanding that broadband technologies may one day take the place of legacy narrowband networks.

In the NPRM, the Commission tentatively concludes that under the Telecommunications Act, the provision of wireline broadband Internet access service is an information service, even when an entity provides wireline broadband Internet service over its own transmission facilities. In addition, the Commission tentatively concludes that the transmission component of wireline broadband Internet service provided over an entity's own facilities is "telecommunications" and not a "telecommunications service." The Commission reaches this conclusion because, it says, wireline broadband Internet services "fuse communications power with powerful computer capabilities and content," and these services fall within the types of services the Commission has traditionally defined as "information services" (services that blend communications with computer processing). The Commission asks the public to comment on this tentative conclusion.

As the Commission examines this issue, it seems to move broadband services far away from previous categorizations and descriptions of services provided by telecommunications carriers. For example, it notes that in the past, it had considered information services, such as voice mail or telemessaging, to be an extension of the narrowband telecommunications network. i.e., these services were described as using the "existing telephone network" or as "enhancements that build upon basic services." Now, however, the Commission says that the provision of broadband access enables the "deployment of new, bandwidth-intensive, multimedia information services, which in turn drive the use and further deployment of broadband capable facilities." This analysis makes no connection between broadband and basic or adjunct-to-basic telecommunications services.

II. Goals and Objectives of the NPRM

The NPRM sets forth several objectives and goals by which the FCC must be guided in establishing its broadband policy. These are:

1. The Commission wishes to take actions that encourage and accelerate the deployment of broadband for all Americans.
2. The Commission seeks to avoid embedding any one type of broadband technology. The NPRM notes that traditional wireless, cable, satellite and wireline providers have made substantial investments in broadband infrastructures, and that it is the Commission's desire to promote competition across these multiple platforms to meet the demands of the consuming public.
3. The Commission notes its interest in ensuring the provision of broadband services in a "minimal regulatory environment that promotes investment and innovation in a competitive market." Specifically, the Commission seeks to limit "regulatory uncertainty and unnecessary or unduly burdensome regulatory costs." [2]
4. It is the Commission's goal to develop a framework that is consistent across multiple platforms as much as possible. The Commission does not wish to extend existing rules originally developed to govern legacy services and networks to new broadband services.

III. Prior FCC Broadband Proceedings

The NPRM offers a brief summary of past Commission proceedings on broadband. Knowing these helps to provide a basis for understanding the present proceeding:

1. Cable Modem NOI (2000). a proceeding that looks at the appropriate regulatory classification for cable modem service used to provide high-speed Internet access.
2. Incumbent LEC Broadband Notice. a proceeding that considers whether incumbent LECs that are dominant in traditional local exchange and exchange access service should be considered dominant in the provision of broadband services.
3. Triennial UNE Review Notice. a proceeding to determine Section 251 obligations of the incumbent LECs "to make their facilities available as unbundled network elements to competitive LECs for the provision of broadband services." Note that this and the second proceeding consider how Title II regulation (which applies to traditional telecommunications services) applies to broadband service.

IV. Wireline Broadband Internet Access Service as an Information Service.

The NPRM notes that in the Commission's 1998 Report to Congress on universal service, the Commission concluded that Internet access services are information services, and that "the categories of 'telecommunications service' and 'information service' in the 1996 Act are mutually exclusive." The Commission explains that under the Act, "information service" is defined as "the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications." The Act defines "telecommunications" as "the transmission, between or among points specified by the user, of information of the user's choosing, without change in the form or content of the information as sent and received." [3] Thus, an entity provides telecommunications when it provides a transparent transmission path, but does not change the form or content of the information. When this service is offered to the public for a fee, it is considered a "telecommunications service."

In this proceeding, the Commission tentatively concludes that wireline broadband Internet access service provided over a provider's own facilities is an information service. The Commission reaches this conclusion based on the following (note that it seeks comment on its rationale and tentative conclusions):

Providers of wireline broadband Internet access service offer more than transparent transmission paths. Rather, they offer end users enhanced capabilities and various applications that are already classified as information services (e.g., the retrieval of Web files requires subscribers to interact with information stored in the Internet access service provider's facilities). Thus, the provider is offering the end-user the "capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information." Even though the telecommunications provider is delivering these services over its own facilities, the transmission component "is embedded within, and not separate and distinct from, the information service." The Commission considers wireline broadband service as "a single integrated offering to the end-user," rather than two separate services.[4] Because the end-user service is an information service, the entire package. consisting of both the transmission and the information processing made available by the provider. is an information service.

The Commission makes a special point of clarifying that the transmission component of the end-user wireline Internet access service is "telecommunications"," not a telecommunications service. The provision of telecommunications becomes a "telecommunications service" when it is offered "for a fee directly to the public." The Commission concludes that the provision of wireline broadband Internet service over a provider's own facilities does not constitute the offering of "telecommunications for a fee directly to the public." In fact, the Commission explains that because subscribers are being given the opportunity to generate, acquire, process, etc. information via telecommunications, the provider is actually not "providing" telecommunications at all; rather it is "using" telecommunications to provide end-users with the broadband Internet service (even though it is using its own wireline facilities to provide this service). An entity, the Commission explains, provides "telecommunications" (as compared to "using" telecommunications) only when it provides a transparent transmission path and does not change the form or content of the information.

The Commission goes on to ask the public to comment on whether wireline broadband Internet access service should be classified as something other than an information service. Specifically, the Commission asks whether the "self-provision of this service alters the function provided to the end user such that the service should be classified as a telecommunications service." The Commission also asks whether this type of service should be classified as two separate services - an information service and a telecommunications service, or whether it should be considered a new type of "hybrid communications service, neither an information service nor a telecommunications service."

V. Impact of FCC's Broadband Classification on Sections 255 and 251 Coverage

Section 255

In paragraph 59 of the NPRM, the Commission asks how the classification of wireline broadband Internet access service as an information service would affect the applicability of Section 255's requirements. Specifically, it directs commenters to address whether these and other requirements are "needed to protect the interests of consumers in the context of a minimally intrusive regulatory regime for wireline broadband Internet access service." It goes on to explain that the broadband services market is very different from the market for analog voice services because of "intermodal competition among multiple broadband platforms, including DSL, cable modem service, satellite broadband service and terrestrial and mobile wireless services." The Commission is interested in determining whether the existence of such competition provides "adequate incentives" without regulation for wireline broadband providers to protect the interests of consumers.

Brief Analysis

The Commission's tentative conclusion that the provision of wireline broadband Internet access is an information service, and that the transmission aspect of that service is "telecommunications," likely takes this type of service outside the scope of Section 255. However, the NPRM does ask, elsewhere in the NPRM, about the application of regulatory requirements to wireline broadband service even with these classifications.

First, the Commission asks whether it should impose any of its regulations that now apply to the provision of telecommunications services or common carriage, to the "telecommunications" component (i.e., the transmission component) of this Internet service. While the Commission does not discuss Section 255 in raising this issue, were the Commission to treat the transmission component as a "telecommunications service," that aspect of this broadband service would, in fact be covered by Section 255, since Section 255 requires providers of telecommunications services to make those services accessible by people with disabilities and compatible with specialized customer premises equipment.

Second, the Commission explains that it does have the authority to impose regulatory requirements on the information component of the broadband service, if necessary. The Commission provides the following background: In the past, the Commission issued what has come to be known as the Computer II decision. In that proceeding, the Commission created the regulatory categories of "basic" and "enhanced" services. The goal was to distinguish between services that were regulated under Title II as common carrier services (basic services), from unregulated computer processing services which manipulated the "content, code, protocol or other aspects of the subscriber's information." (enhanced services). The "enhanced" category of services was later broadened and re-defined as information services under the 1996 Act.

Although the Computer II proceeding pulled enhanced services out of the scope of Title II regulation, the Commission did determine that it retained jurisdiction over these services under Title I. At the time, it declined to use that jurisdiction to regulate enhanced services, because, it found the enhanced service market to exhibit "effective competition." However, it reserved the right to exercise that jurisdiction "should problems involving enhanced services arise." [5] Thus, it is possible that Title I might afford protections for individuals with disabilities, even if this broadband service is classified as an information service.

Section 251

The Commission also asks about the implications of its tentative classifications on LEC obligations to provide access to network elements under sections 251 and 252. In this regard, the NPRM focuses on matters unrelated to disability access.[6] However, Section 251 does require telecommunications carriers not "to install network features, functions, or capabilities that do not comply with the guidelines and standards established pursuant to section 255." Although the Commission did not address the impact that its classifications will have on Section 251 with respect to disability access, having raised a 251 issue, the NPRM appears open for comment on matters concerning disability access under this section.

VI. Contributions to Telecommunications Relay Services Funds

The NPRM notes that as traditional services migrate to broadband platforms, there may be implications for funding universal service programs. The Commission goes on to ask how it can continue to sustain universal service in a changing communications market, while not overburdening new service providers. Specifically, it seeks comment on how the classification of wireline broadband Internet access (as an information service, with the transmission classified as a telecommunications service) may impact its present system of assessments and contributions for universal service. For example, it asks whether facilities-based broadband Internet access providers should be required to make contributions to support universal service. If so, it asks on what legal basis can such contributions be required. It also asks whether the assessments would be different were it to conclude that the transmission input is a telecommunications service or if it concludes that the broadband service consists of two separate services (information service and a telecommunications service), or a new hybrid of the two (that is neither an information or telecommunications service).

The Commission, in this section of its NPRM, makes no mention of funding for telecommunications relay services (TRS). However, it would appear that issues identical to universal service financing apply as well to relay funding. When reading the section below, keep in mind that universal service funding was patterned after TRS funding, and follows the same methodology.

Presently, under both the TRS and universal service rules, carriers are assessed contributions based on their end-user telecommunications revenues. In a separate proceeding. the Universal Service Contribution Methodology proceeding. the Commission is considering changes to this funding methodology. [7] One possible change would be to assess contributions based on connections to the public network.

The Commission explains that Section 254(d) requires all telecommunications carriers that provide interstate telecommunications services to contribute to universal service. [8] Although Section 254 is contained in Title II, the Commission has said that the contribution requirement can extend beyond telecommunications carriers. This is because section 254(d) gives the Commission the authority to require "[a]ny other provider of interstate telecommunications" to contribute to universal service if required by the public interest. The Commission has, in fact, used this authority to reach other providers of interstate telecommunications. Specifically, the Commission has required contributions to the universal service fund by entities that provide interstate telecommunications to end-users for a fee and payphone aggregators.[9] The Commission's rationale for collecting these revenues was that that these providers are similar to telecommunications carriers because they "have built their businesses . . . on access to the [public switched telephone network], provide telecommunications in competition with common carriers, and their non-common carrier status results solely from the manner in which they have chosen to structure their operations."

The Commission notes that existing rules do require telecommunications carriers that provide broadband transmission services to make universal service contributions based on the revenues associated with those services. These carriers are required to contribute "to the extent they provide broadband transmission services or other telecommunications services on a stand-alone basis to affiliated or unaffiliated Internet service providers (ISPs) or to end-users. This proceeding will not change this.

In contrast, ISPs that do not own telecommunications facilities, but rather lease transmission from telecommunications carriers to transmit information services, do not make universal service contributions directly, although they make indirect contributions through charges assessed by the telecommunications carrier providing them with the leased services. In its Universal Service Report to Congress, the Commission concluded that it has the authority to require facilities-based ISPs that do not provide any stand-alone telecommunications services to make universal service contributions. In the past, the Commission has declined to use that authority. However, now the Commission states that, given the expected growth of broadband Internet access, and in particular the growth of access as provided by ISPs, the time is ripe to ask whether broadband providers that provide "last-mile connectivity over their own facilities should be required to contribute to universal service based upon their self-provisioning of telecommunications."

The Commission poses additional questions related to this issue:

• Should all facilities-based wireline broadband Internet access providers - both wireline telecommunications carriers and ISPs - be subject to the same contribution requirements?

• Should facilities-based wireline broadband providers contribute based on all of their wireline broadband Internet access revenues, a fraction of those revenues, or a different amount? How should the Commission allocate revenues associated with telecommunications or the telecommunications service as compared to revenues associated with Internet access?

• If the Commission decides to assess contributions based on connections rather than revenue, how should this apply with respect to wireline broadband providers?

• Should other facilities-based providers of broadband Internet access services - e.g., providers that use wireless, cable, or satellite platforms - be required to contribute? The Commission asks commenters to identify factors that should be considered in deciding whether the public interest would be served by requiring contributions from other facilities-based providers of broadband Internet access.

• Generally, the Commission asks how changes in technology and the marketplace - e.g., the growth of broadband Internet services - will impact its ability to support universal service. For example, if broadband providers increasingly offer broadband services over their own facilities, will that cause a drop in contribution revenues? The Commission asks about the implications of these developments were it to move to a per-connection-based (non-revenue-based) assessment

• Finally, the Commission asks whether commenters predict that voice traffic will migrate to broadband Internet platforms, and the impact that such migration would have on the Commission's ability to support universal service.

As TRS moves to video relay, Internet relay, and speech-to-speech services, revenues will continue to be needed to support these various new services. For this reason the above issues. concerned with maintaining universal service funding. similarly apply to TRS funding.

This summary was prepared as part of the RERC on Telecommunications Access, a joint project of Gallaudet University and the Trace Center, University of Wisconsin-Madison under funding from the National Institute on Disability and Rehabilitation Research (NIDRR) of the US Dept of Education Grant H133E990006. The opinions offered herein are those of the author and do not necessarily represent those of the RERC on Telecommunications Access, the Universities or funding agencies.

[1] The NPRM does not address issues concerning the provision of broadband Internet access services provided over cable, wireless, power line (electric grid), or all-fiber networks that are not part of the traditional telephone network.

[2] The Commission makes a point of noting Congress' intent to open the broadband market to "as many potential providers as possible to bring consumers the benefits of newer, better and more cost-effective products and services." It notes that competition in the broadband arena is considerable between cable and telephone companies, and that various Internet and technology companies are now advocating for the Commission to reduce regulatory burdens, so that these companies can accelerate their investments in broadband infrastructure.

[3] Section 3 of the Telecommunications Act of 1996.

[4] Were these considered separate services, the transmission component might be considered a telecommunications service, since it would be taking place over traditional telephone wirelines.

[5] The Commission did, in its Computer II and Computer III decisions, impose certain requirements on the provision of information services. For example, in order to encourage competition, the Commission directed local telephone companies that provide information services to offer the transmission component of that service separately pursuant to tariff. It also directed non-dominant carriers that owned transmission facilities to unbundled basic services from enhanced services and offer transmission capacity to other enhanced service providers under the same terms and conditions as they provided to their own enhanced services operations.

[6] For example, the Commission looks at whether an incumbent LEC provider of wireline broadband service over its own facilities should be required to provide access to those facilities as "network elements" if the facilities are only used to provide information services.

[7] I believe that the methodology proceeding does address TRS issues.

[8] The Act defines a telecommunications carrier as "any provider of telecommunications services" ¦," and. as noted above, "telecommunications service" as the "offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used."

[9] This would include providers that lease excess telecommunications capacity on a private contractual basis to end-users.

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