On Appeal from Public Service Board September Term, 2012 James Volz, Chair
The opinion of the court was delivered by: Reiber, C.J.
In re Investigation into Regulation of Voice Over Internet Protocol (VoIP) Services (2012-109)
PRESENT: Reiber, C.J., Dooley, Skoglund and Burgess, JJ., and Eaton,
¶ 1. This appeal concerns whether the Vermont Public Service Board has jurisdiction to regulate interconnected Voice over Internet Protocol (VoIP) services provided in Vermont. The Board concluded that fixed VoIP is a "telecommunications service" under Vermont law and Vermont regulation of VoIP is not preempted by federal law because intrastate calls can be separately identified. The Board deferred consideration of what type of regulation to impose to a separate phase of the proceeding. On appeal, Comcast Phone of Vermont, LLC*fn1 argues that the Board erred in not addressing whether interconnected fixed VoIP is an information service or telecommunications service under federal law because, according to Comcast, VoIP is an information service and therefore any regulation is preempted by federal law. We agree that the Board must reach this question and remand for further proceedings.
¶ 2. Some background is necessary for understanding the issues raised in this appeal. Traditional phone service operates on a public switched telephone network (PSTN). That network relies on circuit-switched technology, which sets up a dedicated line between the sender and receiver. A traditional telephone converts the caller's voice into an electrical signal that travels on a copper line over the PSTN. When the analog signal reaches the receiver's telephone, it is converted back into audible format. Users on the network are assigned a ten-digit North American Numbering Plan (NANP) number that corresponds to their geographic location.
¶ 3. VoIP technology is simply another mechanism for delivering voice communication. VoIP transmits the voice data over internet protocol (IP) instead of through traditional telephone lines on the PSTN. The voice data is converted into digital bits which are placed in packets and sent over the same pathways as internet data. VoIP can be provided over the public internet or a private IP network. The packets of information run through various computers, routers, and switches before they are reconstituted at their destination. VoIP-to-VoIP communications are those that originate and terminate at IP addresses existing in cyberspace without regard to the person's geographic location. Minn. Pub. Utils. Comm'n v. FCC, 483 F.3d 570, 574 (8th Cir. 2007). In contrast, interconnected VoIP involves communication of VoIP to or from a traditional PSTN landline connection. Interconnected VoIP is defined as a service that provides real-time, two-way voice communication over a broadband connection from the user's location using special equipment that permits the user to receive calls from or terminate calls on the PSTN. See 47 C.F.R. § 9.3 (2009).
¶ 4. Interconnected VoIP telephony takes different forms. Nomadic VoIP service may be used from anywhere a caller can access a broadband connection, without regard to the identity of the broadband provider. When nomadic service is used, it is not possible to determine the specific geographic endpoints of the call. Fixed VoIP service originates at a permanent location known to the user and the provider. The user places a call with a telephone by using special equipment that converts the sound into information that can travel on the IP. For the user, the experience resembles placing a call using a traditional telephone.
¶ 5. The service relevant to this appeal is provided by Comcast.*fn2 Comcast has a network of cables in Vermont and using those cables provides high-speed internet, and interconnected VoIP services called Comcast Digital Voice (CDV). To use CDV, Comcast leases to customers an embedded multimedia terminal adaptor (eMTA), which is connected to the customer's phone and converts the voice signal into a format that can travel on the internet over the cable line. To place a call, the CDV customer uses a traditional telephone connected to the eMTA. The eMTA converts the call to IP in the case of an originating call or from IP in a terminating call. CDV calls may terminate in traditional telephone service subscribers, or may remain entirely on the Comcast network if terminating to another CDV customer. Comcast's CDV VoIP telephony is a fixed service as it requires the end-user to use it from a specific geographic location known to Comcast. The issue before the Board was whether the Board could regulate this service or if regulation was preempted by federal law.
¶ 6. Regulation of telecommunications is done through a partnership between federal and state authorities. In re Verizon New England Inc., 173 Vt. 327, 332, 795 A.2d 1196, 1200-01 (2002). Under federal law, the Federal Communications Commission (FCC) has authority to regulate interstate and foreign telecommunications services, while the states retain jurisdiction over intrastate services. 47 U.S.C. §§ 151, 152(b).*fn3 Over the years, as methods of communication changed, the FCC sought to apply the terms of the Communications Act to newer technologies by creating two categories of services--basic and enhanced. Petition for Declaratory Ruling that AT&T's Phone-to-Phone IP Telephony Servs. are Exempt from Access Charges, 19 FCC Rcd. 7457, 7459 (April 21, 2004). The FCC defined basic service as the transmission of "information without a net change in form or content." Id. In contrast, enhanced service applied to a service involving any sort of data alteration or manipulation "that changes the form or content of the transmitted information." Id. The FCC concluded that enhanced services were free from Title II regulations that applied to common carriers to encourage new data processing features.*fn4 Id. at 7460. In 1996, Congress amended the Act to address new developing technologies and services, and utilized the terms "telecommunications service" and "information services." See 47 U.S.C. § 153(53), 153(24). The FCC construed the terms "telecommunications service" and "information service" as having the same meanings as basic and enhanced services, respectively. AT&T's Phone-to-Phone IP Telephony Servs., 19 FCC Rcd. at 7460-61. Thus, "telecommunications services and information services are separate and distinct categories, with Title II regulation applying to telecommunications services but not to information services." Id. at 7461. The result of designating VoIP as an information service would mean that the regulations in Title II of the Telecom Act do not apply. Federal-State Joint Bd. on Universal Serv., 13 FCC Rcd. 11501, 11507-08 (April 10, 1998).
¶ 7. The 1996 Act, however, preserved the dual-jurisdictional regimen between federal and statute authorities. Verizon New England, 173 Vt. at 331, 795 A.2d at 1200. Thus, Vermont retains authority to regulate telecommunications within the state as long as such regulation is not inconsistent with federal law. Id. at 332, 795 A.2d at 1200-01. The Legislature has delegated this authority to the Board by authorizing it to regulate companies "offering telecommunications service to the public on a common carrier basis." 30 V.S.A. § 203(5). Telecommunications service is broadly defined by Vermont law as "the transmission of any interactive two-way electromagnetic communications, including voice, image, data and information." Id. The statute provides that transmission of electromagnetic communications "includes the use of any media such as wires, cables, television cables, microwaves, radio waves, light waves or any combination of those or similar media." Id.
¶ 8. In April 2007, the Department of Public Service sent a letter to the Board recommending that it open a generic investigation into VoIP services to clarify the rights and responsibilities of VoIP service providers in Vermont. The Board opened its investigation in May 2007 and appointed a hearing officer to conduct the proceedings. Several companies participated in the proceedings, including Comcast and Verizon. Several entities were also permitted intervenor status, including a group of independent Vermont local exchange carriers, Central Vermont Public Service Corporation, City of Burlington Electric Department, Stowe VoIP, LLC, and AT&T.
¶ 9. The parties agreed to divide the proceeding into phases. In Phase I, the Board was confined to factfinding and determining the extent of its jurisdiction, and in Phase II, the Board was supposed to consider to what extent it should exercise its jurisdiction. A technical hearing was held in November 2008. Before the hearing officer, the Department argued that VoIP services are telecommunications services under Vermont law, and that fixed services are intrastate and not preempted by federal law. Comcast ...