Watch This Space!

Somewhere between Internet space and telephone space is a strange new world, where the FCC is shaping the future of telecommunications—using some very murky logic

by Christopher W. Savage Partner, Cole, Raywid & Braverman L.L.P. [June 9, 1999]

This is the first of a series of columns I will be writing for ISP Planet. But this isn't the space you should watch.

The space you should watch is the intertidal zone between the unregulated Internet and the heavily (and sometimes oddly) regulated public telephone network. These two worlds have been on a collision course for years. The collision is now happening.

Recent ruling
The latest incursion into Internet space happened on February 26, 1999. That's the day the FCC issued its [in]famous Declaratory Ruling about reciprocal compensation for ISP-bound calls.

On one level—despite the hoopla surrounding it—that decision didn't actually do very much. It said that the FCC thought that ISP-bound calls were under its legal authority (as opposed to state authority). But the FCC has been saying that consistently since 1983. No news there. It said that ILECs and CLECs can agree to treat ISP-bound calls as local for purposes of compensation. But anybody who had read the 1996 Telecom Act already knew that. (Check out Section 252(a)(1)—parties can agree to whatever they want). And it said that when CLECs send calls to ISPs, they incur real costs, and should be compensated for those costs in some way.

But anyone who has paid a vendor for a switch—particularly a big switch—and then staffed up to run it knows that it costs money to receive calls from an ILEC and route them to an ISP.

Prediction
The debate about reciprocal compensation will stagger on for a while until the FCC decides what compensation scheme it wants. Then that debate will be over and those of us in the regulatory litigation business will turn our attention to other things.

But compensation aside, the thing about the Declaratory Ruling that should make ISPs nervous (and upstreams and backbones, too) is the logic the FCC used to decide that it had jurisdiction over ISP-bound calls.

The FCC could have said, "The Internet is interstate, international, and (eventually) interplanetary, so any connection to it is a federal issue, not a state issue." It didn't say that.

It could have said, "ISPs perform an 'interstate' information service, so that even local calls to ISPs are under federal, not state control." It didn't say that either.

It could have said, "We don't care whether the calls are interstate or intrastate, we get to set the rules for compensation under the 1996 Act," and then set a rule. It didn't say that, either.

POTL
What the FCC did was apply POTL (plain old telephone logic)—not to the call from an ISP subscriber to the ISP, but to the connection between the user and the Web sites the user accesses. Under this logic, each packet in a request for a distant Web site, and each packet of the response, is treated as a separate "end-to-end call" between the user and the Web site.

Now, the FCC didn't say what I'm about to say. And maybe they didn't even mean to imply it. But think about it. If an end user accessing a distant Web site does so by means of a single, integrated end-to-end "call," then what does that make everybody in between?

Answer: a carrier.

Does this mean that the FCC is about to declare that ISPs are literally "telecommunications carriers," subject to regulation and in need of state or federal authorization to operate? Does it mean that the "modem tax" is coming back? I would say almost certainly not. But it does mean that the FCC needs a better understanding than it has of what ISPs do—and how that differs from what traditional telephone companies do.

Otherwise ISPs may wake up one day to discover that they—and their upstreams—and their backbones—have all morphed into carriers, without knowing quite how they got there. Speaking from my personal perspective as a regulatory lawyer always looking for new, interesting work, I can't say that this would be bad for me. But I could certainly understand if ISPs were not very happy about it.    —End

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