Before the Federal Communications Commission Washington, D.C ) ) ) TRANSCOM ENHANCED SERVICES, INC. REPLY COMMENTS ON FNPRM

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1 In the Matter of Rural Call Completion Before the Federal Communications Commission Washington, D.C ) ) ) WC Docket No TRANSCOM ENHANCED SERVICES, INC. REPLY COMMENTS ON FNPRM NOW COMES TRANSCOM ENHANCED SERVICES, INC. ( Transcom ) and submits these Reply Comments regarding the FNPRM portion of the November 8, 2013 Report and Order ( Order ) issued in the above styled proceeding (FCC ). I. Introduction. The FNPRM portion of the Order requested comment on whether the Commission should extend certain rules to intermediate providers. One commenter proposed that the Commission promulgate a rule requiring all intermediate providers to register with the Commission. 1 requirements. 2 Some supported regulation of intermediate providers by way of reporting A few went even further and sought a declaration or rule allowing state commissions to impose entry/exit (and, perhaps, economic or other) regulation on intermediate providers. 3 None of these proposals can be adopted if and to the extent they would apply to an entity that is not a common carrier and does not offer or provide telecommunications. The Commission wholly lacks any power to regulate by way of requiring registration or reporting and it cannot give permission for states to regulate in this area. Transcom is an end user, and a rating end-point where calls originate and terminate. Transcom does not admit that it is an intermediate provider as defined by Rule (f) and 1 Oregon PUC Comments, p See, e.g., Independent LEC Comments, p. 8; Northwest Associations Comments, p. 4; Rural Association Comments, pp Missouri PSC Comments, pp. 2-4; MNDOC Comments, pp. 1-3; NARUC Comments, pp. 4-7; Nebraska PSC Comments, p. 1. 1

2 new Rule (e). But Transcom, however, admits that the Commission has disagreed at least in part. Transcom maintains its position, but these Reply Comments apply the Commission s interpretation of originate and terminate and then show that the Commission lacks jurisdiction under the Act to extend any regulation to intermediate providers that are not common carriers and do not offer or provide telecommunications. Transcom will also show that the Act prohibits the states from imposing entry/exit or any other form of regulation on entities that are not common carriers, and the Commission has no power or discretion to allow them to try to do so. Transcom does not provide retail service to consumers. More important, Transcom does not either offer or provide 4 telecommunications. Two federal courts in four different decisions held that Transcom s service involves changes to both the form and the content of the information as sent and received and that Transcom provides enhanced/information service, not telecommunications or a telecommunications service. 5 The statute requires that the information must be without change in order for the product to constitute telecommunications. 6 Transcom reserves the right to and does change the content of the information it receives from its individual customers and obtains elsewhere to deliver to its individual customers. Transcom reserves the right to and does change some of the bearer voice related content and some of the signaling ( call control ) content, 7 by using its 4 The Commission has distinguished offer and provide. Provide encompasses a broader set of activities than does offer. In the Matter of Universal Service Contribution Methodology, 21 FCC Rcd 7518, , 34-45, pet. review denied sub nom, Vonage Holdings Corp. v. FCC, 489 F.3d 1232, 1241 (D.C. Cir. 2007). Transcom, however, does not either offer or provide telecommunications under the prevailing authority. 5 See Exhibits 1-4. See especially Transcom FMPRM Reply Comments Exhibits Page See 47 U.S.C. 153(50). 7 SS7 call control relies on a series of messages, each with several parameters. The Commission s rules for signaling delivery and integrity in Part 64, Subparts P and W address a relatively few parameters in only some of the SS7 messages. Transcom is presently abiding by the Commission s specific rules (under protest and without waiver), but reserves the right to, and does, remove, replace, supplement and/or modify the content of other message parameters not governed by the rules. 2

3 advanced technology to do so as it deems necessary in its own business judgment. Transcom s system acts on the content as the basis to perform some of its functions, and this often results in the replacement or deletion (more precisely a failure to wholly regenerate an exact duplicate) of both signaling and bearer content. Transcom s system can and does generate new content, again for both bearer voice and call control information. As a matter of law, therefore, Transcom does not either offer or provide telecommunications. Even if Transcom did offer or provide telecommunications it would not be a provider of telecommunications service because Transcom is not a common carrier. 8 Transcom has never held out as a common carrier. Transcom requires individual negotiations, and its contracts are long term. Transcom reserves the right to refuse service. Transcom has differing terms as between its customers, and reserves the right to have and does have contract terms that would constitute unjust or unreasonable discrimination if Transcom were a carrier. Transcom develops individual products for discrete customers in response to actual or potential market demand, and the specifics of its services and prices vary amongst and between individual customers. The Commission is well aware that Transcom has vigorously defended its status as a non-carrier enduser, another strong indication that Transcom is not a common carrier because it shows that Transcom will not willingly submit to regulatory attempts to make it become one. Although Transcom supports IP Telephony, it does not provide interconnected VoIP service (as defined in Rule 9.3), non-interconnected VoIP service (as defined by 47 U.S.C. 153(36)) or Broadband Internet Access (as defined by the now-vacated Rule 8.11(a)). 9 This is so because, once again, Transcom does not serve retail end users. Transcom carefully selects the entities with whom it negotiates, and upon successful negotiation, signs individualized long-term 8 See Transcom FMPRM Reply Comments Exhibits Page 30 of Since Transcom does not provide Broadband Internet Access, the Commission cannot justify imposing regulation under 706. C.f. Verizon v. FCC, No , 2014 U.S. App. LEXIS 680 (D.C. Cir. Jan. 14, 2014). 3

4 contracts to provide enhanced/information services to each of its contract partners. These companies use Transcom s enhanced/information service as an input to their own output product. The customers output product will then have its own regulatory classification. 10 Transcom is not a carrier so it is by definition an end user. 11 Transcom uses CPE (as defined by 47 U.S.C. 153(16)), and Transcom does not employ telecommunications equipment as defined in 47 U.S.C. 153(52). These provisions on their face clearly result in the conclusion that calls originate from and terminate to Transcom s CPE, even though Transcom s CPE may almost immediately initiate a further communication just like is the case with most ESP services. 12 Since calls originate from and terminate to Transcom s CPE, Transcom cannot, as a matter of law, be an intermediate provider as defined in Rule (f) and now Rule (e). Transcom acknowledges that the Commission disagrees with the proposition that Transcom is an end-point where calls originate and terminate for rating purposes. It rejected that assertion in Connect America. 13 The Commission held that traffic does not either originate from or terminate to Transcom s CPE. The Commission chose notwithstanding Transcom s 10 The Commission and ILECs consistently try to define and characterize Transcom based on the services received by, and notional imputed expectations of, retail end users procuring telecommunications services from third parties. But Transcom does not serve retail end users and is not in privity with them. Transcom s customer is another company which purchases Transcom s enhanced/information service at wholesale to use as an input to the customer s own output product. Transcom s regulatory classification and status must, as a matter of law, be determined by the nature of the service that Transcom provides to Transcom s direct customer, not by reference to what some retail end user one or more further links down the chain may receive or perceive. AT&T Submarine Systems, Inc. Application for a License to Land and Operate a Digital Submarine Cable System Between St. Thomas and St. Croix in the U.S. Virgin Islands, 13 FCC Rcd 21585, , 6 (1998), aff d Virgin Islands Telephone Corporation v. FCC, 198 F.3d 921, (D.C. Cir. 1999). 11 See, e.g. 47 C.F.R. 69.2(m). The Act incorporates the carrier or end user binary construct in a host of ways, but the starkest illustration appears through a comparison of the 153(16) definition of customer premises equipment [ equipment employed on the premises of a person (other than a carrier) to originate, route, or terminate telecommunications. ] and the 153(52) definition of telecommunications equipment [ equipment, other than customer premises equipment, used by a carrier to provide telecommunications services, and includes software integral to such equipment (including upgrades) ]. 12 Bell Atlantic Tel. Cos. v. FCC, 206 F.3d 1, 6-7 (D.C. Cir. 2000). 13 Connect America Fund, , 26 FCC Rcd 17663, (2011). 4

5 judicially-recognized end user status to treat Transcom as an intermediate provider (e.g. an entity that carries or processes traffic that traverses or will traverse the PSTN at any point insofar as that entity neither originates nor terminates that traffic ). Transcom does not intend to relitigate the matters decided in Connect America Fund in this proceeding. The Connect America Fund rules are presently on review at the Tenth Circuit. Rather, Transcom s sole purpose is to challenge the proposals to extend additional regulations on non-carrier intermediate providers beyond those imposed in Connect America. Thus, while Transcom continues to assert it is not an intermediate provider because for rating purposes it is an end-point rather than an intermediate point, these Reply Comments will assume arguendo (but without waiver) that Transcom is an intermediate provider under rules (f) and (e). Transcom will then show that the Commission cannot lawfully impose even more regulation on intermediate providers that are not common carriers, and the states are statutorily prohibited from doing so as well. Transcom will also show that the Commission lacks any power to give permission to the states to expand their jurisdiction beyond what is allowed by the Act. II. The definition of intermediate provider is overbroad and includes entities outside of the Commission s jurisdiction. Extending retention and reporting requirements and allowing state regulation over intermediate providers that are not common carriers would be unlawful because the definition of intermediate provider captures a huge number of innocent parties that have no idea they meet the definition. The FNPRM asked whether it extend regulations to intermediate providers. The FNPRM did not limit the question to only intermediate providers operating on common carrier basis or those that offer and/or provide telecommunications. Several commenters supported imposing additional burdens. Others suggested that the FCC should require that intermediate 5

6 providers register with the Commission, while a few asked the Commission to bless efforts by state regulators to impose entry/exit or economic regulation on intermediate providers. The Commission should not do any of these things. The definition of an intermediate provider in 47 C.F.R (f) is very broad. It purports to cover any entity that carries or processes traffic that traverses or will traverse the PSTN at any point insofar as that entity neither originates nor terminates that traffic. (Emphasis added.) The definition is not limited to entities that offer or provide telecommunications, or even to companies that consciously choose to participate in the call handling business. 14 It says that if you are somehow involved in a call, but are not the company that originates or terminates the call, then you are an intermediate provider. Every entity whose Internet instrumentalities (routers, servers, and even the backbone) in any manner carry or process a VoIP-PSTN call is an intermediate provider even though most of them have no idea that a voice call is being carried or processed because they are merely providing Internet. A hotel, coffee shop or regular business in any trade that makes Wi-Fi available as an amenity could be used by a patron employing a VoIP client to make or receive a call. They are an intermediate provider because the radio connection carries the datagrams representing the call, and the router processes them. A cable company whose broadband service is used to make or receive an over the top VoIP call is an intermediate provider. 15 Any company that supports conferencing, operates a 14 The Commission and commenting parties appear to assume that the definition is (or at least its actual application will be) limited only to a provider who is in some manner consciously participating in the market of supporting voice calls because most of the discussion by all concerned is stated in that context. But the plain words of the definition are not so limited, and capture a host of other entities. The loose terminology will create innumerable problems. 15 This is so because the entity providing the over the top interconnected VoIP service or its LEC partner is deemed under the Commission s Connect America rules to be the one that is providing the origination and/or termination. 47 C.F.R (d)(3) says that the carrier s end office switch, or equivalent facility, [] deliver[ing] [] such traffic to the called party s premises is the one providing termination. The company owning 6

7 leaky key system, PBX or softswitch that allows someone to dial in, secure dial tone and then dial out is an intermediate provider. Any entity using CPE that internally performs a function akin to call forwarding is an intermediate provider. The operations allowed by the Commission in ARCO 16 turn ARCO into an intermediate provider. Thomas Carter and all others that use an interconnecting device fit within the definition of intermediate provider. 17 The definition captures a wide-ranging group of entities that likely have no idea they meet the definition and may soon have to register or retain call data 18 If intermediate providers become covered providers then they would have to file the burdensome reports required by rule A large number of folks will be quite unpleasantly surprised to learn that they must seek state certification and submit to state regulation merely because they use modern CPE and take advantage of the capabilities allowed by their customer premises equipment, or supply Wi-Fi as an amenity to their patrons. The Initial Regulatory Flexibility Analysis wholly fails to recognize the broad sweep of entities captured by the plain meaning of the words used in the definition of intermediate provider because it does not mention the multitude of private businesses operating modern CPE or hotels and coffee shops offering Wi-Fi to their patrons even though, as shown above, they meet the definition and thus would be captured by any extension of the contemplated rules to or operating the underlying transmission facility is often not the same entity as the terminating provider. See also 47 C.F.R (c)(3). But the transmission is what carries the datagrams representing the call and the router processes them even though it likely does not know or care that the datagrams it is processing represent a voice call and it for sure will not know if the call involves a rural OCN. 16 In the Matter of Atlantic Richfield Company, 3 FCC Rcd 3089 (1988), aff d Public Utility Com. v. FCC, 886 F.2d 1325 (D.C. Cir. 1989). 17 In The Matter of Use of the Carterfone Device, 14 FCC 2d 571 (1968). 18 If the rule requirements are extended to every entity meeting the definition then every such entity, including a very large number of private businesses that do not even consider themselves to be in the communications business will have to record and retain information about each call attempt and preserve all of the information demanded by (e)(1)-(9). 7

8 intermediate providers. This omission must be rectified before any new recordkeeping or other regulatory burdens can be imposed on an intermediate provider as that term is presently defined. III. The FCC lacks the power to regulate entities that are not common carriers and do not provide telecommunications or any telecommunications service. The Commission s Title II powers extend only to common carriers, e.g., entities that offer telecommunications service. While the Commission has discretion to impose some obligations on entities that provide telecommunications there is nothing in the Act that allows the FCC to impose registration, certification, record retention, reporting or any other obligation on an entity that neither offers nor provides telecommunications, especially if the entity does not have any kind of license or receive any federal support overseen by the Commission. The entity is wholly outside of the Commission s ability to require registration or impose any obligations. 19 The FCC completely lacks the statutory power to take any act with regard to an entity that is not a carrier and does not offer or provide telecommunications. IV. FCC cannot bless any state s assertion of entry/exit or other regulation on non-carriers. The states residual authority extends only to common carriers. The reservation to the states in section 2(b) (47 U.S.C. 152(b)) allows state regulatory power over carriers but it also limits their reserved power to only carriers. The Commission has recognized this legal principle: Intrastate communications is not separately defined in the Act except to the extent it is described in the definition of interstate communication as a wire or radio communication between points in the same State. 47 U.S.C. 153(22) (emphasis added). We note that section 2(b) reserves to the states only matters connected with carriers, which means common carriers or 19 The D.C. Circuit s recent opinion in Loving v. United States, No , 2014 U.S. App. LEXIS 2512 (D.C. Cir. Feb. 11, 2014) illustrates this point. The Court held that the IRS could not require tax preparers to submit to regulation, register, pay fees and take other substantive action because they are not subject to IRS regulation. In our context, that translates into the proposition that the FCC cannot impose regulations and rules of conduct on noncarriers that do not either offer or provide telecommunications. 8

9 telecommunications carriers under sections 3(10) and 3(44) of the Act. 47 U.S.C. 153(10), (44). 20 The courts agree: Section 152(b) of Title 47, U.S.C., expresses a similar denial of Commission jurisdiction, except as provided by 301, over radio or wire carriers whose operations are either intrastate, or interstate or foreign only by interconnection with another carrier with whom it has no interlocking control relationship. Reserving the same question set forth above as to the breadth of the 301 licensing power, and not conceding that SMRS fit within the categories of intrastate and interconnection interstate operations to which the section applies, we again rest our holding on other grounds. Under 47 U.S.C. 153(h), the term carrier, as used in 152(b), is equated with common carrier. Thus, 152(b) only has application to common carriers, and our affirmance of the Commission s non-common carrier classification of SMRS vitiates any objection which might rest upon it. 21 And The plain meaning of the language of any carrier is that the statute applies to communications services provided by common carriers such as AT&T and the BOCs as distinguished from communications services provided by noncommon carriers such as IBM. Thus, the distinction made by the statute is between providers of communications services, i.e., between carriers and noncarriers. 22 The states do not have, and cannot assert, regulatory jurisdiction over an entity that is not a common carrier. This is particularly so with regard to non-carrier providers of enhanced/information service because they have been preempted. The Communications Act regulates telecommunications carriers, but not information service providers, as common carriers. 23 The Commission has long recognized Congressional intent to maintain a regime in 20 In the Matter of Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an Order of the Minnesota Public Utilities Commission, 19 FCC Rcd 22404, 22412, 16, n 53 (2004), aff d Minn. PUC v. FCC, 483 F.3d 570 (8th Cir. 2007) (emphasis added). 21 National Asso. of Regulatory Utility Comm rs v. Federal Communications Com., 525 F.2d 630, (D.C. Cir. 1976) ( NARUC I ), cert. den. 425 U.S. 992 (1976) (emphasis added). 22 California v. FCC, 905 F.2d 1217, 1240 (9th Cir. 1990), cert. den. 514 U.S (1995) (emphasis added). 23 NCTA v. Brand X Internet Services, Inc., 545 U.S. 967, 975 (2005); Verizon v. FCC, slip op at

10 which information service providers are not subject to Title II regulations as common carriers. 24 The Commission cannot grant the states request that they be allowed to impose entry/exit or other regulation over non-carriers and enhanced/information service providers. V. Conclusion. Transcom is not a common carrier. Transcom does not offer or provide telecommunications. Neither the Commission nor any state has any power to impose registration, entry/exit or economic regulation of any sort on Transcom or any other entity that is not a common carrier and does not offer or provide telecommunications. Transcom cannot be compelled to submit to regulation by the FCC or any state merely because it (along with a wide range of other entities ) arguably falls within the overbroad definition of an intermediate provider. The Commission cannot (and should not) require a non common carrier that does not either offer or provide telecommunications to register or abide by any rule of conduct. The states do not have any jurisdiction over non common carriers, and the FCC cannot give it to them. The FCC and the states are all statutorily barred from trying to tell Transcom that it cannot provide enhanced/information service absent their consent and must submit to regulation as a condition for continuing to provide enhanced/information services. The Act does not permit the contemplated actions. February 18, 2014 Respectfully Submitted, W. SCOTT MCCOLLOUGH MCCOLLOUGH HENRY PC 1250 S. Capital of Texas Hwy., Bldg West Lake Hills, TX Phone: Fax: wsmc@dotlaw.biz Counsel for Transcom Enhanced Services, Inc. 24 In the Matter of Appropriate Regulatory Treatment for Broadband Access to the Internet Over Wireless Networks, 22 FCC Rcd 5901, 5916 ( 41) (2007). 10

11 Transcom FMPRM Reply Comments Exhibits Page 1 of 52. Exhibit 1 to Transcom Enhanced Services, Inc. Reply Comments

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