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Voice Over IP services: Regulatory perspectives from the developed and the developing worlds
Computer Law & Security Report (2005) 21, 478e487
TELECOMMUNICATIONS LAW
Voice Over IP services: Regulatory perspectives from the developed and the developing worlds Stephen Rawson McCarthy Te´trault LLP, Toronto, Canada
Abstract As the technology for Internet telephone service (‘‘Voice Over IP’’ or ‘‘VOIP’’) matures, and the quality of service improves, regulators in developed and developing countries are encountering significant and very different regulatory challenges. This article looks at the issues faced by regulators in developed country markets with a history of extensive service competition. A follow-up article will contrast the issues faced in developing country markets, particularly those where service competition is limited. ª 2005 McCarthy Te ´trault LLP, Toronto. Published by Elsevier Ltd. All rights reserved.
A. The issues in developed countries Very similar issues are being encountered in a number of developed countries, including Canada, the United States and the United Kingdom. For the purposes of this article, the issues identified in regulatory proceedings in Canada will be discussed with comparisons made to similar proceedings or issues in the United States and the United Kingdom.
1. The CRTC’s communication using Internet Protocol proceeding Canada’s telecommunications regulator, the Canadian RadioeTelevision and Telecommunications Commission (‘‘CRTC’’) issued a Public Notice on 7 April 20041 by which it commenced a proceeding to examine regulatory issues associated with the provision of voice communication services using Internet Protocol technologies (i.e., VOIP). 1
E-mail address: [email protected]
Telecom Public Notice CRTC 2002-2, Regulatory Framework for Voice Communication Services using Internet Protocol; available at www.crtc.gc.ca.
0267-3649/$ - see front matter ª 2005 McCarthy Te ´trault LLP, Toronto. Published by Elsevier Ltd. All rights reserved. doi:10.1016/j.clsr.2005.08.006
Telecommunications law In the public notice, the CRTC expresses the ‘‘preliminary views’’ that voice communication services using VOIP, that use telephone numbers based on conventional numbering plans and that provide unrestricted access to or from the public switch telephone network, have functional characteristics that are the same as conventional ‘‘circuit-switched’’ voice communication services. The CRTC expresses the related view that such services should be treated for regulatory purposes in the same way as conventional voice communication services and should be subject to the same regulatory framework.2 The CRTC also expresses the following, more specific ‘‘preliminary views’’ that: VOIP services should be subject to the same principles and practices for tariff regulation as conventional voice communications services; VOIP voice communication services should be subject to the same emergency service access (or ‘‘911’’) and special access for persons with disability requirements as conventional voice communications services; and VOIP communications services should be subject to the same obligation to support the cost of service in high cost areas (the ‘‘contribution’’ mechanism used in Canada to achieve universal service objectives) as conventional voice communications services. In essence, the CRTC’s preliminary view is that voice communication services using VOIP technologies are practically equivalent to conventional voice communication services, and should be subject to the same overall regulatory framework and specific regulatory obligations as those conventional voice communication services. However, the public notice invited comments on the CRTC’s preliminary views and any other issues relevant to determining the appropriate regulatory framework for voice communication services using VOIP technologies. The CRTC conducted a public consultation in connection with this proceeding in September 2004, and received a large number of written submissions from interested parties. The CRTC has recently issued two decisions setting out its final determinations regarding the issues raised in the public notice. These decisions are reviewed in Section C of this article. 2 The CRTC expresses this conclusion in terms of the regulatory framework for competitive local exchange services, a framework established in the Commission’s ‘‘Local Competition’’ decision (Decision 97e8, 1 May 1997).
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2. FCC Notice of Proposed Rule Making The issues raised in the CRTC’s VOIP proceeding are similar in many respects to the issues raised in a comparable Notice of Proposed Rule Making (‘‘NPRM’’) issued by the Federal Communications Commission.3 In its NPRM regarding ‘‘IP-enabled services’’, the FCC poses the general question whether VOIP services should be subject to traditional economic regulation and other aspects of the regulatory framework developed for conventional voice communication services. The NPRM specifically addresses whether VOIP service providers should be subject to the sorts of disability access obligations imposed on conventional voice communication service providers, and whether VOIP service providers should be subject to equivalent emergency (911) service obligations. Other issues addressed in the NPRM include the extent to which VOIP service providers should be required to contribute to universal service funding schemes, any special consumer protection requirements associated with VOIP services and the extent to which VOIP service providers should be subject to specific tariff regulation. The NPRM invited industry comment on these and related issues. The NPRM also makes reference to a 1998 report to Congress known as the ‘‘Stevens Report’’,4 in which the FCC considered the proper classification of IP voice communication services under the Telecommunications Act of 1996. In that report the FCC declined to render conclusions regarding the proper legal or regulatory framework for VOIP services ‘‘in the absence of a more complete record focused on individual service offerings’’. However, the Commission distinguished voice communications engaged in by individuals using personal computers and related software to place calls between two computers connected to the Internet, and VOIP services that provided ‘‘phoneto-phone’’ connections having the following characteristics: the service provider holds itself out as providing voice communication or fax transmission services; customers do not require customer equipment different from the customer equipment necessary to place an ordinary touch-tone call (or a fax transmission) over the public switch telephone network; 3 ‘‘In the matter of IP-Enabled Services’’, WC Docket No. 04-36; FCC 04-28 (released 10 March 2004). 4 Federal-State Joint Board on Universal Service, CC Docket No. 96-45, report to Congress, 13FCC Rcd11501 (1998).
480 customers make calls using telephone numbers assigned in accordance with the North American Numbering Plan; and customer calls and the information conveyed by those calls are transmitted without ‘‘net change in form or content’’. The early determinations of the Stevens Report appear conceptually similar to the CRTC’s emphasis on whether VOIP services are practically equivalent to conventional voice communication services.
3. OFCOM’s consultation on new voice services OFCOM, the integrated communications regulator in the United Kingdom, issued a consultation document dated 6 September 2004 titled New Voice Services: A Consultation and Interim Guidance in which it expresses initial views and invites related comment regarding issues associated with VOIP services. The following comments taken from the introductory pages of the consultation document illustrate that OFCOM’s issues and concerns are very similar to those expressed by the CRTC and the FCC: ‘‘Some new voice services have the potential to look and feel like traditional telephone services but may not be able to deliver, in the same way or to the same standard, the same features consumers have come to expect as standard.. In dealing with this challenge OFCOM has identified its top level aims as follows: to help create an environment in which new technologies can be developed successfully in the market, so that consumers can benefit from a wider and more innovative range of services; to ensure that consumers are properly informed and protected in relation to the products they are using; and to limit the extent to which regulation creates distortions in the market. OFCOM has also identified a number of specific questions, in particular: is it desirable for all voice services to be required to offer the same standard features and level of consumer protection as traditional voice services? what should we do about access to 999? OFCOM recognizes that a balance needs to be struck between creating the right conditions in
S. Rawson which new voice services and new providers can enter the market and ensuring that consumers are properly informed and protected..’’ From these introductory comments, OFCOM’s emphasis can be summarized as: (i) seeking a balance between encouragement for service innovation and consumer protection (including providing consumers with adequate information to permit informed choice); (ii) determining how to apply service standards or obligations such as access to emergency services (‘‘999’’ in the European Union being equivalent to ‘‘911’’ in North America) to VOIP service offerings; and (iii) ensuring that regulation itself does not create market distortions.
B. Further examination of selected issues Among the issues that recur in the regulation of VOIP services, and that require further examination, are the need for economic regulation and the technical challenges of providing access to emergency services and services to disabled users. In addition to their inherent importance and public impact, these issues illustrate the dual themes of treating comparable services comparably, while recognizing and providing for practical differences between VOIP and conventional services. The selected issues will be examined using submissions in the CRTC’s VOIP proceeding, and the circumstances and arguments raised in some of those submissions.
1. The need for economic regulation The economic regulation of telecommunications carriers and service providers has a number of aspects, but one recurring aspect is the need to protect the public interest where a carrier or service provider has significant market power or dominance in a particular telecommunications market. As the CRTC has said on an earlier occasion: ‘‘The Commission does not share the view that the current circumstances warrant that it apply the same regulatory treatment to all Canadian carriers providing similar services. In the opinion of the Commission, Canadian carriers that provide, or that traditionally have provided, public-switched local telephone service on a monopoly basis (hereafter, referred to as ‘‘the Telephone Companies’’) are in a position to exercise a significant degree of market power.. In this context, the
Telecommunications law Commission notes that the Telephone Companies, as indicated, in previous decisions, have control over access to bottleneck local services, and are in a position to exercise that control in a manner that could foreclose or diminish entry to the detriment of users, including competitors’’.5 Similar observations are set out in the FCC’s IPEnabled Services NPRM: ‘‘We also seek comment on whether various traditional economic regulations set forth in Title II and Commission rules should be applied to any class of IP-enabled service provider. Among other things, Title II requires all common carriers of inter-state or foreign communications by wire or radio to provide those communications upon reasonable request at rates, classifications, and practices that are just and reasonable; prohibits common carriers from unjustly or unreasonably discriminating in charges, practices, classifications, regulations, facilities, or services against similarly situated third-party customers; and requires providers of telecommunications service to interconnect directly or indirectly with the facilities and equipment of other such providers.. While several of the regulatory obligations discussed in this Notice may have general applicability to any entity that seeks to offer voice services, many of the economic regulations set forth here have been written to apply specifically to cases involving a monopoly service provider using its bottleneck facilities to provide services to a public that is without significant power to negotiate the rates, terms and conditions of those services. With the advent of competition in markets for telecommunications services, the Commission has tailored the application of these requirements, reserving application of the most stringent for carriers considered dominant.’’6 The question arises whether VOIP services should be subject to economic regulation, particularly price regulation. In determining this issue, regulators such as the CRTC and FCC continue to draw a distinction between VOIP services offered by incumbent, dominant network operators and services provided by competitors that do not have significant market power. In the CRTC’s VOIP proceeding public notice, the Commission summarizes its history of granting forbearance from price regulation to competing providers of local and long distance voice communications services that 5 Telecom Decision CRTC 95-19, ‘‘Forbearance e Services Provided by Non-dominant Canadian Carriers’’, 8 September 1995 at p. 4. 6 Ibid, note 4 above, at p. 49e51.
481 are unable to exercise significant market power, while retaining tariff regulation for incumbent network operators that continue to exercise significant market power.7 In the public notice, the Commission concludes that where incumbent carriers provide VOIP services in the geographic markets in which they have continuing dominance, those services should be subject to otherwise applicable tariff and price regulation requirements. Conversely, competing carriers or service providers, and incumbent carriers operating in geographic markets in which they do not have significant market power, should not be required to file tariffs for VOIP services.8 The industry submissions in the CRTC’s VOIP proceeding further develop these issues and regulatory concerns. The perspective of the incumbent carriers can be seen in the submission made by Bell Canada and other incumbent companies.9 In its submission, the Companies argue that the advent of VOIP services significantly changes the retail voice communications services marketplace and calls for the Commission to exempt VOIP services from price regulation even where those services are provided by the incumbent companies in their home territories. The Companies base their call for forbearance from price regulation on a number of arguments including that: (i) the supply of VOIP services is highly competitive, with low barriers to entry (particularly given that VOIP service providers do not need their own transmission facilities); (ii) in VOIP markets specifically incumbent carriers have very small market share and so do not have market power; and (iii) VOIP services, depending on the market and configuration, are either within the category of retail Internet services (already forborne from price regulation in Canada); or, where bundled with IP network access offerings for business customers, are supplied in a highly competitive market. Another incumbent carrier, Telus Communications Inc., argues for price regulation forbearance on the basis of the ‘‘access-independent’’ nature of VOIP services.10 Telus describes the accessindependent nature of VOIP services in the following terms:
7
Ibid, note 1 above, at p. 3, 4. See also Section C.2 of this article. 9 See Submission dated 18 June 2004 submitted by Aliant Telecom, Bell Canada, Saskatchewan Telecommunications and Telebec, available at www.crtc.gc.ca using proceeding reference number 8663-C12-200402892. 10 See ‘‘Comments of Telus Communications Inc., 18 June 2004’’. 8
482 ‘‘VOIP changes voice from a service associated with a particular network infrastructure to an application that runs on virtually any data network. VOIP is access-independent, decoupling voice service from the underlying access network. That is, VOIP services are provided independent of the method of access. Customers may choose among a variety of high-speed access networks: digital subscriber line (DSL), cable modem, or wireless, to access the Internet, and via that connection to access a variety of VOIP services. These voice services operate at the Internet’s ‘‘application layer’’, quite separate from the physical access and transport layer provided by network access providers such as ILECs [incumbent carriers], cable companies, and wireless service providers. As such, access-independent VOIP services share many characteristics with other internet applications, such as email and instant messaging services (many of which feature voice capabilities).’’ In essence, Telus argues that VOIP services need to be recognized as an information technology application that operates on an underlying telecommunications service, and that is distinct from the underlying telecommunications service. Accordingly, and as the supply of VOIP services as an information technology application is highly competitive, VOIP services themselves should not be subject to price regulation. Where appropriate, however, price regulation would continue for the underlying telecommunications service (i.e., the service that permits connection to the Internet). The perspective of competing carriers (i.e., telecommunications carriers that compete with the incumbent companies) can be seen in the submission filed by MTS Allstream Inc.11 In its submission, MTS Allstream largely agrees with the Commission’s preliminary views as set out in the public notice including particularly the preliminary view that incumbent carrier VOIP services should be subject to existing tariff regulation. MTS Allstream makes a number of arguments in support of its position, but its overall position can be summarized as follows: ‘‘ILECs such as Bell Canada and Telus are replacing their digital switches with packet data switches because these switches can carry all of this traffic on one switching platform. But none of these developments have changed the elemental need for a local network that is capable of switching or routing traffic between two
11
Submission dated 18 June 2004.
S. Rawson different points on the network. Whether circuit switched or packet switched, the PSTN remains a bottleneck transmission network which will continue to be used to originate and terminate the vast majority of customer traffic for many years to come.. For the time being, therefore, the delivery of voice service using conventional circuit switching technology will remain the most pervasive and prevalent form of voice telephony service in Canada. But none of this, of course, detracts from the fact that the ILECs continue to be dominant in the local market or that this dominance will continue for some time to come regardless of how they choose to deliver voice services.. Accordingly, to view VOIP as anything other than what it is, namely a local telephone service delivered over an upgraded network, would be to lose sight of the Commission’s policy of regulating the services of dominant service providers and not the technologies which underlie those services.’’
2. Emergency services, privacy protection and services for disabled users (a) Emergency services Emergency services are the means of accessing police, fire, ambulance and similar services using the 911 number in North America and 999 in the United Kingdom (and other European countries). The importance of subscriber access to these emergency services is not questioned by anyone in the industry, including VOIP service providers. The problems associated with emergency services and VOIP services come from the fact that VOIP services have ‘‘nomadic’’ and non-geographic characteristics that can make it difficult to determine the true location of a specific user at a particular point in time. The ‘‘nomadic’’ characteristics of VOIP services result from the fact that the individual consumer can use the equipment and broadband Internet connection from any location, and not just from a fixed residential or business address. For example, a subscriber might sign up for VOIP services on the basis of his or her home broadband Internet connection and might make the majority of his or her telephone calls from that location. However, that subscriber might travel with the gateway device and other terminal equipment (either the equivalent of a conventional telephone handset, or ‘‘softphone’’ installed on a laptop computer) and might use a broadband Internet connection at a different location to access and place calls using the VOIP service.
Telecommunications law Another feature of VOIP services is that they permit a subscriber to be assigned an exchange number that appears, and that functions, as a local exchange number in a geographic service area that is distant from the subscriber’s billing address and physical location. Again, by way of example, a subscriber located and registering for service in Toronto, Canada can be issued a number that appears and functions as a local exchange number in Los Angeles, California; with calls to that number being routed to terminal equipment located in Toronto, Canada (or anywhere else the subscriber chooses). Emergency services typically function by using the signalling information embedded in a telephone call to route information about a subscriber directly to the ‘‘public service answering point’’ (PSAP) that serves the subscriber’s location. For example, a subscriber in a neighbourhood in Toronto, Canada that dials 911 has information about him or her automatically directed to the PSAP serving the relevant area, including the physical location of the subscriber associated with the telephone number. In a conventional fixed line telephone service environment, the subscriber’s location will not change unless the subscriber moves her residence or office (in which case her information will be updated by the service provider). The subscriber’s location is uniquely associated with a specific address or physical location. As indicated above, the nomadic and non-geographic aspects of VOIP services mean that subscribers using VOIP services to place emergency service calls might be located somewhere other than the residential or business address recorded by the service provider for that subscriber. Accordingly, there is a risk that emergency services could fail to locate the subscriber or could be dispatched to the wrong location. Pending other technological developments, interim solutions to these problems include the following: ensuring that VOIP service subscribers understand the potential complications associated with access to emergency services and the use of VOIP services on a nomadic or nongeographic basis; providing VOIP service subscribers with convenient ways to update the service provider’s record of the subscriber’s location (for example, using a web-based location updating tool as part of the service management system); and using call centres as an intermediary between public safety answering points and individual subscribers, so that emergency calls are directed to a call centre agent who either
483 verifies the caller’s location and then contacts the emergency service; or, at a minimum, ensures that the most current information about a subscriber’s location is available to the person responding to the emergency call. It can be noted that emergency service limitations are not unique to VOIP services. Subscribers to mobile wireless services are, by definition, not limited to a single location; and require the development of special practices or technologies to direct emergency services as closely as possible to the subscriber’s actual location. (b) Services for disabled users Perhaps the best example of disabled user access is the use of Message Relay Service allowing hearing-impaired subscribers to communicate with others using operator intervention. A hearing person who wishes to communicate with a hearing-impaired person dials a toll-free number to be connected to an operator who contacts the hearingimpaired user and relays the communication using a teletypewriter device. Conversely, a hearingimpaired person uses a teletypewriter and contact through the intervening operator to communicate with a hearing person. Technical interfaces between teletypewriter devices and IP-based technologies are still under development, meaning that conventional Message Relay Service are not feasible for at least some VOIP service configurations at the present time. It has been suggested that VOIP service providers might be able to provide a functionally equivalent means of text to speech and speech to text intervention using web-based facilities (or by using an instant messaging application); however, there is a view that the familiarity of teletypewriter devices in the hearing-impaired community makes a Message Relay Service based solution preferable. (c) Privacy protection Providers of conventional voice telephone services are typically subject to a number of privacy requirements including the blocking of calling line identification information and disabling of call return features. Depending on the technologies and service configuration used by a VOIP service provider, implementing these privacy protections may not be feasible at the present time. Accordingly, regulators need to assess whether these privacy protections are absolutely required (in which case technologies or service configurations which cannot comply would not be permitted); or whether a more flexible approach can be taken,
484 perhaps accompanied by clear communication to subscribers of the service limitations.
C. The CRTC’s recent decisions The CRTC has rendered two decisions dealing with the issues raised by Telecom Public Notice CRTC 2004-2.
1. The emergency services decision On 4 April 2005 the CRTC released Telecom Decision CRTC 2005-21.12 In that Decision, the CRTC made its final determinations regarding the emergency service issues raised in Telecom Public Notice CRTC 2002-2. In the Emergency Services Decision, the CRTC confirms its position that the public interest requires imposing emergency service obligations on local VOIP service providers. By contrast, a VOIP service offering providing only long distance calling capability would not be subject to these obligations. Only VOIP services that provide a substitute or functional equivalent to local public switched telephone network services are to be subject to the identified emergency service obligations. The Emergency Services Decision examines the special complications associated with the nomadic and non-geographic capabilities of VOIP services, and resolves these complications by examining three different ways in which VOIP services can be deployed: from a fixed address with a telephone number that is native to one of the exchanges within the customer’s PSAP (i.e., within its service area); from a fixed address with a telephone number that is not native to one of the exchanges within the customer’s PSAP service area (i.e., where the assigned telephone number is identified with an exchange that is outside the geographic area of the subscriber’s registered service address); and on a nomadic basis, where the customer makes calls from an address that is different from the registered address for service. For services associated with a fixed address and a telephone number that is native to the public safety answering point service area, the CRTC expects VOIP service providers to be able to supply 12 ‘‘Emergency Services Obligations for Local VOIP Service Providers’’.
S. Rawson emergency services practically equivalent to those for conventional local service offerings, including participating in the exchange of all required subscriber information and related data. For nongeographic and nomadic services, the CRTC requires VOIP service providers to implement appropriate interim solutions which provide a level of emergency service that is comparable to the basic emergency services provided by conventional service providers, including by using the intervention of call centre agents to confirm the location of the caller and to ensure that the call is transferred to the appropriate PSAP or emergency service best able to respond to the emergency and subscriber location. The CRTC has also asked the industry steering committee responsible for resolving competitive market issues (the ‘‘CRTC Interconnection Steering Committee’’, or ‘‘CISC’’) to submit a report identifying the technical and operational issues that impair emergency services where local VOIP service is offered on a non-geographic basis, and a similar report within one year with respect to service offered on a nomadic basis. In addition to identifying the practical problems of implementing emergency services in these circumstances, the reports will identify alternative solutions, will make recommendations for preferred solutions and will propose time frames for implementation. Finally, the Emergency Services Decision emphasizes the importance of informing potential subscribers of all emergency service limitations prior to any VOIP service commitment, and requires expressing acknowledgement by subscribers of these service limitations as part of the process of contracting for VOIP services.
2. The regulatory framework decision On 12 May 2005 the CRTC issued Telecom Decision CRTC 2005-28 resolving the remaining issues raised by Telecom Public Notice CRTC 2004-2.13 This Decision deals with the issues raised by Public Notice CRTC 2004-2 that were not dealt with in the Emergency Services Decision. Most importantly, in this Decision the CRTC sets out its final determinations regarding the regulatory framework that should apply to VOIP services, including the extent to which those services should be forborne from conventional regulation. (a) VOIP service categories The regulatory framework decision begins with a discussion of various categories of VOIP services. 13 ‘‘Regulatory Framework for Voice Communication Services using Internet Protocol’’.
Telecommunications law One category of service that the CRTC separates out for specific treatment is what it characterizes as ‘‘peer-to-peer’’ or ‘‘P2P’’ services, which the CRTC defines as ‘‘IP-enabled voice communications services that do not connect to the public switched telephone network and that do not use conventionally assigned telephone numbers’’. These peer-to-peer services include computer to computer voice communications, with traffic routed via the Internet and without using a conventional telephone number or related switching to establish the voice connection. These peer-to-peer VOIP services are considered by the CRTC to be within the category of retail Internet services, a service category that the Commission has previously determined should be forborne from regulation.14 The FCC has also determined that these peerto-peer communication services are not subject to traditional telecommunications regulation by either the FCC or state regulatory commissions, on the basis that they constitute regulation exempt ‘‘information services’’ and do not constitute ‘‘telecommunication services’’.15
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(b) Forbearance from regulation Under its governing legislation, Canada’s Telecommunications Act, the CRTC has the power to forbear from regulation where it determines that markets are sufficiently competitive or that forbearance would otherwise be in accordance with the policies set out in the Act.16 In the Regulatory Framework Decision, the CRTC confirms that VOIP services, other than peer-to-peer services, are not within the category of ‘‘retail end user Internet services’’ previously forborne from tariff and other regulation by the CRTC. The Commission bases that determination on characteristics of VOIP services that distinguish them from retail Internet services. Ultimately, the CRTC finds that the primary function of VOIP services is not accessing the Internet, but rather is accessing the public switched telephone network in order to make and receive telephone calls.17 Having determined that local VOIP services are not within existing forbearance determinations, the CRTC also considers specific requests by the
incumbent telephone companies to grant new forbearance orders regarding local VOIP services.18 The CRTC examines these requests for forbearance in accordance with a methodology based primarily on consideration of the relevant market for local VOIP services, and whether firms in that market have market power sufficient to enable them to maintain prices above those that would prevail in a competitive market.19 In performing this analysis, the CRTC finds that local VOIP services satisfy the same general requirements as circuit-switched local exchange services, and are close substitutes for those circuit switched services. Accordingly, local VOIP services are part of the same relevant market as conventional circuit switched local services. The CRTC includes ‘‘access-independent’’ VOIP service configurations in this finding that local VOIP services are part of the same relevant market as conventional local services.20 The Commission also notes that the incumbent local exchange carriers in Canada remain dominant providers of local service, accounting for 98% of local residential revenues and 92% of local business revenues in 2003. Given the definition of the relevant market, and the continuing market share of incumbent carriers, the CRTC concludes that it would not be appropriate to forbear from tariff and other regulation of local VOIP services offered by incumbent carriers at this time.21 The CRTC also considers whether cable television companies provide sufficient competition to incumbent carriers in local VOIP or other voice services markets to support forbearance. The Commission observes that though the cable companies are emerging as stronger competitors, they remain subject to obstacles compared with the incumbent carriers including the need to upgrade conventional cable networks to permit the delivery of VOIP or other voice services, and the need to accumulate experience in offering local voice services over time. The CRTC also expresses concern about the competitive advantage enjoyed by incumbent carriers in their ability to migrate existing customers from conventional telephone services to VOIP
14 See Telecom Order CRTC 99-592, ‘‘Forbearance from Retail Internet Services’’, 25 June 1999. 15 See WC Docket No. 03-45, ‘‘In the Matter of a Petition for Declaratory Ruling that Pulver.com’s Free World Dialup is neither Telecommunications nor a Telecommunications Service’’, Memorandum, Opinion and Order released 19 February 2004, FCC 04-27. See also the findings of the Stevens Report, described in Section A.2 of this article. 16 Sections 34(1) and (2) of the Telecommunications Act. 17 See p. 12 of the Decision.
18 Again, long distance services provided using IP-enabled networks would be forborne from tariff regulation in accordance with earlier CRTC determinations that the long distance market is sufficiently competitive for tariff regulation to be unnecessary. 19 This is a concept similar to that of significant market power in the European Union. See also Section B.1 of this article. 20 See the argument for regulatory forbearance made by Telus Communications Inc., described in Section B.1 of this article. 21 See paragraph 132, p. 20 of the Decision.
486 services, particularly given their continuing dominance in conventional local service markets. Another concern is that granting forbearance from tariff regulation prematurely could permit incumbent carriers to engage in targeted below cost pricing of local VOIP services, and related bundling strategies, permitting them to continue their market dominance prior to the entry of other competitors. Ultimately, the Commission denies the request for forbearance from the regulation of local VOIP services and determines that local VOIP services should be regulated as local exchange services, including application of the Commission’s previously determined regulatory framework governing local service competition22 (as modified by other parts of the Decision). (c) Application of local service regulatory framework Having dealt with the request for regulatory forbearance, in the balance of the decision the CRTC examines specific issues in the application of its regulatory framework for local service competition to local VOIP services. The Commission’s determinations include confirmation that the existing framework for the allocation of telephone numbers, and rights and obligations pertaining to local number portability, apply to local VOIP service providers on the same basis as conventional local service providers. Similarly, the requirements of directory information and subscriber listing information remain generally the same, except that directory listings for VOIP service subscribers are to appear in the local directory where calls to or from the assigned number are local calls regardless of the location of the subscriber’s service address. Local VOIP service providers are also subject to the general obligation to ensure equal access to competitive long distance service providers, and not to enter into contractual arrangements or otherwise obstruct access by their subscribers to competing long distance service providers. Regarding Message Relay Service and other disability services, the Commission concludes that local VOIP service providers should offer comparable service capabilities to the extent technically feasible, and relies on the CRTC Interconnection Steering Committee (‘‘CISC’’) to prepare a report to the Commission addressing technical problems
22
The regulatory framework for local competition is the subject of Telecom Decision CRTC 97-8, ‘‘Local Competition’’, 1 May 1997.
S. Rawson and recommended solutions for the implementation of these disability functions. Similarly, the CRTC determines that privacy safeguards such as blocking of calling line identification and disabling of call return should be implemented by local VOIP service providers to the extent technically feasible, and again requests CISC to assess the technical issues associated with implementing these privacy safeguards using VOIP technologies and service configurations. Regarding tariff filing requirements, the CRTC confirms that incumbent carriers must file tariffs for local VOIP services within their traditional geographic operating territories. Outside these territories, where the incumbent carriers do not exercise market power, the carriers will have the benefit of tariff regulation forbearance. Similarly, carriers that are non-dominant and that do not have market power in a geographic market will not be required to file tariffs for local VOIP services so long as they generally comply with the requirements of being a competitive local exchange carrier. As indicated in Section A.1 of this article, in Telecom Public Notice CRTC 2002-2 the Commission made a preliminary determination that VOIP services should be subject to the same obligation to support the cost of telecommunication service in high cost areas (the ‘‘contribution’’ mechanism used in Canada to achieve universal service objectives). In the Regulatory Framework Decision, the CRTC confirms this preliminary determination and provides further guidance on the extent to which revenues from VOIP services should be contribution eligible. Generally, the Commission confirms that the revenues for services that permit access to and from the public switched telephone network are to be contribution eligible, and that revenues associated with peer-to-peer voice communications (i.e., computer to computer and other communications that do not use conventional numbering to make a connection) are not contribution eligible. The Commission also confirms that local VOIP service providers will be entitled to the benefit of contribution fund subsidies to extend service into high cost service areas where they meet the basic service characteristics defined for conventional local service. Finally, the regulatory framework decision includes determinations requiring cable companies and telecommunications carriers to remove contractual restrictions that prohibit the offering of voice communication services from their terms of service for ISP resellers. The intention of this further determination is to ensure that ISPs making use of cable television systems or telephone company facilities or services are able to offer
Telecommunications law voice communications as part of their competing service offerings.
D. Concluding comments As indicated earlier in this article, the issues raised by the CRTC in its VOIP Public Notice are similar to issues that have been raised by the FCC and OFCOM in their own VOIP public notices and proceedings. The issues include the extent to which VOIP services and service providers should be subject to the regulatory framework established for local (and long distance) voice services generally, particularly given the underlying technologies and service characteristics of VOIP services. The CRTC’s recent decisions are among the first efforts to deal with these issues by a regulator in a market with a history of extensive voice service competition. It remains to be seen whether the CRTC’s determinations on VOIP issues will be repeated by the FCC, OFCOM or other regulators examining the issues in similar service environments. For its part, the CRTC has taken the position that to the extent that VOIP services provide unrestricted access to and from the public switched telephone network, make use of the same numbering conventions and otherwise
487 provide consumers with services that are practically equivalent to conventional telephone services, VOIP services should be subject to the same regulatory framework as conventional telephone services. The CRTC has, however, recognized that VOIP service platforms are not at present able to reproduce all of the emergency services, disability access and other service characteristics of conventional circuit switched telephone services. The CRTC has adopted the pragmatic stance of requiring VOIP services to meet these public requirements as soon as the technology makes them feasible; with specific interim measures applicable until that time, including particularly disclosure to consumers of the service limitations. The regulatory challenges faced in countries where there is not a history of extensive service competition, and where the state of development of telecommunications network facilities and services is more limited, are very different and will be explored in the second instalment of this two-part article. Stephen Rawson, Report Correspondent, Senior Counsel, International Telecommunications and Technology practice, McCarthy Te ´trault LLP, Toronto, Canada. E-mail: srawson@ mccarthy.ca
TELECOMMUNICATIONS LAW
Voice Over IP services: Regulatory perspectives from the developed and the developing worlds Stephen Rawson McCarthy Te´trault LLP, Toronto, Canada
Abstract As the technology for Internet telephone service (‘‘Voice Over IP’’ or ‘‘VOIP’’) matures, and the quality of service improves, regulators in developed and developing countries are encountering significant and very different regulatory challenges. This article looks at the issues faced by regulators in developed country markets with a history of extensive service competition. A follow-up article will contrast the issues faced in developing country markets, particularly those where service competition is limited. ª 2005 McCarthy Te ´trault LLP, Toronto. Published by Elsevier Ltd. All rights reserved.
A. The issues in developed countries Very similar issues are being encountered in a number of developed countries, including Canada, the United States and the United Kingdom. For the purposes of this article, the issues identified in regulatory proceedings in Canada will be discussed with comparisons made to similar proceedings or issues in the United States and the United Kingdom.
1. The CRTC’s communication using Internet Protocol proceeding Canada’s telecommunications regulator, the Canadian RadioeTelevision and Telecommunications Commission (‘‘CRTC’’) issued a Public Notice on 7 April 20041 by which it commenced a proceeding to examine regulatory issues associated with the provision of voice communication services using Internet Protocol technologies (i.e., VOIP). 1
E-mail address: [email protected]
Telecom Public Notice CRTC 2002-2, Regulatory Framework for Voice Communication Services using Internet Protocol; available at www.crtc.gc.ca.
0267-3649/$ - see front matter ª 2005 McCarthy Te ´trault LLP, Toronto. Published by Elsevier Ltd. All rights reserved. doi:10.1016/j.clsr.2005.08.006
Telecommunications law In the public notice, the CRTC expresses the ‘‘preliminary views’’ that voice communication services using VOIP, that use telephone numbers based on conventional numbering plans and that provide unrestricted access to or from the public switch telephone network, have functional characteristics that are the same as conventional ‘‘circuit-switched’’ voice communication services. The CRTC expresses the related view that such services should be treated for regulatory purposes in the same way as conventional voice communication services and should be subject to the same regulatory framework.2 The CRTC also expresses the following, more specific ‘‘preliminary views’’ that: VOIP services should be subject to the same principles and practices for tariff regulation as conventional voice communications services; VOIP voice communication services should be subject to the same emergency service access (or ‘‘911’’) and special access for persons with disability requirements as conventional voice communications services; and VOIP communications services should be subject to the same obligation to support the cost of service in high cost areas (the ‘‘contribution’’ mechanism used in Canada to achieve universal service objectives) as conventional voice communications services. In essence, the CRTC’s preliminary view is that voice communication services using VOIP technologies are practically equivalent to conventional voice communication services, and should be subject to the same overall regulatory framework and specific regulatory obligations as those conventional voice communication services. However, the public notice invited comments on the CRTC’s preliminary views and any other issues relevant to determining the appropriate regulatory framework for voice communication services using VOIP technologies. The CRTC conducted a public consultation in connection with this proceeding in September 2004, and received a large number of written submissions from interested parties. The CRTC has recently issued two decisions setting out its final determinations regarding the issues raised in the public notice. These decisions are reviewed in Section C of this article. 2 The CRTC expresses this conclusion in terms of the regulatory framework for competitive local exchange services, a framework established in the Commission’s ‘‘Local Competition’’ decision (Decision 97e8, 1 May 1997).
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2. FCC Notice of Proposed Rule Making The issues raised in the CRTC’s VOIP proceeding are similar in many respects to the issues raised in a comparable Notice of Proposed Rule Making (‘‘NPRM’’) issued by the Federal Communications Commission.3 In its NPRM regarding ‘‘IP-enabled services’’, the FCC poses the general question whether VOIP services should be subject to traditional economic regulation and other aspects of the regulatory framework developed for conventional voice communication services. The NPRM specifically addresses whether VOIP service providers should be subject to the sorts of disability access obligations imposed on conventional voice communication service providers, and whether VOIP service providers should be subject to equivalent emergency (911) service obligations. Other issues addressed in the NPRM include the extent to which VOIP service providers should be required to contribute to universal service funding schemes, any special consumer protection requirements associated with VOIP services and the extent to which VOIP service providers should be subject to specific tariff regulation. The NPRM invited industry comment on these and related issues. The NPRM also makes reference to a 1998 report to Congress known as the ‘‘Stevens Report’’,4 in which the FCC considered the proper classification of IP voice communication services under the Telecommunications Act of 1996. In that report the FCC declined to render conclusions regarding the proper legal or regulatory framework for VOIP services ‘‘in the absence of a more complete record focused on individual service offerings’’. However, the Commission distinguished voice communications engaged in by individuals using personal computers and related software to place calls between two computers connected to the Internet, and VOIP services that provided ‘‘phoneto-phone’’ connections having the following characteristics: the service provider holds itself out as providing voice communication or fax transmission services; customers do not require customer equipment different from the customer equipment necessary to place an ordinary touch-tone call (or a fax transmission) over the public switch telephone network; 3 ‘‘In the matter of IP-Enabled Services’’, WC Docket No. 04-36; FCC 04-28 (released 10 March 2004). 4 Federal-State Joint Board on Universal Service, CC Docket No. 96-45, report to Congress, 13FCC Rcd11501 (1998).
480 customers make calls using telephone numbers assigned in accordance with the North American Numbering Plan; and customer calls and the information conveyed by those calls are transmitted without ‘‘net change in form or content’’. The early determinations of the Stevens Report appear conceptually similar to the CRTC’s emphasis on whether VOIP services are practically equivalent to conventional voice communication services.
3. OFCOM’s consultation on new voice services OFCOM, the integrated communications regulator in the United Kingdom, issued a consultation document dated 6 September 2004 titled New Voice Services: A Consultation and Interim Guidance in which it expresses initial views and invites related comment regarding issues associated with VOIP services. The following comments taken from the introductory pages of the consultation document illustrate that OFCOM’s issues and concerns are very similar to those expressed by the CRTC and the FCC: ‘‘Some new voice services have the potential to look and feel like traditional telephone services but may not be able to deliver, in the same way or to the same standard, the same features consumers have come to expect as standard.. In dealing with this challenge OFCOM has identified its top level aims as follows: to help create an environment in which new technologies can be developed successfully in the market, so that consumers can benefit from a wider and more innovative range of services; to ensure that consumers are properly informed and protected in relation to the products they are using; and to limit the extent to which regulation creates distortions in the market. OFCOM has also identified a number of specific questions, in particular: is it desirable for all voice services to be required to offer the same standard features and level of consumer protection as traditional voice services? what should we do about access to 999? OFCOM recognizes that a balance needs to be struck between creating the right conditions in
S. Rawson which new voice services and new providers can enter the market and ensuring that consumers are properly informed and protected..’’ From these introductory comments, OFCOM’s emphasis can be summarized as: (i) seeking a balance between encouragement for service innovation and consumer protection (including providing consumers with adequate information to permit informed choice); (ii) determining how to apply service standards or obligations such as access to emergency services (‘‘999’’ in the European Union being equivalent to ‘‘911’’ in North America) to VOIP service offerings; and (iii) ensuring that regulation itself does not create market distortions.
B. Further examination of selected issues Among the issues that recur in the regulation of VOIP services, and that require further examination, are the need for economic regulation and the technical challenges of providing access to emergency services and services to disabled users. In addition to their inherent importance and public impact, these issues illustrate the dual themes of treating comparable services comparably, while recognizing and providing for practical differences between VOIP and conventional services. The selected issues will be examined using submissions in the CRTC’s VOIP proceeding, and the circumstances and arguments raised in some of those submissions.
1. The need for economic regulation The economic regulation of telecommunications carriers and service providers has a number of aspects, but one recurring aspect is the need to protect the public interest where a carrier or service provider has significant market power or dominance in a particular telecommunications market. As the CRTC has said on an earlier occasion: ‘‘The Commission does not share the view that the current circumstances warrant that it apply the same regulatory treatment to all Canadian carriers providing similar services. In the opinion of the Commission, Canadian carriers that provide, or that traditionally have provided, public-switched local telephone service on a monopoly basis (hereafter, referred to as ‘‘the Telephone Companies’’) are in a position to exercise a significant degree of market power.. In this context, the
Telecommunications law Commission notes that the Telephone Companies, as indicated, in previous decisions, have control over access to bottleneck local services, and are in a position to exercise that control in a manner that could foreclose or diminish entry to the detriment of users, including competitors’’.5 Similar observations are set out in the FCC’s IPEnabled Services NPRM: ‘‘We also seek comment on whether various traditional economic regulations set forth in Title II and Commission rules should be applied to any class of IP-enabled service provider. Among other things, Title II requires all common carriers of inter-state or foreign communications by wire or radio to provide those communications upon reasonable request at rates, classifications, and practices that are just and reasonable; prohibits common carriers from unjustly or unreasonably discriminating in charges, practices, classifications, regulations, facilities, or services against similarly situated third-party customers; and requires providers of telecommunications service to interconnect directly or indirectly with the facilities and equipment of other such providers.. While several of the regulatory obligations discussed in this Notice may have general applicability to any entity that seeks to offer voice services, many of the economic regulations set forth here have been written to apply specifically to cases involving a monopoly service provider using its bottleneck facilities to provide services to a public that is without significant power to negotiate the rates, terms and conditions of those services. With the advent of competition in markets for telecommunications services, the Commission has tailored the application of these requirements, reserving application of the most stringent for carriers considered dominant.’’6 The question arises whether VOIP services should be subject to economic regulation, particularly price regulation. In determining this issue, regulators such as the CRTC and FCC continue to draw a distinction between VOIP services offered by incumbent, dominant network operators and services provided by competitors that do not have significant market power. In the CRTC’s VOIP proceeding public notice, the Commission summarizes its history of granting forbearance from price regulation to competing providers of local and long distance voice communications services that 5 Telecom Decision CRTC 95-19, ‘‘Forbearance e Services Provided by Non-dominant Canadian Carriers’’, 8 September 1995 at p. 4. 6 Ibid, note 4 above, at p. 49e51.
481 are unable to exercise significant market power, while retaining tariff regulation for incumbent network operators that continue to exercise significant market power.7 In the public notice, the Commission concludes that where incumbent carriers provide VOIP services in the geographic markets in which they have continuing dominance, those services should be subject to otherwise applicable tariff and price regulation requirements. Conversely, competing carriers or service providers, and incumbent carriers operating in geographic markets in which they do not have significant market power, should not be required to file tariffs for VOIP services.8 The industry submissions in the CRTC’s VOIP proceeding further develop these issues and regulatory concerns. The perspective of the incumbent carriers can be seen in the submission made by Bell Canada and other incumbent companies.9 In its submission, the Companies argue that the advent of VOIP services significantly changes the retail voice communications services marketplace and calls for the Commission to exempt VOIP services from price regulation even where those services are provided by the incumbent companies in their home territories. The Companies base their call for forbearance from price regulation on a number of arguments including that: (i) the supply of VOIP services is highly competitive, with low barriers to entry (particularly given that VOIP service providers do not need their own transmission facilities); (ii) in VOIP markets specifically incumbent carriers have very small market share and so do not have market power; and (iii) VOIP services, depending on the market and configuration, are either within the category of retail Internet services (already forborne from price regulation in Canada); or, where bundled with IP network access offerings for business customers, are supplied in a highly competitive market. Another incumbent carrier, Telus Communications Inc., argues for price regulation forbearance on the basis of the ‘‘access-independent’’ nature of VOIP services.10 Telus describes the accessindependent nature of VOIP services in the following terms:
7
Ibid, note 1 above, at p. 3, 4. See also Section C.2 of this article. 9 See Submission dated 18 June 2004 submitted by Aliant Telecom, Bell Canada, Saskatchewan Telecommunications and Telebec, available at www.crtc.gc.ca using proceeding reference number 8663-C12-200402892. 10 See ‘‘Comments of Telus Communications Inc., 18 June 2004’’. 8
482 ‘‘VOIP changes voice from a service associated with a particular network infrastructure to an application that runs on virtually any data network. VOIP is access-independent, decoupling voice service from the underlying access network. That is, VOIP services are provided independent of the method of access. Customers may choose among a variety of high-speed access networks: digital subscriber line (DSL), cable modem, or wireless, to access the Internet, and via that connection to access a variety of VOIP services. These voice services operate at the Internet’s ‘‘application layer’’, quite separate from the physical access and transport layer provided by network access providers such as ILECs [incumbent carriers], cable companies, and wireless service providers. As such, access-independent VOIP services share many characteristics with other internet applications, such as email and instant messaging services (many of which feature voice capabilities).’’ In essence, Telus argues that VOIP services need to be recognized as an information technology application that operates on an underlying telecommunications service, and that is distinct from the underlying telecommunications service. Accordingly, and as the supply of VOIP services as an information technology application is highly competitive, VOIP services themselves should not be subject to price regulation. Where appropriate, however, price regulation would continue for the underlying telecommunications service (i.e., the service that permits connection to the Internet). The perspective of competing carriers (i.e., telecommunications carriers that compete with the incumbent companies) can be seen in the submission filed by MTS Allstream Inc.11 In its submission, MTS Allstream largely agrees with the Commission’s preliminary views as set out in the public notice including particularly the preliminary view that incumbent carrier VOIP services should be subject to existing tariff regulation. MTS Allstream makes a number of arguments in support of its position, but its overall position can be summarized as follows: ‘‘ILECs such as Bell Canada and Telus are replacing their digital switches with packet data switches because these switches can carry all of this traffic on one switching platform. But none of these developments have changed the elemental need for a local network that is capable of switching or routing traffic between two
11
Submission dated 18 June 2004.
S. Rawson different points on the network. Whether circuit switched or packet switched, the PSTN remains a bottleneck transmission network which will continue to be used to originate and terminate the vast majority of customer traffic for many years to come.. For the time being, therefore, the delivery of voice service using conventional circuit switching technology will remain the most pervasive and prevalent form of voice telephony service in Canada. But none of this, of course, detracts from the fact that the ILECs continue to be dominant in the local market or that this dominance will continue for some time to come regardless of how they choose to deliver voice services.. Accordingly, to view VOIP as anything other than what it is, namely a local telephone service delivered over an upgraded network, would be to lose sight of the Commission’s policy of regulating the services of dominant service providers and not the technologies which underlie those services.’’
2. Emergency services, privacy protection and services for disabled users (a) Emergency services Emergency services are the means of accessing police, fire, ambulance and similar services using the 911 number in North America and 999 in the United Kingdom (and other European countries). The importance of subscriber access to these emergency services is not questioned by anyone in the industry, including VOIP service providers. The problems associated with emergency services and VOIP services come from the fact that VOIP services have ‘‘nomadic’’ and non-geographic characteristics that can make it difficult to determine the true location of a specific user at a particular point in time. The ‘‘nomadic’’ characteristics of VOIP services result from the fact that the individual consumer can use the equipment and broadband Internet connection from any location, and not just from a fixed residential or business address. For example, a subscriber might sign up for VOIP services on the basis of his or her home broadband Internet connection and might make the majority of his or her telephone calls from that location. However, that subscriber might travel with the gateway device and other terminal equipment (either the equivalent of a conventional telephone handset, or ‘‘softphone’’ installed on a laptop computer) and might use a broadband Internet connection at a different location to access and place calls using the VOIP service.
Telecommunications law Another feature of VOIP services is that they permit a subscriber to be assigned an exchange number that appears, and that functions, as a local exchange number in a geographic service area that is distant from the subscriber’s billing address and physical location. Again, by way of example, a subscriber located and registering for service in Toronto, Canada can be issued a number that appears and functions as a local exchange number in Los Angeles, California; with calls to that number being routed to terminal equipment located in Toronto, Canada (or anywhere else the subscriber chooses). Emergency services typically function by using the signalling information embedded in a telephone call to route information about a subscriber directly to the ‘‘public service answering point’’ (PSAP) that serves the subscriber’s location. For example, a subscriber in a neighbourhood in Toronto, Canada that dials 911 has information about him or her automatically directed to the PSAP serving the relevant area, including the physical location of the subscriber associated with the telephone number. In a conventional fixed line telephone service environment, the subscriber’s location will not change unless the subscriber moves her residence or office (in which case her information will be updated by the service provider). The subscriber’s location is uniquely associated with a specific address or physical location. As indicated above, the nomadic and non-geographic aspects of VOIP services mean that subscribers using VOIP services to place emergency service calls might be located somewhere other than the residential or business address recorded by the service provider for that subscriber. Accordingly, there is a risk that emergency services could fail to locate the subscriber or could be dispatched to the wrong location. Pending other technological developments, interim solutions to these problems include the following: ensuring that VOIP service subscribers understand the potential complications associated with access to emergency services and the use of VOIP services on a nomadic or nongeographic basis; providing VOIP service subscribers with convenient ways to update the service provider’s record of the subscriber’s location (for example, using a web-based location updating tool as part of the service management system); and using call centres as an intermediary between public safety answering points and individual subscribers, so that emergency calls are directed to a call centre agent who either
483 verifies the caller’s location and then contacts the emergency service; or, at a minimum, ensures that the most current information about a subscriber’s location is available to the person responding to the emergency call. It can be noted that emergency service limitations are not unique to VOIP services. Subscribers to mobile wireless services are, by definition, not limited to a single location; and require the development of special practices or technologies to direct emergency services as closely as possible to the subscriber’s actual location. (b) Services for disabled users Perhaps the best example of disabled user access is the use of Message Relay Service allowing hearing-impaired subscribers to communicate with others using operator intervention. A hearing person who wishes to communicate with a hearing-impaired person dials a toll-free number to be connected to an operator who contacts the hearingimpaired user and relays the communication using a teletypewriter device. Conversely, a hearingimpaired person uses a teletypewriter and contact through the intervening operator to communicate with a hearing person. Technical interfaces between teletypewriter devices and IP-based technologies are still under development, meaning that conventional Message Relay Service are not feasible for at least some VOIP service configurations at the present time. It has been suggested that VOIP service providers might be able to provide a functionally equivalent means of text to speech and speech to text intervention using web-based facilities (or by using an instant messaging application); however, there is a view that the familiarity of teletypewriter devices in the hearing-impaired community makes a Message Relay Service based solution preferable. (c) Privacy protection Providers of conventional voice telephone services are typically subject to a number of privacy requirements including the blocking of calling line identification information and disabling of call return features. Depending on the technologies and service configuration used by a VOIP service provider, implementing these privacy protections may not be feasible at the present time. Accordingly, regulators need to assess whether these privacy protections are absolutely required (in which case technologies or service configurations which cannot comply would not be permitted); or whether a more flexible approach can be taken,
484 perhaps accompanied by clear communication to subscribers of the service limitations.
C. The CRTC’s recent decisions The CRTC has rendered two decisions dealing with the issues raised by Telecom Public Notice CRTC 2004-2.
1. The emergency services decision On 4 April 2005 the CRTC released Telecom Decision CRTC 2005-21.12 In that Decision, the CRTC made its final determinations regarding the emergency service issues raised in Telecom Public Notice CRTC 2002-2. In the Emergency Services Decision, the CRTC confirms its position that the public interest requires imposing emergency service obligations on local VOIP service providers. By contrast, a VOIP service offering providing only long distance calling capability would not be subject to these obligations. Only VOIP services that provide a substitute or functional equivalent to local public switched telephone network services are to be subject to the identified emergency service obligations. The Emergency Services Decision examines the special complications associated with the nomadic and non-geographic capabilities of VOIP services, and resolves these complications by examining three different ways in which VOIP services can be deployed: from a fixed address with a telephone number that is native to one of the exchanges within the customer’s PSAP (i.e., within its service area); from a fixed address with a telephone number that is not native to one of the exchanges within the customer’s PSAP service area (i.e., where the assigned telephone number is identified with an exchange that is outside the geographic area of the subscriber’s registered service address); and on a nomadic basis, where the customer makes calls from an address that is different from the registered address for service. For services associated with a fixed address and a telephone number that is native to the public safety answering point service area, the CRTC expects VOIP service providers to be able to supply 12 ‘‘Emergency Services Obligations for Local VOIP Service Providers’’.
S. Rawson emergency services practically equivalent to those for conventional local service offerings, including participating in the exchange of all required subscriber information and related data. For nongeographic and nomadic services, the CRTC requires VOIP service providers to implement appropriate interim solutions which provide a level of emergency service that is comparable to the basic emergency services provided by conventional service providers, including by using the intervention of call centre agents to confirm the location of the caller and to ensure that the call is transferred to the appropriate PSAP or emergency service best able to respond to the emergency and subscriber location. The CRTC has also asked the industry steering committee responsible for resolving competitive market issues (the ‘‘CRTC Interconnection Steering Committee’’, or ‘‘CISC’’) to submit a report identifying the technical and operational issues that impair emergency services where local VOIP service is offered on a non-geographic basis, and a similar report within one year with respect to service offered on a nomadic basis. In addition to identifying the practical problems of implementing emergency services in these circumstances, the reports will identify alternative solutions, will make recommendations for preferred solutions and will propose time frames for implementation. Finally, the Emergency Services Decision emphasizes the importance of informing potential subscribers of all emergency service limitations prior to any VOIP service commitment, and requires expressing acknowledgement by subscribers of these service limitations as part of the process of contracting for VOIP services.
2. The regulatory framework decision On 12 May 2005 the CRTC issued Telecom Decision CRTC 2005-28 resolving the remaining issues raised by Telecom Public Notice CRTC 2004-2.13 This Decision deals with the issues raised by Public Notice CRTC 2004-2 that were not dealt with in the Emergency Services Decision. Most importantly, in this Decision the CRTC sets out its final determinations regarding the regulatory framework that should apply to VOIP services, including the extent to which those services should be forborne from conventional regulation. (a) VOIP service categories The regulatory framework decision begins with a discussion of various categories of VOIP services. 13 ‘‘Regulatory Framework for Voice Communication Services using Internet Protocol’’.
Telecommunications law One category of service that the CRTC separates out for specific treatment is what it characterizes as ‘‘peer-to-peer’’ or ‘‘P2P’’ services, which the CRTC defines as ‘‘IP-enabled voice communications services that do not connect to the public switched telephone network and that do not use conventionally assigned telephone numbers’’. These peer-to-peer services include computer to computer voice communications, with traffic routed via the Internet and without using a conventional telephone number or related switching to establish the voice connection. These peer-to-peer VOIP services are considered by the CRTC to be within the category of retail Internet services, a service category that the Commission has previously determined should be forborne from regulation.14 The FCC has also determined that these peerto-peer communication services are not subject to traditional telecommunications regulation by either the FCC or state regulatory commissions, on the basis that they constitute regulation exempt ‘‘information services’’ and do not constitute ‘‘telecommunication services’’.15
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(b) Forbearance from regulation Under its governing legislation, Canada’s Telecommunications Act, the CRTC has the power to forbear from regulation where it determines that markets are sufficiently competitive or that forbearance would otherwise be in accordance with the policies set out in the Act.16 In the Regulatory Framework Decision, the CRTC confirms that VOIP services, other than peer-to-peer services, are not within the category of ‘‘retail end user Internet services’’ previously forborne from tariff and other regulation by the CRTC. The Commission bases that determination on characteristics of VOIP services that distinguish them from retail Internet services. Ultimately, the CRTC finds that the primary function of VOIP services is not accessing the Internet, but rather is accessing the public switched telephone network in order to make and receive telephone calls.17 Having determined that local VOIP services are not within existing forbearance determinations, the CRTC also considers specific requests by the
incumbent telephone companies to grant new forbearance orders regarding local VOIP services.18 The CRTC examines these requests for forbearance in accordance with a methodology based primarily on consideration of the relevant market for local VOIP services, and whether firms in that market have market power sufficient to enable them to maintain prices above those that would prevail in a competitive market.19 In performing this analysis, the CRTC finds that local VOIP services satisfy the same general requirements as circuit-switched local exchange services, and are close substitutes for those circuit switched services. Accordingly, local VOIP services are part of the same relevant market as conventional circuit switched local services. The CRTC includes ‘‘access-independent’’ VOIP service configurations in this finding that local VOIP services are part of the same relevant market as conventional local services.20 The Commission also notes that the incumbent local exchange carriers in Canada remain dominant providers of local service, accounting for 98% of local residential revenues and 92% of local business revenues in 2003. Given the definition of the relevant market, and the continuing market share of incumbent carriers, the CRTC concludes that it would not be appropriate to forbear from tariff and other regulation of local VOIP services offered by incumbent carriers at this time.21 The CRTC also considers whether cable television companies provide sufficient competition to incumbent carriers in local VOIP or other voice services markets to support forbearance. The Commission observes that though the cable companies are emerging as stronger competitors, they remain subject to obstacles compared with the incumbent carriers including the need to upgrade conventional cable networks to permit the delivery of VOIP or other voice services, and the need to accumulate experience in offering local voice services over time. The CRTC also expresses concern about the competitive advantage enjoyed by incumbent carriers in their ability to migrate existing customers from conventional telephone services to VOIP
14 See Telecom Order CRTC 99-592, ‘‘Forbearance from Retail Internet Services’’, 25 June 1999. 15 See WC Docket No. 03-45, ‘‘In the Matter of a Petition for Declaratory Ruling that Pulver.com’s Free World Dialup is neither Telecommunications nor a Telecommunications Service’’, Memorandum, Opinion and Order released 19 February 2004, FCC 04-27. See also the findings of the Stevens Report, described in Section A.2 of this article. 16 Sections 34(1) and (2) of the Telecommunications Act. 17 See p. 12 of the Decision.
18 Again, long distance services provided using IP-enabled networks would be forborne from tariff regulation in accordance with earlier CRTC determinations that the long distance market is sufficiently competitive for tariff regulation to be unnecessary. 19 This is a concept similar to that of significant market power in the European Union. See also Section B.1 of this article. 20 See the argument for regulatory forbearance made by Telus Communications Inc., described in Section B.1 of this article. 21 See paragraph 132, p. 20 of the Decision.
486 services, particularly given their continuing dominance in conventional local service markets. Another concern is that granting forbearance from tariff regulation prematurely could permit incumbent carriers to engage in targeted below cost pricing of local VOIP services, and related bundling strategies, permitting them to continue their market dominance prior to the entry of other competitors. Ultimately, the Commission denies the request for forbearance from the regulation of local VOIP services and determines that local VOIP services should be regulated as local exchange services, including application of the Commission’s previously determined regulatory framework governing local service competition22 (as modified by other parts of the Decision). (c) Application of local service regulatory framework Having dealt with the request for regulatory forbearance, in the balance of the decision the CRTC examines specific issues in the application of its regulatory framework for local service competition to local VOIP services. The Commission’s determinations include confirmation that the existing framework for the allocation of telephone numbers, and rights and obligations pertaining to local number portability, apply to local VOIP service providers on the same basis as conventional local service providers. Similarly, the requirements of directory information and subscriber listing information remain generally the same, except that directory listings for VOIP service subscribers are to appear in the local directory where calls to or from the assigned number are local calls regardless of the location of the subscriber’s service address. Local VOIP service providers are also subject to the general obligation to ensure equal access to competitive long distance service providers, and not to enter into contractual arrangements or otherwise obstruct access by their subscribers to competing long distance service providers. Regarding Message Relay Service and other disability services, the Commission concludes that local VOIP service providers should offer comparable service capabilities to the extent technically feasible, and relies on the CRTC Interconnection Steering Committee (‘‘CISC’’) to prepare a report to the Commission addressing technical problems
22
The regulatory framework for local competition is the subject of Telecom Decision CRTC 97-8, ‘‘Local Competition’’, 1 May 1997.
S. Rawson and recommended solutions for the implementation of these disability functions. Similarly, the CRTC determines that privacy safeguards such as blocking of calling line identification and disabling of call return should be implemented by local VOIP service providers to the extent technically feasible, and again requests CISC to assess the technical issues associated with implementing these privacy safeguards using VOIP technologies and service configurations. Regarding tariff filing requirements, the CRTC confirms that incumbent carriers must file tariffs for local VOIP services within their traditional geographic operating territories. Outside these territories, where the incumbent carriers do not exercise market power, the carriers will have the benefit of tariff regulation forbearance. Similarly, carriers that are non-dominant and that do not have market power in a geographic market will not be required to file tariffs for local VOIP services so long as they generally comply with the requirements of being a competitive local exchange carrier. As indicated in Section A.1 of this article, in Telecom Public Notice CRTC 2002-2 the Commission made a preliminary determination that VOIP services should be subject to the same obligation to support the cost of telecommunication service in high cost areas (the ‘‘contribution’’ mechanism used in Canada to achieve universal service objectives). In the Regulatory Framework Decision, the CRTC confirms this preliminary determination and provides further guidance on the extent to which revenues from VOIP services should be contribution eligible. Generally, the Commission confirms that the revenues for services that permit access to and from the public switched telephone network are to be contribution eligible, and that revenues associated with peer-to-peer voice communications (i.e., computer to computer and other communications that do not use conventional numbering to make a connection) are not contribution eligible. The Commission also confirms that local VOIP service providers will be entitled to the benefit of contribution fund subsidies to extend service into high cost service areas where they meet the basic service characteristics defined for conventional local service. Finally, the regulatory framework decision includes determinations requiring cable companies and telecommunications carriers to remove contractual restrictions that prohibit the offering of voice communication services from their terms of service for ISP resellers. The intention of this further determination is to ensure that ISPs making use of cable television systems or telephone company facilities or services are able to offer
Telecommunications law voice communications as part of their competing service offerings.
D. Concluding comments As indicated earlier in this article, the issues raised by the CRTC in its VOIP Public Notice are similar to issues that have been raised by the FCC and OFCOM in their own VOIP public notices and proceedings. The issues include the extent to which VOIP services and service providers should be subject to the regulatory framework established for local (and long distance) voice services generally, particularly given the underlying technologies and service characteristics of VOIP services. The CRTC’s recent decisions are among the first efforts to deal with these issues by a regulator in a market with a history of extensive voice service competition. It remains to be seen whether the CRTC’s determinations on VOIP issues will be repeated by the FCC, OFCOM or other regulators examining the issues in similar service environments. For its part, the CRTC has taken the position that to the extent that VOIP services provide unrestricted access to and from the public switched telephone network, make use of the same numbering conventions and otherwise
487 provide consumers with services that are practically equivalent to conventional telephone services, VOIP services should be subject to the same regulatory framework as conventional telephone services. The CRTC has, however, recognized that VOIP service platforms are not at present able to reproduce all of the emergency services, disability access and other service characteristics of conventional circuit switched telephone services. The CRTC has adopted the pragmatic stance of requiring VOIP services to meet these public requirements as soon as the technology makes them feasible; with specific interim measures applicable until that time, including particularly disclosure to consumers of the service limitations. The regulatory challenges faced in countries where there is not a history of extensive service competition, and where the state of development of telecommunications network facilities and services is more limited, are very different and will be explored in the second instalment of this two-part article. Stephen Rawson, Report Correspondent, Senior Counsel, International Telecommunications and Technology practice, McCarthy Te ´trault LLP, Toronto, Canada. E-mail: srawson@ mccarthy.ca