8th Circuit Judge Takes 'Strong Guidance' From FCC on State VoIP Regulation
ST. PAUL -- A federal circuit judge showed deference to FCC legal analysis but asked if there can be federal pre-emption of states regulating interconnected VoIP without a ruling on classification of such services. The question came at oral argument Tuesday at the 8th U.S. Circuit Court of Appeals. Other judges asked if technical differences between Charter Communications’ VoIP service and traditional phone services make it an information rather than telecom service. Minnesota is challenging a lower court’s May 2017 decision that Charter’s cable VoIP is an information service exempt from Public Utilities Commission regulation (see 1705080048).
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The 8th Circuit case is seen as having big ramifications for the jurisdictional question of whether states may regulate VoIP and other IP-based services. Charter’s complaint at U.S. District Court in St. Paul alleged the PUC overstepped its authority by imposing state regulations for traditional phone services on VoIP. The case began in March 2013, when Charter transferred 100,000 Minnesota customers to an affiliate that provided VoIP phone service that wasn't certified by the PUC. The agency said interconnected VoIP is a telecom service subject to state regulation, but Charter and intervenor the Voice on the Net Coalition said it’s an information service and subject only to FCC regulation.
Judge James Loken said he placed much weight in the FCC October amicus brief that said Minnesota VoIP regulation would disrupt the market, stifle competition and hurt consumers (see 1710300036). “I take that as, if not a marching order,” then as “strong guidance,” the judge said. But he noted the FCC didn’t say interconnected VoIP is an information service. It “bothered” the judge what the basis would be for federal pre-emption if classification isn’t decided, he said.
The court should give more weight to FCC decisions than to that agency's legal brief, which contradicted decades of FCC precedence, said Minnesota Assistant Attorney General Andrew Tweeten. He pointed to a statutory note by Congress to the Telecom Act saying that state authority shall not be pre-empted. The court need not go to the “great length” that the lower court did to resolve classification of interconnected VoIP, a question not even the FCC has resolved, Tweeten said.
The panel should strongly consider the FCC brief, said Charter outside counsel Ian Gershengorn of Jenner & Block. The federal agency gave policy justifications that could be used to reach a classification decision, and the court may go “one step further than the FCC has,” he said.
Loken disagreed with Minnesota counsel that the 8th Circuit decided in Vonage III that a state may regulate under the 1996 act if traffic can be separated into intrastate and interstate buckets. That 2008 ruling, which quoted a 2006 FCC USF contribution order, supports PUC regulation since Charter can separate traffic and most calls are within Minnesota, Tweeten argued. Vonage III didn’t resolve the question, said Gershengorn.
Judge Ralph Erickson asked if it's a "red herring" for Charter to argue it sells phone service as part of a package with advanced services. Judge Steven Grasz asked if the court may need to remand the case to the lower court to consider if phone and added IP-based services are “inextricably intertwined.” The statutory definition of telecom services includes a line saying the facilities used don’t make a difference in classification, noted Grasz, asking if the average customer sees any difference.
Combining protocol conversion with telecom makes it an information service, said Gershengorn. Charter’s “unified offering” has advanced functions like robocall blocking and voice-to-text transcription, he said. The court must remand to the lower court on the intertwined-services question only if it rules against the company, he said.
The cable operator plainly sells a phone service, not a protocol conversion service, and bundling it with other services doesn’t affect classification, said Tweeten. The question to ask is whether a telecom service is offered, which Charter is doing, the state lawyer said.
Letting Minnesota regulate VoIP would lead to patchwork rules stifling innovation and throwing the voice service market into “disarray,” Gershengorn said. It’s not fair to treat Charter’s interconnected VoIP service differently from wireless or nomadic VoIP services with which it competes, he said. Tweeten countered that it’s unequal to regulate traditional phone services but not Charter’s competing cable VoIP service.
State consumer advocates supported state regulation of interconnected VoIP as a universal service, in a May 31 letter to the court (see 1806010019), while phone, cable and VoIP industry groups urged in amicus briefs last year a light touch for VoIP (see 1710310025). The Charter counsel and the Minnesota PUC declined to comment after the argument.