Cybertelecom Federal Internet Law & Policy An Educational Project

Notes: Computer Inquiries

Definitions

Computer I

38. It was prior to the development of these very different legal, technological and market circumstances that the Commission initiated its Computer Inquiry line of cases.  In Computer I, the Commission addressed the questions of whether data processing services should be subject to regulation under Title II of the Act, and whether, and under what conditions, all common carriers should be permitted to compete in the market for data processing services.  Finding that the computer data services industry "is one characterized by open competition and relatively free entry," the Commission concluded that it "should not, at this point, assert regulatory authority over data processing as such."   Moreover, the Commission found that allowing common carriers to provide computer data services would likely benefit the public through "new and improved services and lower prices."   Yet the Commission also recognized that common carriers might be able to "favor their own data processing activities by discriminatory services, cross-subsidization, improper pricing of common carrier services, and related anticompetitive practices and activities."   Thus, the Commission required common carriers to furnish data processing services through a separate corporate entity that could not use regulated communications facilities to provide unregulated services.   Finally, the Commission prohibited common carriers from discriminating in favor of their data processing affiliates.
--In Re Appropriate Framework for Broadband Access to the Internet over Wireline Facilities, CC Docket No. 02-33, CC Dockets Nos. 95-20, 98-10, NPRM (February 15, 2002) http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-02-42A1.doc

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"the Commission distinguished between communications services using computers to perform message or circuit switching, which were regulated, and data processing services, which were left to marketplace competition" Computer and Communications Industry Association v. Federal Communications Commission, 693 F.2d 198, 203, 224 U.S.APP.D.C. 83 (D.C. Cir. 1982).

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The Commission defined data processing as the "use of a computer for the processing of information as distinguished from circuit or message- switching." Computer I Tentative Decision, 28 FCC2d at 295. "Message-switching" was defined as "[t]he computer-controlled transmission of messages, between two or more points, via communications wherein the content of the message remains unaltered." Id. at 296. Computer and Communications Industry Association v. Federal Communications Commission, 693 F.2D 198, 203 n. 6, 224 U.S.APP.D.C. 83 (D.C. Cir. 1982)

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In Computer II the Commission found it increasingly difficult to distinguish between communications and dataprocessing. Computer and Communications Industry Association v. Federal Communications Commission, 693 F.2D 198, 224 U.S.APP.D.C. 83 (D.C. Cir. 1982) ("It therefore became increasingly difficult to classify terminals and services as either communications or data processing")

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 17.  Regulatory forbearance with respect to data processing services made it necessary to distinguish regulated communications services from unregulated data processing services.  Accordingly, in the First Computer Inquiry a set of definitions was adopted to assist in making such determinations.  See 47 CFR s 64.702.  The thrust of this definitional approach was to distinguish between unregulated data processing and permissible carrier utilization of computers by establishing a dichotomy between data processing and message or circuit switching.  We recognized that entities would offer 'hybrid' services combining both communications and data processing functions.  We stated that where message-switching is offered as an incidental feature of an integrated service offering that is primarily data processing, there would be total regulatory forbearance with respect to the entire service.  However, where the package offering is oriented to satisfy the communications or message-switching requirements of the subscriber, and the data processing function is incidental to the message-switching performance, we concluded that the entire integrated service would be treated as a communications service.  We also stated that in making such determinations we would look to whether the service, by virtue of its message-switching capability, has the attributes of the point-to-point services offered by conventional communications common carriers and is basically a substitute therefor.
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 22.  As a result of the Dataspeed 40/4 decision, a Supplemental Notice was issued.  We proposed to enlarge the scope of the proceeding to include all processing activities, whether performed at a central location, at the customer's premises, or at intermediate locations within or interconnected with a telecommunications network.  A modified definition of data processing was proposed to render our computer rules applicable to the distributed processing environment and to determinations as to the nature of a carrier's processing activities--regardless of location or system structure.  We proposed that 'data processing' be defined as:

  the electronically automated processing of information wherein: (a) the information content, or meaning, of the input information is in any way transformed, or b) where the output information constitutes a programmed response to input information.

Supplemental Notice at para. 8.  Recognizing that various computer processing functions are performed in the provision of both data processing and communications services, the new definition was structured in a manner so as to focus on processing activities. [FN5]  Under the new definition the determination as to whether a communications or data processing service is being offered would depend on the nature of the processing activity involved.
--In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Final Decision, 77 FCC2d 384 (May 2, 1980) (Computer II Final Decision)

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Commission's classification of complex of small machines with communicative capacity to send and receive messages from central computer as "communications" as opposed to "data processing," enabling common carrier to offer service at lower rate, was not improper. International Business Machines Corp. v. FCC, 570 F.2d 452 (2nd Cir. 1972).

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 45. Several parties expressed concern that the definitions and concepts we adopted for purposes of this decision be neither fixed nor immutable, and that recognition be accorded the fact that they may change with developing technology. We concur. As was indicated in paragraph 15 of the Tentative Decision, the definitions therein were for purposes 'of providing clarity and precision of definition and application'. They were, as was pointed out, 'for our immediate purposes' and consequently do not apply, nor do we necessarily urge their application, beyond this proceeding and the rules promulgated herein.
--In The Matter Of Regulatory And Policy Problems Presented By The Interdependence Of Computer And Communication Services And Facilities, Docket No. 16979, Final Decision and Order, 1971 WL 22948 (FCC), 21 Rad. Reg. 2d (P & F) 1591 (March 18, 1971) (Computer I).

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 15. In our First Report, we noted that before these issues could be resolved, it would be necessary to define as precisely as possible the terms we shall employ so that they could be understood and uniformly applied by all interested parties. In this highly technical and rapidly growing industry, new terms, many of which may overlap in meaning, have proliferated. However useful these terms may be to the data processing community, or any segment thereof, we have concluded that, for our immediate purposes, we need to establish definitions that are as free from ambiguity as language permits. The task of definition is no simple one. This is because computers and communications have become so interdependent and interactive in the transmission and processing of data that sharp delineation of these functions is hardly possible except in somewhat generalized terms. Since our purpose is uniquely that of government regulation, we shall define only those basic terms indispensable to our objective of providing clarity and precision of definition and application. The specific terms which we shall employ are set forth below with their respective definitions:
 (a) Data Processing -- The use of a computer for the processing of information as distinguished from circuit or message-switching. 'Processing' involves the use of the computer for operations which include, inter alia, the functions of storing, retrieving, sorting, merging and calculating data, according to programmed instructions.
 (b) Message-Switching -- The computer-controlled transmission of messages, between two or more points, via communications facilities, wherein the content of the message remains unaltered.¹
 (c) Local Data Processing Service -- an offering of data processing wherein communications facilities are not involved in serving the customer.
 (d) Remote Access Data Processing Service -- an offering of data processing wherein communications facilities, linking a central computer to remote customer terminals, provide a vehicle for the transmission of data between such computer and customer terminals.
 (e) Hybrid Service -- an offering of service which combines Remote Access data processing and message-switching to form a single integrated service.
--In The Matter Of Regulatory And Policy Problems Presented By The Interdependence Of Computer And Communication Services And Facilities, Docket No. 16979, Tentative Decision, 28 FCC 291 (April 3, 1970)
 

Hybrid

Computer II

These two statutory classifications originated in the late 1970’s, as the Commission developed rules to regulate data-processing services offered over telephone wires. That regime, the “Computer II” rules, distinguished between “basic” service (like telephone service) and “enhanced” service (computer-processing service offered over telephone lines). In re Amendment of Section 64.702 of the Commission’s Rules and Regulations (Second Computer Inquiry), 77 F. C. C. 2d 384, 417–423, ¶¶86–101 (1980) (hereinafter Computer II Order). The Computer II rules defined both basic and enhanced services by reference tohow the consumer perceives the service being offered.

NCTA v. BrandX, No. 04-277, 545 U.S. __, Slip at 4 (S.Ct. June 27, 2005)

2. In 1980, the Commission released its Computer II Order in which it addressed regulatory issues associated with the convergence of telecommunications and "computer and data processing."⁴   The cornerstone of the decision is that it distinguished between the common carrier offering of basic transmission service, which provides a communications path for the movement of information, and the offering of enhanced services, which then consisted primarily of data processing services.⁵   Enhanced services are now referred to as "information services" in the 1996 Act and comprise services such as voice mail, e-mail and other Internet services, interactive voice response, audiotext information services, and protocol processing, among others. ⁶

⁴ Computer II Order, 77 FCC 2d at 386, para. 2.  The Commission stated that it must promulgate rules addressing this convergence "in the context of rapid technological and market developments affecting communications and data processing services, the ever-increasing reliance upon common carrier transmission facilities in the movement of all kinds of information, and the need to tailor communications-related services to individual user requirements."  Id. at para. 84.
⁵   Computer II Order, 77 FCC 2d at 418-28, paras. 92-113.  The Commission stated that enhanced service "combines basic service with computer processing applications that act on the format, content, code, protocol or similar aspects of the subscriber's transmitted information or provide the subscriber additional, different, or restructured information, or involve subscriber interaction with stored information."  Id. at para. 5.  See also 47 C.F.R. § 64.702(a).
⁶  Implementation of the Non-Accounting Safeguards of Section 271 and 272 of the Communications Act of 1934, as amended, CC Docket No. 96-149, First Report and Order and Further Notice of Proposed Rulemaking, 11 FCC Rcd 21905, 21955-56, para. 102 (1996) (Non-Accounting Safeguards Order).  To avoid confusion, and to be consistent with the terminology in the Further Notice, we will continue to use the term "enhanced  services" to refer to the restrictions adopted in Computer II.  Further Notice, 13 FCC Rcd at 21549, para. 32.  The Commission has concluded that Congress sought to maintain the basic/enhanced distinction in its definition of "telecommunications services" and "information services," and that "enhanced services" and "information services" should be interpreted to extend to the same functions.  See Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report to Congress, 13 FCC Rcd 11501, 11516-17, 11520, 11524,  paras. 33, 39, 45-46 (1998).

"Beginning with the Computer II proceeding in the 1970s, we have distinguished between basic and enhanced communications services. "
--In re Access Charge Reform, NPRM, Third Report and Order, and NOI, CC Docket 96-262 ? 284 (Dec 24, 1996)

We initiated the Computer III proceeding in the summer of 1985 to undertake a broad reexamination of the regulatory framework for enhanced services adopted in Computer II and related proceedings.²¹  The Phase I Order concluded that, relative to nonstructural safeguards, structural separation requirements for the enhanced service operations of the BOCs and AT & T impose significant costs on the public in decreased efficiency and innovation that outweigh their benefit in limiting the ability of these carriers to engage in anticompetitive behavior.  We retained, however, the two fundamental regulatory categories for telecommunications services established in Computer II:  basic services, which are subject to common carrier regulation under Title II of the Act, and enhanced services, which are not subject to such regulation.²²
-- In the Matter of Filing and Review of Open Network Architecture Plans, CC Docket No. 88-2, Phase I, MEMORANDUM OPINION AND ORDER  16 (December 22, 1988)

 10. After Computer I took effect, technological and competitive developments in the telecommunications and computer industries exposed shortcomings in its definitional structure, and in particular its ad hoc approach to evaluating the "hybrid" category.²¹  In light of such shortcomings, we conducted an extensive examination in the Computer II proceeding to determine the most appropriate regulatory framework for the provision of data processing services by carriers and others.  In the Final Decision, we found that because of technological change and consumer demand, communications and data processing technologies had become so intertwined in new service offerings that it was impossible to draw an "enduring line of demarcation" between them. ²² Accordingly, we adopted a new regulatory definitional scheme with two service categories:  basic and enhanced. ²³  We defined basic service as limited to "the common carrier offering of transmission capacity for the movement of information." ²⁴  Data processing, computer memory or storage, and switching techniques can be components of a basic service if they are used solely to facilitate the movement of information.  We further determined to continue to regulate basic services under Title II of the Act, since such services are "wholly traditional common carrier activities." ²⁵
--In the Matters of: Amendment of Sections 64.702 of the Commission's Rules and Regulations (Third Computer Inquiry);  and Policy and Rules Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations Thereof Communications Protocols under Section 64.702 of the Commission's Rules and Regulations, CC Docket No. 85-229, Report and Order (June 16, 1986)

5. Although more simplified terminology is employed, this basic/enhanced dichotomy for network services is consistent with the approach taken in the Tentative Decision. We find that basic service is limited to the common carrier offering of transmission capacity for the movement of information, whereas enhanced service combines basic service with computer processing applications that act on the format, content, code, rotocol or similar aspects of the subscriber's transmitted information, or provide the subscriber additional, different, or restructured information,  involve subscriber interaction with stored information.
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 86.  The structure set forth in the Tentative Decision focused on the separation of common carrier transmission services from those computer services which depend on common carrier services in the transmission of information.  We proposed a resale structure for those computer processing services which would be subject to a regulatory delineation between communications and data processing. A distinction was made between basic common carrier transmission services and enhanced services; enhanced services were to be provided on a resale basis such that the requisite common carrier facilities would be acquired pursuant to tariff.  Moreover a set of definitions was proposed for distinguishing the regulated or non-regulated status of enhanced services based on the communications or data processing nature of the service.
-- In the Matter of Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Final Decision (May 2, 1980)

¹²  By the term computer we mean any device which is capable of performing the functions described herein.
¹³  We use program in its broadest sense, here.  It includes stored programs which can be altered by a user as well as hard-wired or read only memory (ROM) devices.
¹⁴  The second condition (b) brings services such as process control and proprietary information retrieval within the ambit of the definition of data processing (see para. 20 below).  In the process control case, a message or other stimulus results in a change of state in the process which is being controlled.  In the proprietary information retrieval case, the arrival of an input message--the information request--is operated upon by the computer and results in an output which is the specific information requested.
¹⁵  These categories are meant to include packet switching (and its variations) and time-division circuit switching.  We also would consider permissible, the use of switching computers to provide ancillary functions such as automatic call-forwarding, abbreviated dialing, restricted dialing, and special announcements.
¹⁶  Signal processing comprises the use of computers in applications which maintain the information content of an electrical signal.  These include signal detection and regeneration, and the adaptive equalization of transmission channels.
¹⁷  Section 64.702(g) encompasses the discontinuance of hybrid as well as non-hybrid services.  With the deletion of 64.702(g) authorization for the discontinuance of tariffed service offerings must still be obtained pursuant to Section 214 of the Communications Act.

Basic Service

In particular, the Commission defined “basic service” as “a pure transmission capability over a communications path that is virtually transparent in terms of its interaction with customer supplied information.” Id., at 420, ¶96. By “pure” or “transparent” transmission, the Commission meant a communications path that enabled the consumer to transmit an ordinary-language message to another point, with no computer processing or storage of the information, other than the processing or storage needed to convert the message into electronic form and then back into ordinary language for purposes of transmitting itover the network—such as via a telephone or a facsimile. Id., at 419–420, ¶¶94–95. Basic service was subject to common-carrier regulation. Id., at 428, ¶114.

NCTA v. BrandX, No. 04-277, 545 U.S. __, Slip at 4 (S.Ct. June 27, 2005)

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Computer II Inquiry, 77 FCC 2d 384 (1980), recon. 84 FCC 2d 50 (1980), further recon. 88 FCC 2d 512 (1981), aff'd sub nom. Computer and Communications Industry Association v. FCC, 693 F.2d 198 (D.C. Cir. 1982), cert. denied, 461 U.S. 938 (1983). In Computer II the Commission defined "basic" services as those that provide a "pure transmission capability over a communications path that is virtually transparent in terms of its interaction with customer-supplied information." Basic services are subject to regulation

^4. Amendment of Section 64.702 of the Commission's Rules and Regulations (Computer II), Final Decision, 77 FCC 2d 384 (1980) (Computer II Final Decision), recon., 84 FCC 2d 50 (1980) (Reconsideration Order), further recon., 88 FCC 2d 512 (1981) (Further Reconsideration Order), aff'd sub nom., Computer and Communications Indus. Ass'n v. FCC, 693 F.2d 198 (D.C. Cir. 1982), cert. denied, 461 U.S. 938 (1983).

^5. Computer II Final Decision, 77 FCC 2d at 420.  "Basic services," such as "plain old telephone service" (POTS), are regulated transmission services that are offered under tariff pursuant to Title II of the Communications Act of 1934, as amended (the Act).  In the NATA Centrex Order the Commission discussed characteristics of "adjunct to basic services" that facilitate the use of traditional telephone service but do not alter the fundamental character of telephone service.  See North American Telecommunications Association, Petition for Declaratory Ruling Under Section 64.702 of the Commission's Rules Regarding the Integration of Centrex, Enhanced Services, and Customer Premises Equipment, 101 FCC 2d 349, 359-361, paras. 23-28 (1985) (NATA Centrex Order)).

      92.  We conclude that the record in this proceeding supports our adopting a basic/enhanced dichotomy for network services.  In going forward with a regulatory scheme that distinguishes a carrier's basic transmission services from its enhanced services, it behooves us to make clear our perception of what constitutes a basic service.  In so doing we are mindful of the arguments raised by various parties that the basic service category should be broadly construed so as to not limit the scope of regulated services.  However, based on our review of the comments and our determination, infra, that enhanced services should not be subject to regulation, we conclude that the parameters of a basic service should be dictated by the purposes of the Act and the statutory scheme set forth in Title II for the regulation of common carrier communications services.
      93.  A basic transmission service is one that is limited to the common carrier offering of transmission capacity for the movement of information.  In offering this capacity, a communications path is provided for the analog or digital transmission of voice, data, video, etc. information.  Different types of basic services are offered by carriers depending on a) the bandwidth desired, b) the analog and/or digital capabilities of the transmission medium, c) the fidelity, distortion, or other conditioning parameters of the communications channel to achieve a specified transmission quality, and d) the amount of transmission delay acceptable to the user. Under these criteria a subscriber is afforded the transmission capacity to suit its particular communications needs.
       94.  Traditionally, transmission capacity has been offered for discrete services, such as telephone service.  With the incorporation of digital technology into the telephone network and the inclusion of computer processing capabilities into both terminal equipment located in the customer's premises and the equipment making up a firm's 'network,' this is no longer the case. Telecommunications service is no longer just 'plain old telephone service' to the user.  A subscriber may use telephone service to transmit voice or data. Both domestic and international networks allow for voice and data use of the same communications path. ³² Thus in providing a communications service, carriers no longer control the use to which the transmission medium is put. More and more the thrust is for carriers to provide bandwidth or data rate capacity adequate to accommodate a subscriber's communications needs, regardless of whether subscribers use it for voice, data, video, facsimile, or other forms of transmission.
      95.  Accordingly, we believe that a basic transmission service should be limited to the offering of transmission capacity between two or more points suitable for a user's transmission needs and subject only to the technical parameters of fidelity or distortion criteria, or other conditioning.  Use internal to the carrier's facility of companding techniques, bandwidth compression techniques, circuit switching, message or packet switching, error control techniques, etc. that facilitate economical, reliable movement of information does not alter the nature of the basic service.  In the provision of a basic transmission service, memory or storage within the network is used only to facilitate the transmission of the information from the origination to its destination, and the carrier's basic transmission network is not used as an information storage system.  Thus, in a basic service, once information is given to the communication facility, its progress towards the destination is subject to only those delays caused by congestion within the network or transmission priorities given by the originator.
      96.  In offering a basic transmission service, therefore, a carrier essentially offers a pure transmission capability over a communications path that is virtually transparent in terms of its interaction with customer supplied information.  It is clear that in defining a basic service in this manner, we are in no way restricting a carrier's ability to take advantage of advancements in technology in designing its telecommunication network. Consistent with our Tentative Decision, a carrier maintains its flexibility to structure its communications network such that the network efficiently functions as the basic building block upon which it (in the form of a separate subsidiary in some cases) as well as other service vendors can add computer facilities to perform myriad combinations and permutations of information processing, data processing, process control, and other enhanced services.
--In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Final Decision, 77 FCC2d 384 (May 2, 1980) (Computer II Final Decision)

Functionality Test

This functional approach is consistent with Congress's direction that the classification of a provider should not depend on the type of facilities used.   A telecommunications service is a telecommunications service regardless of whether it is provided using wireline, wireless, cable, satellite, or some other infrastructure.  Its classification depends rather on the nature of the service being offered to customers.  Stated another way, if the user can receive nothing more than pure transmission, the service is a telecommunications service.  If the user can receive enhanced functionality, such as manipulation of information and interaction with stored data, the service is an information service.  A functional analysis would be required even were we to adopt an overlapping definition of "telecommunications service" and "information service."
-- In re Federal-State Joint Board on Universal Service, Report to Congress, FCC 98-67  59 (April 10, 1998).

Backbone Transmission

 Test:  Convenience of network vs. convenience of end user

      95.  Accordingly, we believe that a basic transmission service should be limited to the offering of transmission capacity between two or more points suitable for a user's transmission needs and subject only to the technical parameters of fidelity or distortion criteria, or other conditioning.  Use internal to the carrier's facility of companding techniques, bandwidth compression techniques, circuit switching, message or packet switching, error control techniques, etc. that facilitate economical, reliable movement of information does not alter the nature of the basic service.  In the provision of a basic transmission service, memory or storage within the network is used only to facilitate the transmission of the information from the origination to its destination, and the carrier's basic transmission network is not used as an information storage system.  Thus, in a basic service, once information is given to the communication facility, its progress towards the destination is subject to only those delays caused by congestion within the network or transmission priorities given by the originator.
--In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Final Decision, 77 FCC2d 384 (May 2, 1980) (Computer II Final Decision)
 

Adjunct Services

^{Para 2, note 5.} Computer II Final Decision, 77 FCC 2d at 420.  "Basic services," such as "plain old telephone service" (POTS), are regulated transmission services that are offered under tariff pursuant to Title II of the Communications Act of 1934, as amended (the Act).  In the NATA Centrex Order the Commission discussed characteristics of "adjunct to basic services" that facilitate the use of traditional telephone service but do not alter the fundamental character of telephone service.  See North American Telecommunications Association, Petition for Declaratory Ruling Under Section 64.702 of the Commission's Rules Regarding the Integration of Centrex, Enhanced Services, and Customer Premises Equipment, 101 FCC 2d 349, 359-361, paras. 23-28 (1985) (NATA Centrex Order)).

^55. NATA Centrex Order, 101 FCC 2d 359-361, paras. 23-28.
^56. Id. at para. 25.  The Commission also concluded in the SWBT Waiver Order that electronic directory assistance is an adjunct to basic service because the purpose of the service is an electronic form of directory assistance that does not change the nature of the basic telephone service. Id. 5 FCC Rcd 3792.
^57. NATA Centrex Order, 101 FCC 2d at 360-361, paras. 26, 28.

 Example: Packet Switching

SOURCE: In The Matter Of Independent Data Communications Manufacturers Association, Inc., Petition for Declaratory Ruling That AT&T's InterSpan Frame Relay Service Is a Basic Service; DA 95-2190, MO&O, 1995 WL 613619, 10 FCCR. 13,717, 10 FCC Rcd. 13,717, 1 Communications Reg. (P&F) 409,  4 (October 18, 1995)

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The use of packet switching and error control techniques "that facilitate the economical, reliable movement of [such] information [do] not alter the nature of the basic service." 15 Thus, for example, in subsequent decisions the Commission has determined that packet-switched networks following X.25 protocols provide a basic transport service under Commission Rules. 16

SOURCE: In The Matter Of Independent Data Communications Manufacturers Association, Inc., Petition for Declaratory Ruling That AT&T's InterSpan Frame Relay Service Is a Basic Service; DA 95-2190, MO&O, 1995 WL 613619, 10 FCCR. 13,717, 10 FCC Rcd. 13,717, 1 Communications Reg. (P&F) 409,  11 (October 18, 1995)

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    6. Frame relay is a relatively new, high-speed packet-switching technology used to communicate digital data between, among other things, geographically dispersed local area networks (LANs). In addition, frame relay technology often serves as the intermediary format for data traveling between different computer systems employing different communications protocols.
     7. As the term suggests, frame relay networks communicate "frames" containing digital data. The format of a frame-defined by a specific interface protocol-consists of a beginning "flag," a "header," a variable length data field, a "trailer," and an ending "flag." The header contains routing and congestion control information, while the trailer holds an error control sequence enabling detection of errors within frames. Unlike the slower X.25 packet switching protocol, frame relay switches do not store frames until a positive acknowledgement is received from a destination switch. When a destination switch receives a frame with errors, it simply discards the frame, relying on higher-layer protocols of intelligent customer premises equipment (CPE) to note the omission and take corrective action by rerequesting transmission of the packet. [8] This streamlined operation allows frame relay networks to operate at significantly higher speeds than X.25 networks. In a typical frame relay application, a LAN is linked to a device known as a "router" on the customer premises. [9] If the router supports frame relay protocol, it is connected to an access link which carries the frame relay traffic to a central office port. If the router does not support frame relay, a frame relay assembler/disassembler (FRAD) is located on a customer premise between the router and access link to convert the data transmitted from the router to frame relay format. [10] The central office frame relay switch establishes a permanent virtual circuit (PVC) connecting the access link to a communications line linking one switch to another. While the access link may operate at speeds from 56 to over 1,000 kilobits per second (kbs), the data relay rate across the network is limited by the transmission rate of the PVC, which varies according to customer needs and budgets. The customer contracts with the service provider for a specified information transmission rate. If the customer attempts to transmit data at speeds that exceed the agreed-upon rate, the network tries to accommodate the higher rate if capacity is available. If the network is unable either to perform the transmission or temporarily buffer the data, the network discards excess frames beyond the agreed-upon rate. As with frames containing errors, frames discarded in this fashion must be tracked by CPE.
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     29.  Under section 64.702(a) of the Commission's Rules, frame relay service constitutes an enhanced service if it "employ[s] computer processing applications that act on the . . . content . . . of the subscriber's transmitted information, [or] provide[s] the subscriber . . . different, or restructured information."  AT&T contends that modifications to the frame header that occur during network transmission such as changes in discard eligibility or location code render the customer data that is delivered to the terminating customer through its frame relay service "different" from the data transmitted by the originating customer.  We disagree.
      30.  Regardless of changes made to the frame header, the customer's data contained within the frame are not modified in any way as they travel through the network and arrive intact.  Moreover, changes to the header information such as the location code, are in some instances responsible for the carriage of the customer's data through the network to the proper termination point and, hence, are part of a basic transmission service.   Accordingly, we conclude that modifications to the frame header, without more, fail to alter the customer's data in a manner that results in the delivery of "different" data to the termination point.
      31.  As discussed above, however, frame relay networks may discard entire frames of customer data if errors are detected in the frame or if the customer's transmission rate exceeds the maximum rate permitted under its agreement.  In contrast to X.25 transmission networks, the customer's CPE, not the network, must detect and compensate for such discards.  Thus, AT&T and others assert that the customer receives "different" or "restructured" information within the meaning of section 64.702 if the network discards eligible frames in frame relay networks.
     32.  We conclude, however, that this is a misreading of the Rule.  The functionality that AT&T relies on to argue that the data are "different" is designed to facilitate the overall transparency and efficiency of the frame relay service.  Ultimately the data on the receiving end is the same as what is transmitted.  Thus, discarding data is not a "service" rendered to a customer within the meaning of section 64.702.
     33.  It is important to note that the only frames that are normally discard eligible (other than frames containing errors) are those transmitted in excess of the contracted-for data rate.  Thus, the network normally delivers frames at the agreed-upon data rate without omission.  It is only when the customer exceeds the agreed-upon rate that frames may be discarded, and only then if excess capacity is unavailable.  Thus, the discard feature of frame relay networks allows the network to deliver unaltered customer data at rates exceeding minimum, contracted-for transmission rates.  The use of such a feature to facilitate the economical, reliable movement of information in this manner does not alter the nature of the basic service.   Nor do we view this difference between existing basic packet-switched services (such as AT&T's ACCUNET Packet Service) and frame relay technology as sufficient to justify disparate treatment under Commission Rules.  As a result, we conclude that the discard feature does not render the frame relay service an enhanced service under the Commission's rules.
     34.  We, therefore, find that frame relay service offers a transmission capability that is virtually transparent in terms of its interaction with customer-supplied data.  The service is designed to transport customer data transparently through the network, and the service is already provided pursuant to tariff in this manner by all but one of the BOCs.   Accordingly, we decline to conclude that frame relay is an enhanced service.
     35.  The provision of frame relay as a basic service, and the availability of basic digital services in general, are consistent with policies established in Computer II and Computer III, and is in the public interest.  Treating frame relay as a basic service provides competitive access to the underlying basic service of facilities-based carriers who are often better able to implement new communications technologies.  This access allows competing enhanced service providers to more easily enter and compete in the market for such technologies.  Thus, under the Computer II and Computer III decisions, competitive access has promoted the public interest by accelerating the development of emerging technologies such as frame relay.
. . . . .
    40.  We conclude that AT&T provides a basic frame relay service (alone or bundled with enhanced protocol processing) that must be offered under tariff.  According to the InterSpan Interface Standard, AT&T provides transport of customer data "transparently" across the AT&T frame relay network.   IDCMA argues (and AT&T does not refute) that the vast majority of AT&T's frame relay customers terminate to, and receive from, the network frame relay data that do not require conversion to frame relay protocol.  Since in these cases AT&T's frame relay service "provides a pure transmission capability in a communication's path," without any protocol conversion, we find that this is a basic service.   We again note that six Bell Operating Companies (BOCs) treat frame relay as a basic transport service.
      41.  The assertion by AT&T and other commenters that the enhanced protocol conversion capabilities associated with AT&T's InterSpan service bring it within the definition of an enhanced service is beside the point.  Under the Commission's Computer II and Computer III decisions, AT&T must unbundle the basic frame relay service, regardless of whether the InterSpan offering also provides a combined, enhanced protocol conversion and transport service for those customers who require it.

SOURCE: In The Matter Of Independent Data Communications Manufacturers Association, Inc., Petition for Declaratory Ruling That AT&T's InterSpan Frame Relay Service Is a Basic Service; DA 95-2190, MO&O, 1995 WL 613619, 10 FCCR. 13,717, 10 FCC Rcd. 13,717, 1 Communications Reg. (P&F) 409 (October 18, 1995)

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33. As a result of our decision to apply the structural separation requirements to the post-divestiture BOCs' enhanced service offerings, they could not integrate protocol conversion with their basic services unless they obtained waivers from our rules pursuant to the guidelines established in the Protocols Order.  Several BOCs filed petitions asking us for permission to provide various forms of protocol conversion within their basic networks.  In November 1984, we considered the merits of BOC requests to provide an X.25/X.75 84 internetworking protocol conversion interface without structural separation.  We granted these requests 85 and treated this interface as one that is to be offered under tariff in conjunction with the associated basic services.  We acknowledged that the interface would have been used internally in the Bell System network prior to divestiture and, accordingly, would have been an element of basic service at the time that we defined basic service in Computer II.
    34. Subsequently, in the Asynchronous/X.25 Waiver Order, 86 we permitted several BOCs to provide asynchronous/X.25 87 protocol conversion from equipment collocated with their network facilities, as a component of basic, packet-switched, data transport services.  We found that the public interest would be served both by the additional competition the BOCs would provide to existing providers of packet-switched services and by the real efficiencies that such collocation would permit in increased use of the public switched network and in elimination of duplicated facilities.  Accordingly, we granted the BOCs permission to collocate facilities, subject to three express conditions.  First, we required the BOCs to make available to competitors without discrimination the inter-office channels from which the BOCs construct their underlying packet-switched networks.  Second, we required the BOCs to include in tariffs for their underlying packet-switched services an additional network utilization rate element (NURE) to be applied to any user of asynchronous/X.25 conversion, representing the cost, in decreased efficiency, to the underlying basic packet service caused by the integrated enhanced protocol conversion operations.  Third, we required the BOCs to offer end-users access to the protocol conversion offerings of their competitors that is equal to that provided for the BOCs' own such offerings.  As a corollary to this, the BOCs' protocol operations were required to take under tariff the intra-office connections by which they connect with their subscribers. 88
    35. By fulfilling the foregoing conditions, the BOCs would be permitted to install, maintain, and operate their asynchronous/X.25 conversion facilities and their packet-switched facilities in an integrated fashion.  We also established additional conditions that the BOCs would be required to satisfy in order to market their protocol conversion services jointly with basic packet switching. 89

SOURCE: In the Matters of: Amendment of Sections 64.702 of the Commission's Rules and Regulations (Third Computer Inquiry);  and Policy and Rules Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations Thereof Communications Protocols under Section 64.702 of the Commission's Rules and Regulations, CC Docket No. 85-229, Report and Order (June 16, 1986)

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     92.  We conclude that the record in this proceeding supports our adopting a basic/enhanced dichotomy for network services.  In going forward with a regulatory scheme that distinguishes a carrier's basic transmission services from its enhanced services, it behooves us to make clear our perception of what constitutes a basic service.  In so doing we are mindful of the arguments raised by various parties that the basic service category should be broadly construed so as to not limit the scope of regulated services.  However, based on our review of the comments and our determination, infra, that enhanced services should not be subject to regulation, we conclude that the parameters of a basic service should be dictated by the purposes of the Act and the statutory scheme set forth in Title II for the regulation of common carrier communications services.
      93.  A basic transmission service is one that is limited to the common carrier offering of transmission capacity for the movement of information.  In offering this capacity, a communications path is provided for the analog or digital transmission of voice, data, video, etc. information.  Different types of basic services are offered by carriers depending on a) the bandwidth desired, b) the analog and/or digital capabilities of the transmission medium, c) the fidelity, distortion, or other conditioning parameters of the communications channel to achieve a specified transmission quality, and d) the amount of transmission delay acceptable to the user. Under these criteria a subscriber is afforded the transmission capacity to suit its particular communications needs.
       94.  Traditionally, transmission capacity has been offered for discrete services, such as telephone service.  With the incorporation of digital technology into the telephone network and the inclusion of computer processing capabilities into both terminal equipment located in the customer's premises and the equipment making up a firm's 'network,' this is no longer the case. Telecommunications service is no longer just 'plain old telephone service' to the user.  A subscriber may use telephone service to transmit voice or data. Both domestic and international networks allow for voice and data use of the same communications path. 32 Thus in providing a communications service, carriers no longer control the use to which the transmission medium is put. More and more the thrust is for carriers to provide bandwidth or data rate capacity adequate to accommodate a subscriber's communications needs, regardless of whether subscribers use it for voice, data, video, facsimile, or other forms of transmission.
      95.  Accordingly, we believe that a basic transmission service should be limited to the offering of transmission capacity between two or more points suitable for a user's transmission needs and subject only to the technical parameters of fidelity or distortion criteria, or other conditioning.  Use internal to the carrier's facility of companding techniques, bandwidth compression techniques, circuit switching, message or packet switching, error control techniques, etc. that facilitate economical, reliable movement of information does not alter the nature of the basic service.  In the provision of a basic transmission service, memory or storage within the network is used only to facilitate the transmission of the information from the origination to its destination, and the carrier's basic transmission network is not used as an information storage system.  Thus, in a basic service, once information is given to the communication facility, its progress towards the destination is subject to only those delays caused by congestion within the network or transmission priorities given by the originator.
      96.  In offering a basic transmission service, therefore, a carrier essentially offers a pure transmission capability over a communications path that is virtually transparent in terms of its interaction with customer supplied information.  It is clear that in defining a basic service in this manner, we are in no way restricting a carrier's ability to take advantage of advancements in technology in designing its telecommunication network. Consistent with our Tentative Decision, a carrier maintains its flexibility to structure its communications network such that the network efficiently functions as the basic building block upon which it (in the form of a separate subsidiary in some cases) as well as other service vendors can add computer facilities to perform myriad combinations and permutations of information processing, data processing, process control, and other enhanced services.

SOURCE: In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Final Decision, 77 FCC2d 384 (May 2, 1980) (Computer II Final Decision)

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     10.  The revision of our proposed definition also necessitates a modification of the processing categories listed in paragraph 21 of our Notice.  Two categories were set forth therein as not being within the ambit of our definition of data processing--'network control and routing' and 'input/output processing.'  For purposes of clarification and in order to conform with our new proposed definition, a restatement of these categories is now called for:

  network control and routing--applications include:  message and circuit switching,[13] speed and code conversion, pulse format conversion, transmission error detection and correction, analog to digital and digital to analog conversion, signal processing,[14] and time division multiplexing.
  input/output processing--this category comprises the uses of processing capability resident in a carrier network facility for the purpose of making disparate information sources and receptors compatible with the transmission system and with each other.  Such processing activities include those necessary for formatting, editing, and buffering of information to make it compatible with the electrical characteristics of different transmission media.

[Note 13]  The categories are meant to include packet switching (and its variations) and time-division circuit switching.  We also would consider permissible those processing activities utilized in the provision of ancillary network services such as automatic call-forwarding, abbreviated dialing, and special announcements.
[Note 14]  Signal processing comprises the use of processing operations in applications which maintain the information content of an electrical signal. These include signal detection and regeneration and the adaptive equalization of transmission channels.

SOURCE:  In re Amendment Of Section 64.702 Of The Commission's Rules And Regulations (Computer Inquiry), Docket No. 20828, Supplemental Notice Of Inquiry And Enlargement Of Proposed Rulemaking, (March 8, 1977)

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21.  We also wish to cite those examples of the use of computers by carriers which would not be within the ambit of the definition of data processing. These applications fall into two categories:

  network control and routing--applications include:  Message and circuit switching,[15] speed and code conversion, pulse format conversion, error detection and correction, analog to digital and digital to analog conversion, signal processing, [16] and time division multiplexing.
  input/output processing--this category comprises the uses of a computer capability resident in a carrier network facility for the purpose of making disparate computers and terminals compatible with each other.  Typical functions are the formatting, editing, and buffering of data to make it compatible with the electrical characteristics of different transmission media.

[Note 15]  These categories are meant to include packet switching (and its variations) and time-division circuit switching.  We also would consider permissible, the use of switching computers to provide ancillary functions such as automatic call-forwarding, abbreviated dialing, restricted dialing, and special announcements.
[Note 16]  Signal processing comprises the use of computers in applications which maintain the information content of an electrical signal.  These include signal detection and regeneration, and the adaptive equalization of transmission channels.

SOURCE:  In re Amendment Of Section 64.702 Of The Commission's Rules And Regulations, Docket No. 20828, Notice Of Inquiry And Proposed Rulemaking, 61 FCC2d 103 (August 9, 1976)
 

Enhanced Service Provider

47 C.F.R. ' 64.702(a): "For the purpose of this subpart, the term 'enhanced service' shall refer to services, offered over common carrier transmission facilities used in interstate communications, which employ computer processing applications that act on the format, content, protocol or similar aspects of the subscriber's transmitted information; provide the subscriber additional, different, or restructured information; or involve subscriber interaction with stored information. Enhanced services are not regulated under Title II of the Act."

“[E]nhanced service,” however, was service in which “computer processing applications [were] used to act on the content, code, protocol, and other aspects of the sub-scriber’s information,” such as voice and data storage services, id., at 420–421, ¶97, as well as “protocol conversion” (i.e., ability to communicate between networks that employ different data-transmission formats), id., at 421– 422, ¶99. By contrast to basic service, the Commission decided not to subject providers of enhanced service, even enhanced service offered via transmission wires, to Title II common-carrier regulation. Id., at 428–432, ¶¶115–123.The Commission explained that it was unwise to subject enhanced service to common-carrier regulation given the “fast-moving, competitive market” in which they were offered. Id., at 434, ¶129.

NCTA v. BrandX, No. 04-277, 545 U.S. __, Slip at 5 (S.Ct. June 27, 2005)

Enhanced services, on the other hand, were described as using computer processing applications to act on the content, code, protocol or other aspects of the subscriber's information.⁷⁷

⁷⁷ Id. at 420-21, paras. 97; see also 47 C.F.R. § 64.702(a) (Enhanced services are "services, offered over common carrier transmission facilities used in interstate communications, which employ computer processing applications that act on the format, content, code, protocol or similar aspects of the subscriber's transmitted information; provide the subscriber additional, different, or restructured information; or involve subscriber interaction with stored information.").  Examples of services that the Commission has treated as enhanced include voice mail, e-mail, store-and-forward services, interactive voice response, protocol processing, gateway and audiotext services.  See Bell Operating Companies Joint Petition for Waiver of Computer II Rules, Order, 10 FCC Rcd 13758, 13770-774, App. A (Com. Car. Bur. 1995).

^6. Enhanced services employ computer processing applications that act on the format, content, code, protocol or similar aspects of a subscriber's transmitted information, provide the subscriber additional, different, or restructured information, or involve subscriber interaction with stored information.  See 47 C.F.R. s 64.702(a).

"Enhanced services" use the telephone network to deliver unregulated services that provide more than a basic voice transmission offering. See  47 C.F.R. S 64.702(a). "Basic services," such as "plain old telephone service" (POTS), are regulated transmission services that are offered under tariff pursuant to Title II of the Communications Act.
-- In the matter of Bell Atlantic Telephone Companies, Offer of Comparably Efficient Interconnection to Providers of Video Dialtone- Related Enhanced Services, 11 FCC Rcd. 985 n 5 (1995)

"Enhanced" services, on the other hand, provide more than a basic voice transmission offering. The Commission defines an enhanced service as an unregulated service that employs computer processing applications that: (1) act on the format, content, code, protocol or similar aspects of a subscriber's transmitted information; (2) provide the subscriber additional, different, or restructured information; or (3) involve subscriber interaction with stored information phone service; and (4) do not alter the fundamental character of telephone service. See North American Telecommunications Association, Petition for Declaratory Ruling under Section 64.702 of the Commission's Rules Regarding the Integration of Centrex, Enhanced Services, and Customer Premise Equipment, 101 FCC 2d 349, 360-361 (1985) (NATA/Centrex Order); modified on recon. 3 FCC Rcd 4385 (1986).

 10. After Computer I took effect, technological and competitive developments in the telecommunications and computer industries exposed shortcomings in its definitional structure, and in particular its ad hoc approach to evaluating the "hybrid" category.²¹  In light of such shortcomings, we conducted an extensive examination in the Computer II proceeding to determine the most appropriate regulatory framework for the provision of data processing services by carriers and others.  In the Final Decision, we found that because of technological change and consumer demand, communications and data processing technologies had become so intertwined in new service offerings that it was impossible to draw an "enduring line of demarcation" between them. ²² Accordingly, we adopted a new regulatory definitional scheme with two service categories:  basic and enhanced. ²³  We defined basic service as limited to "the common carrier offering of transmission capacity for the movement of information." ²⁴  Data processing, computer memory or storage, and switching techniques can be components of a basic service if they are used solely to facilitate the movement of information.  We further determined to continue to regulate basic services under Title II of the Act, since such services are "wholly traditional common carrier activities." ²⁵
 11. In the Final Decision, we described an enhanced service as "any offering over the telecommunications network which is more than a basic transmission service."²⁶  We revised our Rules to define enhanced services by articulating those functions that we considered to be different from basic service:

[T]he term "enhanced service" shall refer to services, offered over common carrier transmission facilities, which employ computer processing applications that act on the format, content, code, protocol or similar aspects of the subscriber's transmitted information;  provide the subscriber additional, different or restructured information;  or involve subscriber interaction with stored information. ²⁷

"Enhanced service is any service other than basic service. Enhanced service "combines basic service with computer processing applications that act on the format, content, code, protocol or similar aspects of the subscriber's transmitted information, or provide the subscriber additional, different, or restructured information, or involve subscriber interaction with stored information." Id. at 387."
--Computer and Communications Industry Association v. Federal Communications Commission, 693 F.2D 198, 204, 224 U.S.APP.D.C. 83 (D.C. Cir. 1982)

 97.  Under this scenario, the regulatory demarcation between basic and enhanced services becomes relatively clear-cut.  An enhanced service is any offering over the telecommunications network which is more than a basic transmission service.  In an enhanced service, for example, computer processing applications are used to act on the content, code, protocol, and other aspects of the subcriber's information.³³  In these services additional, different, or restructured information may be provided the subscriber through various processing applications performed on the transmitted information, or other actions can be taken by either the vendor or the subscriber based on the content of the information transmitted through editing, formating, etc. Moreover, in an enhanced service the content of the information need not be changed and may simply involve subscriber interaction with stored information. Many enhanced services feature voice or data storage and retrieval applications, such as in a 'mail box' service.³⁴ This is particularly applicable in time-sharing services where the computer facilities are structured in a manner such that the customer or vendor can write its own customized programs and, in effect, use the time-sharing network for a variety of electronic message service applications.  Thus the kinds of enhanced store and forward services that can be offered are many and varied. ³⁵
 98.  As we stated in paragraph 90, supra., the 'voice' category was intended to distinguish traditional telephone service consisting of real time human-to- human oral conversation from other basic and various enhanced services.  At footnote 60 of the Tentative Decision, we stated that we are not foreclosing enhanced processing applications from being performed in conjunction with 'voice' service.  We indicated that 'computer processing applications such as call forwarding, speed calling, directory assistance, itemized billing, traffic management studies, voice encryption, etc., may be used in conjunction with 'voice' service.' Id.  The intent was to recognize that while POTS is a basic service, there are ancillary services directly related to its provision that do not raise questions about the fundamental communications or data processing nature of a given service. Accordingly, we are not here foreclosing telephone companies from providing to consumers optional services to facilitate their use of traditional telephone service.  Any option that changes the nature of such telephone service is subject to the basic/enhanced dichotomy and their respective regulatory schemes.  For example, voice storage or automatic call answering within the network would be enhanced services.  See para. 97, supra. Thus any tariffed optional services must not change the nature of traditional telephone service. ³⁶
--In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Final Decision, 77 FCC2d 384 (May 2, 1980) (Computer II Final Decision)

Justification Objectives

¹⁶ Access Charge Reform Order, 12 FCC Rcd at 16134.  See also 47 U.S.C. ? 230(b)(2) ("It is the policy of the United States to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation.").

"The exemption afforded ESPs from interstate access charges in 1983 was intended to be "temporary," designed to avoid unduly burdening the then "fledgling" ESP industry and disrupting the provision of information services to the public" In Re The Provision of Interstate and International Interexchange Telecommunications Service via the "Internet" by Non-Tariffed, Uncertified Entities: Reply comments of the Telecommunications Resellers Association RM No. 8775 at 5 (June 10, 1996) (citing Amendment of Part 69 of the Commission Rules Relating to Enhanced Service Providers, 3 FCC.Rcd 2631, ¶ 2 (1988))
 

 12. In the Computer II proceeding, we sought to maximize benefits for consumers by promoting competition in the provision of enhanced services and CPE.  As in Computer I, we were concerned with the potential for anticompetitive conduct that could result from carrier participation in unregulated markets.  We were particularly concerned that major carriers could use their control over basic services to discriminate against others' competitive services and products.  We were also concerned that these carriers could misallocate costs from unregulated to regulated activities, allowing them to impose unfair burdens on regulated ratepayers and improperly cross-subsidize their competitive offerings.  Accordingly, to guard against such abuses, we required major carriers to provide enhanced services and CPE only through corporate affiliates fully separated from their basic services operations. ³⁰
 13. We did not expect the structural separation requirements to alter the incentives a carrier might have to engage in discrimination or cross- subsidization in enhanced services and CPE markets.  We did expect, however, that structural separation would make such competitive abuses easier to detect and more difficult to accomplish.  Under structural separation, transactions between a business organization's basic services operation and its enhanced services and CPE operations would have to cross corporate boundaries and would be recorded in separate books of account for regulated and unregulated affiliates.  We decided to impose these requirements only if the benefits gained from promoting competition and protecting ratepayers would exceed the costs of complying with structural separation.  On the basis of these considerations, we imposed the structural separation requirements only on AT & T. ³¹  We construed the 1956 Decree to permit AT & T to offer enhanced services and CPE subject only to the structural separation requirements by finding that such activities were "incidential to the furnishing by AT & T or [its] subsidiaries of common carrier communications services," ³² and thus permissible under the terms of that decree.
--In the Matters of: Amendment of Sections 64.702 of the Commission's Rules and Regulations (Third Computer Inquiry);  and Policy and Rules Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations Thereof Communications Protocols under Section 64.702 of the Commission's Rules and Regulations, CC Docket No. 85-229, Report and Order (June 16, 1986)
 

 100.  We believe that our adoption of a differentiation between basic and enhanced services best furthers the public interest because it comports with the actual development of this dynamic industry.  As the market applications of computer technology increase, communications capacity has become the necessary link allowing the technology to function more efficiently and more productively.  Transmission networks have benefitted from some of the productive breakthroughs which this relatively new field has made possible.  As a result, the computer industry and the communications industry are becoming more and more interwoven.  We believe, and the record shows, that this trend will become even more pronounced in the future.  As it does, an increasing number of enhanced services will be developed to meet the need of the marketplace.  Thus, the pressure on a set of administrative rules which fail to recognize the growth in operational sophistication demanded by our nation's economy will be inexorable.
 101.  The distinction we adopt today recognizes that development and indeed should encourage its continuation.  We believe it will do so in several ways. First, it leaves undisturbed the provision of basic service, whether as a building block supporting the provision of enhanced services or by itself. Second, it allows the provider of these basic services to integrate technological advances conducive to the more efficient transmission of information through the network without the threat of a sudden, fundamental change in the regulatory treatment of that service or firm.  Third, it draws a clear and, we believe, sustainable line between basic and enhanced services upon which business entities can rely in making investment and marketing decisions.  Fourth, in conjunction with our decision on the regulatory scheme applicable to such services, it removes the threat of regulation from markets which were unheard of in 1934 and bear none of the important characteristics justifying the imposition of economic regulation by an administrative agency.
--In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Final Decision, 77 FCC2d 384 (May 2, 1980) (Computer II Final Decision)
 

Market Forces - No Need Regulation

⁷Computer II Order, 77 FCC 2d at 430-33, paras. 119, 124, 128.

Because the Commission found that the market for enhanced services is "truly competitive," [41] it believes that market forces will protect the public interest in reasonable rates and availability of  services.  Therefore, in the Commission's view, comprehensive regulation of  enhanced services would not be permissible because it would not be "directed at  protecting or promoting a statutory purpose."  Computer and Communications Industry Association v. Federal Communications Commission, 693 F.2D 198, 207, 224 U.S.APP.D.C. 83 (D.C. Cir. 1982)

"The Commission relied in both cases on newly emergent market forces and the exercise of its own ancillary jurisdiction to protect the public interest by  assuring availability of enhanced services and CPE at reasonable prices."  Computer and Communications Industry Association v. Federal Communications Commission, 693 F.2D 198, 209, 224 U.S.APP.D.C. 83 (D.C. Cir. 1982)

?In Computer II the Commission found that the exercise of ancillary  jurisdiction over both enhanced services and CPE was necessary to assure wire  communications services at reasonable rates.  Regulation of enhanced services  was deemed necessary to prevent AT&T from burdening its basic transmission  service customers with part of the cost of providing competitive enhanced services." Computer and Communications Industry Association v. Federal Communications Commission, 693 F.2D 198, 213, 224 U.S.APP.D.C. 83 (D.C. Cir. 1982)

Avoid Case by Case Review (Administrative Convenience)

"We agree with the Commission that even if some enhanced  services could be classified as common carrier communications activities, the  Commission is not required to subject them to Title II regulation where, as  here, it finds that it cannot feasibly separate regulable from nonregulable  services.  To the extent that certain enhanced services could lawfully be  regulated under Title II once they were identified as common carrier services,  we sanction the Commission's forbearance from Title II regulation.  We  emphasize, however, that our sanction is a very narrow one, given in light of  the peculiar nature of the communications and data processing industries and  the alternative regulatory scheme adopted by the Commission."  -- Computer and Communications Industry Association v. Federal Communications Commission, 693 F.2D 198, 210, 224 U.S.APP.D.C. 83 (D.C. Cir. 1982).

ESP = enhanced + basic telecom

ESPs vs telecommunications carriers

We realize that, as technology evolves, new means of providing telecommunications service may emerge.  Although we conclude that Internet access is not a "telecommunications service," we acknowledge that there may be telecommunications services that can be provisioned through the Internet.  . . . . With respect to the provision of pure transmission capacity to Internet service providers or Internet backbone providers, we have concluded that such provision is telecommunications.
--In re Federal-State Joint Board on Universal Service, Report to Congress, FCC 98-67  101 (April 10, 1998).

"The Internet and other enhanced services have been able to grow rapidly in part because the Commission concluded that enhanced service providers were not common carriers within the meaning of the Act.   This policy of distinguishing competitive technologies from regulated services not yet subject to full competition remains viable.  Communications networks function as overlapping layers, with multiple providers often leveraging a common infrastructure.   As long as the underlying market for provision of transmission facilities is competitive or is subject to sufficient pro-competitive safeguards, we see no need to regulate the enhanced functionalities that can be built on top of those facilities.  We believe that Congress, by distinguishing "telecommunications service" from "information service," and by stating a policy goal of preventing the Internet from being fettered by state or federal regulation, endorsed this general approach.   Limiting carrier regulation to those companies that provide the underlying transport ensures that regulation is minimized and is targeted to markets where full competition has not emerged.  As an empirical matter, the level of competition, innovation, investment, and growth in the enhanced services industry over the past two decades provides a strong endorsement for such an approach."  -- In re Federal-State Joint Board on Universal Service, Report to Congress, FCC 98-67  95 (April 10, 1998).

"In its Computer III proceedings . . . the FCC reaffirmed its earlier conclusion in the Computer II proceedings that enhanced service were not regulatable under the Communications Act and preempted states from imposing their own regulations on those services. ⁷ The FCC also preempted state regulators from imposing any additional or different regulatory safeguard requirements on the BOCs including structural separation."  -Robert J. Butler, In the Aftermath of California V. FCC: Computer III remand Proceedings Pose Difficult Policy Choises For the enhanced service Industry, 8 No. 5 Computer Law. 24, 24 (May 1991).

Hybrid

Non-facilities based provider + computing = enhanced

¹²¹ See, e.g., Computer II Phase II Recon. Order, 3 FCC Rcd at 1153 n. 23; Decreased Regulation of Certain Basic Telecommunications Services, 2 FCC Rcd 645, 648, para. 21 (1987) (Notice of Proposed Rulemaking).]

Examples of Enhanced Services

"More generally, though, it would be incorrect to conclude that Internet access providers offer subscribers separate services -- electronic mail, Web browsing, and others -- that should be deemed to have separate legal status, so that, for example, we might deem electronic mail to be a "telecommunications service," and Web hosting to be an "information service."  The service that Internet access providers offer to members of the public is Internet access.   That service gives users a variety of advanced capabilities.  Users can exploit those capabilities through applications they install on their own computers.  The Internet service provider often will not know which applications a user has installed or is using.  Subscribers are able to run those applications, nonetheless, precisely because of the enhanced functionality that Internet access service gives them. "
--In re Federal-State Joint Board on Universal Service, Report to Congress, FCC 98-67  79 (April 10, 1998).
 

Example:  Internet Access Service

    73   We find that Internet access services are appropriately classed as information, rather than telecommunications, services.  Internet access providers do not offer a pure transmission path; they combine computer processing, information provision, and other computer-mediated offerings with data transport.  Senators Stevens and Burns suggest that services provided by Internet access providers should be deemed to fall on the telecommunications side of the line.  When an Internet service provider transmits an email message, they maintain, it transmits "information of the user's choosing, without change in the form or content of the information as sent or received."  Changes such as the addition of message headers, they argue, are inconsequential:  "If the information chosen by the user has the same form (e.g., typewritten English) and content (e.g., directions to Washington, D.C.) as sent and received, then a 'telecommunication' has occurred."   Senator McCain, by contrast, urges that electronic mail, voice mail and Internet access are information services, because they furnish the capabilities to store, retrieve, or generate information.
    74   In determining whether Internet access providers should be classed as providing information services rather than telecommunications services, the text of the 1996 Act requires us to determine whether Internet access providers merely offer transmission "between or among points selected by the user, of information of the user's choosing, without change in the form or content of the information as sent and received,"  or whether they go beyond the provision of a transparent transmission path to offer end users the "capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information."   For the reasons that follow, we conclude that the latter more accurately describes Internet access service.
    75 We note that the functions and services associated with Internet access were classed as "information services" under the MFJ.  Under that decree, the provision of gateways (involving address translation, protocol conversion, billing management, and the provision of introductory information content) to information services fell squarely within the "information services" definition.   Electronic mail, like other store-and-forward services, including voice mail, was similarly classed as an information service.     Moreover, the Commission has consistently classed such services as "enhanced services" under Computer II.   In this Report, we address the classification of Internet access service de novo, looking to the text of the 1996 Act.  Various commenters have approached this question by inquiring whether specific applications, such as e-mail, available to users with Internet access, constitute ?telecommunications.?   As we explain below, we believe that Internet access providers do not offer subscribers separate services -- electronic mail, Web browsing, and others -- that should be deemed to have separate legal status.  It is useful to examine specific Internet applications, however, in order to understand the nature of the functionality that an Internet access provider offers.
    76   Internet access providers typically provide their subscribers with the ability to run a variety of applications, including World Wide Web browsers, FTP clients,  Usenet newsreaders,  electronic mail clients, Telnet applications,  and others.  When subscribers store files on Internet service provider computers to establish "home pages" on the World Wide Web, they are, without question, utilizing the provider's "capability for . . . storing . . . or making available information" to others.  The service cannot accurately be characterized from this perspective as "transmission, between or among points specified by the user"; the proprietor of a Web page does not specify the points to which its files will be transmitted, because it does not know who will seek to download its files.  Nor is it "without change in the form or content," since the appearance of the files on a recipient's screen depends in part on the software that the recipient chooses to employ.  When subscribers utilize their Internet service provider's facilities to retrieve files from the World Wide Web, they are similarly interacting with stored data, typically maintained on the facilties of either their own Internet service provider (via a Web page "cache") or on those of another.  Subscribers can retrieve files from the World Wide Web, and browse their contents, because their service provider offers the "capability for . . . acquiring, . . . retrieving [and] utilizing . . . information."   Most of the data transport on the Internet relates to the World Wide Web and file transfer.
    77   The same is true when Internet service providers offer their subscribers access to Usenet newsgroup articles.   An Internet service provider receives and stores these articles (in 1996, about 1.2 gigabytes of new material each day)  on its own computer facilities.  Each Internet service provider must choose whether to carry a full newsgroup feed, or only a smaller subset of available newsgroups.  Each Internet service provider must decide how long it will store articles in each newsgroup, and at what point it will delete them as outdated.  A user can then select among the available articles, choosing those that the user will view or read; having read an article, the user may store or forward it; and the user can post articles of his or her own, which will in turn be stored on the facilities of his own Internet service provider and those of every other Internet service provider choosing to carry that portion of the newsgroup feed.  In providing this service, the Internet service provider offers "a capability for generating, acquiring, storing, . . . retrieving . . . and making available information through telecommunications."   Its function seems indistinguishable from that of the database proprietor offering subscribers access to information it maintains on-site; such a proprietor offers the paradigmatic example of an information service.
    78   As noted above, Senators Stevens and Burns state that electronic mail constitutes a telecommunications service.   They note that the provision of a transmission path for the delivery of faxes constitutes telecommunications, and characterize electronic mail as "nothing more or less than a paperless fax."   We have carefully considered this argument, but further analysis leads us to a different result.  Like the World Wide Web and Usenet services described above, electronic mail utilizes data storage as a key feature of the service offering.   The fact that an electronic mail message is stored on an Internet service provider's computers in digital form offers the subscriber extensive capabilities for manipulation of the underlying data.  The process begins when a sender uses a software interface to generate an electronic mail message (potentially including files in text, graphics, video or audio formats).  The sender's Internet service provider does not send that message directly to the recipient.  Rather, it conveys it to a "mail server" computer owned by the recipient?s Internet service provider, which stores the message until the recipient chooses to access it.  The recipient may then use the Internet service provider's facilities to continue to store all or part of the original message, to rewrite it, to forward all or part of it to third parties, or otherwise to process its contents -- for example, by retrieving World Wide Web pages that were hyperlinked in the message.  The service thus provides more than a simple transmission path; it offers users the "capability for . . . acquiring, storing, transforming, processing, retrieving, utilizing, or making available information through telecommunications."
    79   More generally, though, it would be incorrect to conclude that Internet access providers offer subscribers separate services -- electronic mail, Web browsing, and others -- that should be deemed to have separate legal status, so that, for example, we might deem electronic mail to be a "telecommunications service," and Web hosting to be an "information service."  The service that Internet access providers offer to members of the public is Internet access.   That service gives users a variety of advanced capabilities.  Users can exploit those capabilities through applications they install on their own computers.  The Internet service provider often will not know which applications a user has installed or is using.  Subscribers are able to run those applications, nonetheless, precisely because of the enhanced functionality that Internet access service gives them.
    80   The provision of Internet access service involves data transport elements:  an Internet access provider must enable the movement of information between customers' own computers and the distant computers with which those customers seek to interact.  But the provision of Internet access service crucially involves information-processing elements as well; it offers end users information-service capabilities inextricably intertwined with data transport.   As such, we conclude that it is appropriately classed as an "information service."
    81   An Internet access provider, in that respect, is not a novel entity incompatible with the classic distinction between basic and enhanced services, or the newer distinction between telecommunications and information services.  In essential aspect, Internet access providers look like other enhanced -- or information -- service providers.  Internet access providers, typically, own no telecommunications facilities.  Rather, in order to provide those components of Internet access services that involve information transport, they lease lines, and otherwise acquire telecommunications, from telecommunications providers -- interexchange carriers, incumbent local exchange carriers, competitive local exchange carriers, and others.   In offering service to end users, however, they do more than resell those data transport services.  They conjoin the data transport with data processing, information provision, and other computer-mediated offerings, thereby creating an information service.  Since 1980, we have classed such entities as enhanced service providers.  We conclude that, under the 1996 Act, they are appropriately classed as information service providers.
    82   Our findings in this regard are reinforced by the negative policy consequences of a conclusion that Internet access services should be classed as "telecommunications."  We have already described some of our concerns about the classification of information service providers generally as telecommunications carriers.   Turning specifically to the matter of Internet access, we note that classifying Internet access services as telecommunications services could have significant consequences for the global development of the Internet.   We recognize the unique qualities of the Internet, and do not presume that legacy regulatory frameworks are appropriately applied to it.
-- In re Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report to Congress (April 10, 1998) http://www.fcc.gov/Bureaus/Common_Carrier/Reports/fcc98067.html

Example: Backbone

Example: World Wide Web

Example: USENET

Example: E-mail

Example: Gateway

"More generally, though, it would be incorrect to conclude that Internet access providers offer subscribers separate services -- electronic mail, Web browsing, and others -- that should be deemed to have separate legal status, so that, for example, we might deem electronic mail to be a "telecommunications service," and Web hosting to be an "information service."  The service that Internet access providers offer to members of the public is Internet access.   That service gives users a variety of advanced capabilities.  Users can exploit those capabilities through applications they install on their own computers.  The Internet service provider often will not know which applications a user has installed or is using.  Subscribers are able to run those applications, nonetheless, precisely because of the enhanced functionality that Internet access service gives them. "  --In re Federal-State Joint Board on Universal Service, Report to Congress, FCC 98-67   79 (April 10, 1998).

Example: Voice Mail

In re Policy And Rules Concering The Interstate, Interexchange Marketplace/Implementation Of Section 254(G) Of The Communications Act Of 1934, As Amended/In 1998 Biennial Review -- Review Of Customer Premises Equipment And Enhanced Services Unbundling Rules In the Interexchange, Exchange Access and Local Exchange Markets, CC Docket No. 98-183; CC Docket No. 96-61, Report and Order,  2 (March 31, 2001) <www.fcc.gov/Bureaus/Common_Carrier/Orders/2001/fcc01098.doc> ("Enhanced services are now referred to as "information services" in the 1996 Act and comprise services such as voice mail, e-mail and other Internet services, interactive voice response, audiotext information services, and protocol processing, among others.")

---

"Examples of services the Commission has treated as enhanced include voice mail, E-Mail, fax store-and-forward, interactive voice response, protocol processing, gateway, and audiotext information services." In the matter of 1998 Biennial Regulatory Review -- Review of Customer Premises Equipmentand Enhanced Services Unbundling Rules in the Interexchange, Exchange Accessand Local Exchange Markets, CC Docket No. 98-183, Further Notice of Proposed Rulemaking, para 1, n. 20 (October 9, 1998)

---

"We note that the functions and services associated with Internet access were classed as "information services" under the MFJ.  Under that decree, the provision of gateways (involving address translation, protocol conversion, billing management, and the provision of introductory information content) to information services fell squarely within the "information services" definition.   Electronic mail, like other store-and-forward services, including voice mail, was similarly classed as an information service.     Moreover, the Commission has consistently classed such services as "enhanced services" under Computer II. "  --In re Federal-State Joint Board on Universal Service, Report to Congress, FCC 98-67   75 (April 10, 1998).

Example: Fax Store and Forward

"Examples of services the Commission has treated as enhanced include voice mail, E-Mail, fax store-and-forward, interactive voice response, protocol processing, gateway, and audiotext information services." In the matter of 1998 Biennial Regulatory Review -- Review of Customer Premises Equipmentand Enhanced Services Unbundling Rules in the Interexchange, Exchange Accessand Local Exchange Markets, CC Docket No. 98-183, Further Notice of Proposed Rulemaking, para 1, n. 20 (October 9, 1998)

Example: Store and Forward

MO&O, Bell Operating Companies Joint Petition for Waiver of Computer II Rules, DA 95-36, 10 FCC Rcd 1724 n.3, 1995 FCC LEXIS 217 **2 (Jan 1995) [electronic store-and-forward is enhanced service]

What's interesting is that paging - a form of CMRS - is also store and forward but is deemed telecom. Second R&O and FNPRM, In the Matter of Implementation of Sections 3(n) and 332 of the Communications Act Regulatory Treatment of Mobile Services, GN Docket No. 93-252, FCC 94-31, 9 FCC Rcd 1411, ¶¶ 57, 100 (Mar. 1994) ("CMRS Second R&O") [paging is store and forward; paging store and forward can be "interconnected"].  

Example:  Electronic White Pages Reverse Look Up

Example: Alarm Monitoring

Example: Protocol Conversion / Processing

Protocol Processing: Enhanced Service

 7. In the Notice, we proposed three alternative regulatory approaches for protocol processing;  however, we conclude in this Order that none of them should be adopted.  Instead, we identify two analyses of technical and market characteristics of protocol processing that lead to disparate regulatory treatments.  Because of the close technical and functional relationships between protocol processing and basic communications, an approach under which protocol processing would be treated as a neutral "adjunct" service could be an appropriate regulatory response. This approach would require that protocol processing be regulated in the same fashion as the underlying service--whether basic or enhanced--with which it is associated in a particular offering. However, as a pragmatic matter, we recognize that protocol processing functions are offered in competitive, unregulated markets, and we seek to avoid the potential for any unnecessary reregulation in such markets.  Furthermore, it appears that the nonstructural safeguards we adopt in this Order for the unseparated provision of enhanced services in general by AT & T and the BOCs may be appropriate for protocol processing as well.  Accordingly, an alternative regulatory treatment may be to retain protocol processing functions in the existing enhanced services definition and subject them to those nonstructural safeguards.  Because these approaches differ from those we proposed in the Notice, and since we wish to have as complete a record as possible before adopting any changes in this area, we defer to the Supplemental Notice any final action on the regulatory treatment of protocol processing. Pending that final action, we maintain the current regulatory status of protocol processing, including the availability of waivers from the structural separation rules for specific protocol conversions.
. . . . .
 20. After reexamining the classification of protocol processing services as enhanced in the Reconsideration Order, we affirmed the Final Decision's conclusion that code and protocol conversion should be classified as enhanced services.  We emphasized that this classification was not intended to restrict carriers from using protocol conversion within their networks for purposes such as multiplexing, security, and network traffic management. ⁵¹  However, we concluded that protocol conversion external to a carrier's network could be obtained from an increasing number of alternative non-carrier sources and, accordingly, such conversion should not be offered as a basic service. ⁵²
 21. We revisited the protocol processing issue in our 1983 Protocols Order.⁵³  In that Order, we reaffirmed our conclusion that protocol processing generally should remain an enhanced service, clarified the application of the definition, and expressed a willingness to entertain waiver requests to mitigate what we and many in the industry were beginning to perceive were some of the undesirable consequences of our treatment of protocol conversion. First, we specifically noted that a basic switched service can include protocol processing for the initiation, routing, and termination of calls or data packets.  Such protocol processing functions inherent in call processing may be associated with either basic or enhanced service.⁵⁴  Second, we acknowledged that literal application of the enhanced service definition could undesirably limit the ability of carriers to introduce new technology. Accordingly, we held ourselves ready to act favorably and expeditiously on petitions for waiver of the Computer II rules to ensure that new technology to implement an existing service can be employed. ⁵⁵
 22. Third, we indicated that waiver requests to offer "internetworking" protocol conversion ⁵⁶ with basic services on an unseparated basis would be treated more favorably than requests for other types of protocol processing waivers. ⁵⁷  We found that a waiver of structural separation for such internetworking operations would be sufficiently narrow that it would have only a minimal impact on the Computer II policies.
 23. Fourth, we found that the appropriate regulatory treatment is less clear for other forms of protocol conversion that carriers might seek to associate with basic service.  We decided to address such questions through ad hoc proceedings in which parties would request waivers of the structural separation requirements.  To govern the waiver process, we established a set of general principles designed to minimize regulatory uncertainty.  We stated that we would grant waiver requests only on the condition that "underlying transparent transmission facilities, which are comparable in price, quality and conditions of service to that built into the offering to be associated with protocols conversion, remain available generally and unencumbered by protocol conversion." ⁵⁸  We adopted this principle to ensure that if a carrier were to integrate a protocol conversion service with its basic services, it would not limit the availability of underlying basic services to others.  We also stated our intention to focus with particularity on the services at issue in waiver requests.  We sought to ensure that the requests would involve protocol processing alone, as defined in the first clause of section 64.702(a) of our rules, ⁵⁹ and not information processing or subscriber interaction with stored information, as defined in the second and third clauses of section 64.702(a). ⁶⁰  Finally, we stated our willingness to act more favorably in considering waiver requests for those protocol processing services that materially improve the performance of the basic network if such improvement cannot be gained by using protocol processing outside the network. ⁶¹
--In the Matters of: Amendment of Sections 64.702 of the Commission's Rules and Regulations (Third Computer Inquiry);  and Policy and Rules Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations Thereof Communications Protocols under Section 64.702 of the Commission's Rules and Regulations, CC Docket No. 85-229, Report and Order (June 16, 1986)

 99.  A few comments question the legitimacy of not allowing code and protocol conversion as part of a basic service.  While we have concluded that code and protocol conversion are enhancements to a basic service, we recognize that they also increase the utility of the communications channel by allowing disparate terminals to communicate with one another.  Because the universe of terminals that can communicate with one another is larger where such capabilities are offered, arguments can be made that these functions should be allowed as part of a communications service.  We have weighed the relative merits of permitting code and protocol conversion as part of a basic service and affirm our determination in the Tentative Decision, at para. 69, that these capabilities are more appropriately associated with the provision of enhanced services. This conclusion is premised on two factors.  First, there is the likelihood of distorting the regulatory distinction between basic and enhanced services if protocol conversion is performed as part of a basic service.  Second and more significant, however, is the fact that this determination has implications only for those carrier that remain subject to resale structure and the maximum separation policy.  (See discussion in Part D, infra.)  Entities not so subject may offer protocol conversion to all customers regardless of whether it is viewed under our Rules as basic or enhanced.  The most significant effect our decision will have is to require some carriers to offer protocol conversion and like enhancements to their basic services through separate subsidiaries. No compelling evidence has been submitted in this proceeding that this separation will impose significant efficiency losses on the carrier or the public it serves.  If at some future time evidence to the contrary is submitted, we are free to re-examine the public interest ramifications and regulatory implications of allowing a given protocol conversion as part of basic services. ³⁷
--In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Final Decision, 77 FCC2d 384 (May 2, 1980) (Computer II Final Decision)

Protocol Processing:  Basic Service

Protocol Conversion: Basic:  X.25

Protocol Conversion: ATT DataSpeed 40/4

Protocol Conversion:  Basic:  Frame Relay

Bright Line

Contamination Theory

See also Hybrid Services

  42.  We also reject AT&T's contention that the contamination theory applies to its frame relay service and renders its entire InterSpan service offering an enhanced service.  To date, the Commission has not applied the contamination theory to the services of AT&T or any other facilities-based carrier.  Indeed, the Commission rejected that alternative in Computer III and other proceedings. ⁶⁸
  43.  The two orders cited by AT&T in support of applying the contamination doctrine to its services are inapposite.  They do not require or even allude to application of the contamination doctrine to AT&T.  The footnote cited by AT&T in the Async/X.25 Waiver Order contains a general definition of VANs. ⁶⁹ Nothing in the footnote indicates that AT&T is included within the definition of a VAN.  The footnote specifically defines VANs as service providers that acquire common carrier facilities from other carriers, and thus do not own facilities like AT&T.  The second order cited by AT&T is a Commission order approving AT&T's amendment to its CEI plan, which provides customers with basic dial-out capabilities from AT&T's enhanced voice messaging service. ⁷⁰ This order, however, refutes, rather than supports AT&T's interpretation of the contamination theory.  The order approves the amendment because AT&T satisfies all of the CEI requirements, ensuring interconnection to the underlying basic service. ⁷¹  If the contamination theory applied to AT&T, as it argues, AT&T would not have had to satisfy any CEI requirements for the basic service. ⁷²
  44.  Moreover, application of the contamination theory to a facilities-based carrier such as AT&T would allow circumvention of the Computer II and Computer III basic-enhanced framework. AT&T would be able to avoid Computer II and Computer III unbundling and tariffing requirements for any basic service that it could combine with an enhanced service.  This is obviously an undesirable and unintended result. ⁷³
  45.  Thus, in accordance with the Commission's previous decisions, we conclude that the contamination theory does not apply to AT&T, and we do not apply it to AT&T in this order.  AT&T cannot avoid its Computer II and Computer III obligations under the auspices of the contamination doctrine, which applies only to nonfacilities-based service providers.
  46.  AT&T is free to continue its practice of packaging CPE and enhanced protocol processing with the basic frame relay service (purchased under tariff), so long as the underlying basic service is separately offered under tariff.  Thus, AT&T may maintain its flexible approach to offering frame relay services.  AT&T must file a tariff, however, for basic frame relay service within 60 days of the effective date of this order.  We leave the issues of existing AT&T frame relay contracts and the specifics of the required tariff to the tariff-review process.
-- In re Independent Data Communications Manufacturers Association, Inc., DA 95-2190, 1995 WL 613619 (FCC), 10 FCCR. 13,717, 10 FCC Rcd. 13,717, 1 Communications Reg. (P&F) 409, Order (October 18, 1995) (aka Frame Relay Order).http://www.fcc.gov/Bureaus/Common_Carrier/Orders/1995/da952190.wp

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