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Notes: Computer Inquiries
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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
"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).
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)
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")
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.
. . . . .
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)
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).
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).
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
6. When these
definitions were
adopted, it was recognized that there might be instances where an
entity
might find it desirable to offer a service which represents a
combination
of communications and data processing. Not wishing to foreclose
such
opportunities, we embodied the regulatory ground rules for such
operations
in Section 64.702 by defining hybrid services and establishing the
conditions
under which the offering of such services would be subject to
regulation.
[FN6] Where message-switching is offered as an incidental feature
of an integrated service offering that is primarily data processing, we
stated there would be total regulatory forbearance with respect to the
entire service. Where the package offering is oriented to satisfy
the communications or message-switching requirements of the subscriber,
and the data processing feature or function is incidental to the
message-switching
function, we concluded that the entire integrated service would be
treated
as a communications service.
7. The criterion offered here
is that of 'incidental.' Thus, if a service has been found to be
hybrid, and the communications portion is 'incidental to the data
processing
function or purpose,' the service constitutes hybrid data
processing.
If the data processing portion is incidental, there is a hybrid
communications
service. We also stated that in making such determinations we
would
look to: (a) whether the service, by virtue of its
message-switching
capability has the attributes of the point-to-point services offered by
conventional communication common carriers and is basically a
substitute
therefor; and (b) the extent to which the message-switching feature of
the service facilitates or is related to the data processing
component. Thus it was determined that we would look to the facts
surrounding a package
offering with a view toward determining the primary thrust of the
service
offered.
--In re Amendment of Section 64.702 of
the Commission's Rules and Regulations (Second Computer Inquiry),
Docket
No. 20828, Tentative Decision And Further Notice Of Inquiry And
Rulemaking,
72 FCC2d 358 (July 2, 1979)
86. We recognize the inadequacy of the hybrid service
definitions
in the existing rule.71 We have also taken note of the
comments by parties to this proceeding which addressed the inadequacy
of
our treatment of services which would have formerly fallen within the
hybrid
category. Since it was generally felt that mutually exclusive
categories
would result in too rigid a definitional structure, we have retained
the
'hybrid' concept through reliance on a primary purpose test.
Section
64.702(a)(4) defines a 'hybrid data processing service' to be the
offering
of a data processing service which is dependent upon the use of
communication
facilities. Section 64.702(b) is a statement of the processing
which
a carrier may utilize in the provision of a communications
service. This section states:
Communications common carriers may utilize computer processing,
including data processing, in the provision of a communications
service;
provided, however, that any data processing performed by a carrier as
part
of a tariffed service must directly relate to and be for the purpose of
providing a communication service, or for meeting the carrier's own
internal
operational and financial management needs.
87. Under this section a carrier may perform data
processing
as part of a communications offering as long as the data processing
directly
relates to and is for the purpose of providing a communications service
or meeting its own in- house needs. This recognizes that there
are
legitimate uses of data processing in the provision of a communications
service. Under this structure the need for a 'hybrid
communications'
category is eliminated. By stating that carriers may engage in
data
processing and communications processing in the provision of a
communications
service, explicit recognition is given to the previous classification
of
a 'hybrid communications service.' However, where the data
processing
performed does not result in the offering of a 'data processing
service'
(as defined) and, at the same time, is not directly related to or for
the
purpose of providing a communications service, then a carrier may not
engage
in such data processing as part of a regulated communications offering.
--In re Amendment of Section 64.702 of
the Commission's Rules and Regulations (Second Computer Inquiry),
Docket
No. 20828, Tentative Decision And Further Notice Of Inquiry And
Rulemaking,
72 FCC2d 358 (July 2, 1979)
13. In commenting on CBEMA's motion TELENET also states
its concern over the multiple interpretations that are possible
regarding
the proposed amendment to Section 64.702 as contained in our original
Notice. With the proposed elimination of the hybrid concept,
TELENET states that
it appears that the net effect of the proposed amendment would be 'to
render
not subject to regulation any communications service which contained
within
it a non-separable data processing function.'17 On the
other hand, it states that when the proposed amendment of Section
64.702
is read in conjunction with Paragraph 22 of the Notice, it appears that
the Commission 'intends to preclude any hybrid services--to require
that
carriers eliminate any data processing functions from their current
communications
offerings, and to prevent data processing service entities from
including
within their offerings even incidental communications functions.'18
TELENET suggests that any ambiguity be removed with respect to whether
hybrid services could be offered under our proposed definition.
14. In our Notice we proposed to delete the hybrid concept
as a method of classifying services under the present structure of
Section
64.702. Further elaboration may be called for to the extent that
uncertainty may exist as to what is being proposed in its place.
As Section 64.702 is currently structured, the processing functions of
storing, retrieving, merging, and calculating establish the criteria
for
determining whether a particular offering constitutes data
processing. Recognizing that these processing functions can be
employed in the provision
of either data processing or communications services, the new
definition
is structured in a manner so as to focus on processing activities.19
In addition to proposing a definition for data processing, we have set
forth certain processing activities which by their nature would
constitute
data processing within the meaning of the proposed definition.20
Examples of processing activities which would not fit within the ambit
of the data processing definitions, and which, therefore, might be
utilized
in the provision of either data processing or communications have also
been put forth.21 Under this proposed standard it
would
be inconsistent to talk in terms of a communications service having
non-separable
data processing functions, since communications and data processing now
would be considered mutually exclusive activities.22
The
nature of the processing employed would determine whether
communications
processing or data processing is being engaged in. To the extent
that a carrier is offering a communications service, data processing
could
not be offered as part of that service except if offered in accordance
with the requirements imposed by our maximum separation policy.
With
the elimination of the hybrid concept, however, ad hoc determinations
may
still be necessary, but the specific determination to be made becomes
whether
the processing activity under consideration constitutes a data
processing
activity. To the extent that the processing performed is data
processing
under our definition, a carrier's offering would be subject to our
maximum
separation requirements.
-- 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)
6. Consideration was also
given to those 'hybrid service' offerings which combined data
processing
and message-switching to form a single integrated service. One
question
was under what circumstances should a message-switching capability,
when
offered in combination with data processing services, be treated as a
sale
of communications for hire subject to regulation. We stated
general
principles applicable in determining this question. Where
message-
switching is offered as an incidental feature of an integrated service
offering that is primarily data processing, we stated there would be
total
regulatory forebearance with respect to the entire service. Where
the package offering is oriented to satisfy the communications or
message-switching
requirements of the subscriber, and the data processing feature or
function
is incidental to the message-switching function, we concluded that the
entire integrated service would be treated as a communications
service.
We further set forth the criteria for such a determination: (a)
whether
the service, by virtue of its message-switching capability, has the
attributes
of the point-to-point services offered by conventional communication
common
carriers and is, basically, a substitute therefor; (b) the extent to
which
the message-switching feature of the service facilitates or is related
to the data processing component, or whether such message-switching is
essentially independent of such data processing. Thus we
determined
that we would look to the facts surrounding a package offering with a
view
toward determining the primary thrust of the service offered.
. . . . .
11. In the original inquiry
we posited a set of definitions in order to implement the fundamental
regulatory
policies we had established.9 The pivotal definition is the
one for data processing. We stated:
'Data Processing is the use of
a computer for the processing of information as distinguished from
circuit
or message-switching. 'Processing' involves the use of computer for
operations
which include, inter alia, the functions of storing, retrieving,
sorting,
merging and calculating data, according to programmed instructions.
The distinction between data processing
service and the permissible use of computers by carriers was thus made
by establishing a dichotomy between data processing, on one hand, and
message
and circuit switching on the other. We then went on to define
message-switching
as:
'Message-Switching' is the computer-controlled
transmission of messages, between two or more points, via
communications
facilities, wherein the content of the message remains unaltered.
. . . . .
13. When the original rules
were adopted, we recognized that there might be instances where an
entity
might find it desirable to offer a combination of communications and
data
processing service. We did not wish to foreclose such opportunities for
carriers or unregulated entities. We therefore embodied the
regulatory
ground rules for such operations in Rule 64.702 by defining hybrid
services
and the conditions under which they can be offered by carriers or
unregulated
entities. For a service to be hybrid, 64.702(a)(5) invokes the
condition
that remote access data processing and message-switching be combined
'to
form a single service.' Otherwise these would be considered to be
separate services.
14. Once a service has been
found to be hybrid it becomes necessary to further classify it as
hybrid
data processing or hybrid communications in order to determine whether
or not Title II jurisdiction applies. Subsections 64.702(a)(5)(i)
and (ii), respectively, attempt to make this distinction. The
criterion
offered here is that of 'incidental.' Thus if a service has been
found to be hybrid, and the communications portion is 'incidental to
the
data processing function or purpose,' the service can be found to be
hybrid
data processing. If the data processing portion is incidental, we
have a hybrid communications service. The unambiguous resolution
of this matter is of critical importance in establishing a regulatory
boundary
since we have ruled that hybrid communications services are subject to
our jurisdiction.
-- 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)
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).
-- 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>.
"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. In our Final Decision we determined that network services provided
to consumers should be classified as either basic or enhanced. Basic
transmission
services would be regulated under Title II while enhanced services
would
not."
-- In the Matter of Amendment of Section 64.702 of the
Commission's
Rules and Regulations (Second Computer Inquiry), Docket No.
20828, MO&O, 79 FCC2d 953 p/ 5 (July 22, 1980)
(resolving
requests for partial stays of final decision)
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.
. . . .
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. In the Notices released in this proceeding we proposed
to amend Section 64.702 in light of the technological and market
developments that have taken place since the First Computer
Inquiry.
In the proposed revisions to Section 64.702 we sought to define data
processing
positively, in terms of what it is, rather than by exception as had
previously
been done. The following definition was proposed in the
Supplemental
Notice:
'Data processing' is 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 9 response to input
information.10
This definition was formulated with two related regulatory objectives
in mind: (1) an objective identification of those use of
computers
by carriers which require a separate subsidiary, and (2) the
stimulation
of economic activity in the regulated communications sector by removing
ambiguities in the existing definitions. It was stated that by
defining
data processing positively a carrier would be able to use computers for
any purpose which is not data processing. 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 would be encompassed within the proposed definition.
13. Given this definition certain processing activities
would be considered data processing and could not be offered by a
carrier
except under the maximum separation conditions of Section 64.702.
Processing
activities which would constitute data processing under this definition
were stated to include, among others:
arithmetic processing--applications include: general
commercial
accounting, inventory control, banking and point-of-sale processing,
financial
and econometric modeling, scientific calculations, etc.
word processing--applications include: interactive
information
retrieval systems, management information systems, text editing,
translation,
typesetting, etc.
process control--applications include the use of electronic
equipment to monitor and control some process which is occurring on a
continuous
basis--such as nuclear-powered generating stations, an electric power
distribution
grid, an automatic machine tool, or a fire detection and control
system.
14. We also stated that certain processing activities may
be involved in the provision of both communications and data processing
services without necessarily changing the nature of the communications
or data processing service being offered. Among the processing
activities
stated to be included in this category were, among others:
network control and routing--applications include: message
and circuit switching,11 speed and code conversion, pulse
format
conversion, analog to digital and digital to analog conversion, signal
processing,12 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.
15. By defining data processing in this manner the 'hybrid
service' categories contained in the existing Section 64.702 were
deleted,
and the offering of communications and data processing, in effect, were
established as mutually exclusive activities for regulatory
purposes.
As Section 64.702 is currently structured, the processing functions of
storing, retrieving, merging, and calculating establish the criteria
for
determining whether a particular offering constitutes data
processing. Recognizing that these processing functions can be
employed in the provision
of either data processing or communications services, the new
definition
was structured in a manner so as to focus on processing activities.13
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, Tentative
Decision
And Further Notice Of Inquiry And Rulemaking, 72 FCC2d 358 (July 2,
1979)
61. Upon review of the comments filed in this proceeding,
we have concluded that the definitional structure as proposed in the
Notices
is an inadequate means of accomplishing our stated objectives.
Moreover,
it has become increasingly apparent that any solution to the regulatory
concerns raised by the merging of communications and data processing
applications,
short of a stop-gap measure, must address the structure under which
competitive
services are provided. A structure has been set forth under which
various communications common carrier services must be provided.
In this regard we distinguish between three categories of
services--'voice',
'basic non-voice', and 'enhanced non-voice' services. We conclude
that 'voice' and 'basic non- voice' services are divorced from the
communications/data
processing controversy. We require that 'enhanced non-voice'
services
be provided on a resale basis. Thus in an interstate 'enhanced
non-voice'
service, all common carrier transmission facilities are acquired
pursuant
to tariff.
62. Since an 'enhanced non-voice' service by definition
subsumes both communications and data processing services, a
definitional
structure is employed for distinguishing those 'enhanced non-voice'
services
which are communications services from those which constitute the
offering
of a data processing service. This definitional structure basically
allows
a carrier to perform 'data processing' as part of a communications
service
as long as such processing does not result in a 'data processing
service'
(as we define it) and directly relates to and is for the purpose of
providing
a communications service. We recognize that this will not
completely
eliminate the need for case-by-case determinations, but it should
substantially
minimize this need, while providing the marketplace with a greater
degree
of certainty.
63. The structural separation of 'voice' and 'basic
non-voice'
services from 'enhanced non-voice' services permits us to address in a
different manner the cross subsidization and anticompetitive concerns
of
the maximum separation policy. A carrier having an ownership
interest
in transmission facilities used in the provision of interstate voice or
'basic non-voice' services may provide an 'enhanced non-voice' service
only through a separate corporate resale entity. Moreover,
subject
to certain exemptions, the computer facilities of a carrier (including
carriers falling under Section 2(b)(2) of the Act) which are used in
the
provision of interstate 'voice' or 'basic non-voice' services may not
be
used for those additional processing requirements necessary for
'enhanced
non-voice' services. These two forms of separation provide an
adequate
substitute for the existing maximum separation requirements.
Accordingly,
a resale carrier could provide both communications services and data
processing
services through its computer facilities.
--In re Amendment of Section 64.702 of the Commission's Rules and
Regulations
(Second Computer Inquiry), Docket No. 20828, Tentative Decision And
Further
Notice Of Inquiry And Rulemaking, 72 FCC2d 358 (July 2, 1979)
65. At the time the existing computer rules were adopted
the market applications of computer technology were limited to
large-scale
centralized computer services. However, large-scale integrated
circuitry
and microprocessor technology have dramatically altered the manner in
which
services can be offered. The market applications of computer
processing
technology makes the customization of services possible, either through
equipment located on the customer's premises or within a carrier's
network.
For reasons which we discuss later, we believe that, in addressing the
regulatory problems which arise as a result of new market applications
of computer processing technology, a distinction should be drawn
between
the services which a carrier provides on a network basis and the
provision
of customer's-premises equipment which may be used in conjunction with
network services to increase the utilization of the common carrier
service. We first look at network services and the need to
address the computer
processing activities under the carrier's control.
66. A regulatory structure must be established which
adequately
addresses present and foreseeable market applications of computer
processing
technology. In this regard certain observations can be made with
respect
to current hybrid services. The confluence of communications and
data processing has developed to such a degree that the possible
combinations
and permutations of services which can be offered are limited solely by
the constraints technology imposes on the processing capabilities of
equipment
and concomitant software applications. Augmentation of
transmission
and switching services by data processing applications is enormously
beneficial
to communications users. Computer technology and computer programming
applications
render any limitation of the variety of services available to the user
merely a factor of how the information processing applications are
structured
within the computer equipment attached to a carrier's transmission
facilities.
Thus, the nature of these services are determined not by the
transmission
facilities but, rather, by the specific processing applications offered
through equipment attached to the channel of communication. The
implications
for the communications sector become readily apparent. A regulatory
scheme
which limits service that can be provided through computer facilities
imposes
a limitation on the economic use of the equipment; and, in so doing,
imposes
an artificial economic barrier to the provision of new and innovative
services
which may serve to inhibit entry into the communications field.
For
the consumer there is the potential deprivation of needed or desired
services.
Such may be the impact of our existing computer rules. It would appear
more appropriate in light of current market applications to establish a
structure under which a computer facility could be used to provide any
hybrid service. This is premised on the need to establish a
regulatory
scheme which addresses the convergence of communications and data
processing
in a manner which gives primary consideration to users needs and the
availability
of adequate services to the public in the data communications
market.
The comments of carriers and non-carriers alike amply demonstrate the
need
for flexibility in tailoring services to meet the individual
communication
needs of the user. From the user's perspective, what is important is
not
whether a service is classified as communications or data processing,
but
that regulation not inhibit the user's ability to acquire needed
communications
services and facilities in an economic and reasonable fashion.
The
comments also point out that to the extent that services must be
classified
as 'communications' or 'data processing' for regulatory purposes, such
a regulatory classification should not result in an artificial
structure
whereby less flexibility is afforded to tailor a service to
individualized
user needs.
67. After reviewing the
comments filed
in this proceeding we conclude that a revised definitional structure,
standing
alone, does not adequately address the issues before us. In this
respect the Notices were too narrowly focused. While it is
possible
to concentrate solely on the permissible processing activities that may
be engaged in by a carrier as part of a communications service, this by
itself is not sufficient. Continued reliance on a pure
definitional
approach merely accentuates the controversy over whether communications
is incidental to data processing or data processing is incidental to
communications.
Such philosophical discussions serve no useful purpose. It has
become
more than evident in reviewing the comments that any solution which
focuses
merely on the definitional boundary between data processing and
communications
is a short term solution and one which fails to recognize and take
advantage
of the potential for new and innovative competitive data communications
services. The central issue is the movement of information and
the
ability of communications common carriers to provide the services
necessary
for the electronic transmission of information in a manner dictated by
the needs of the consumer. The regulatory problems arising
because
of the interplay of data processing and communications must be
addressed
by way of a comprehensive solution and not in terms of stop-gap
measures. This is necessary if there is to be certainty in the
marketplace and avoidance
of excessive regulatory intervention as to the nature and degree of
permissible
computer processing engaged in by carriers. Moreover, a comprehensive
solution
must consider the realities of the marketplace and accommodate computer
technology and its market applications within a framework which enables
us to carry out the responsibilities entrusted to us by Congress under
the Communications Act of 1934, as amended.
68. The framework for a consistent and
forward looking regulatory policy in this area must focus on the nature
of various categories of services and the structure under which they
are
provided. This is necessary if our regulatory environment is to
accommodate
and be in harmony with the ever continuing convergence of
communications
and data processing market applications. A regulatory scheme can
be adopted which relies in part on a definitional structure for
distinguishing
regulated communication services from unregulated data processing
services
and, at the same time, addresses the structure under which certain
common
carrier communications services are provided. The vehicle which
now
makes this possible is the Commission's Resale Decision.58
This
decision established the concept of a resale entity as a common carrier
under the regulatory scheme of the Communications Act and allowed for
flexible
communications services to be offered through resale carriers utilizing
communications facilities acquired from an 'underlying' carrier.
In essence, it makes it now possible for us to establish a regulatory
structure
under which a distinction can be made between services where the market
applications of computer processing technology do not act as a
constraint
on the class of service offered and services which are inextricably
intertwined
in the convergence of communications and data processing such as to
affect
the nature of the service offered.
69. The essence of such a structure
requires the division of common carrier communications services into
three
classes. Common Carrier communications services can be classified
as 'voice', 'basic non-voice', and 'enhanced non-voice' services.
We define these three categories of services as follows: 1)
A voice service is the electronic transmission of the human voice such
that one human being can orally converse with another human
being.
2) A 'basic non-voice' service is the transmission of subscriber
inputted information or data where the carrier: (a)
electronically
converts originating messages to signals which are compatible with a
transmission
medium, (b) routes these signals through the network to the appropriate
destination, (c) maintains signal integrity in the presence of noise
and
other impairments to transmission, (d) corrects transmission errors,
and
(e) converts the electrical signals to usable form at the destination.59
3) An 'enhanced non-voice service' is any non-voice service which
is more than the 'basic' service, where computer processing
applications
are used to act on the form, content, code, protocol, etc., of the
inputted
information.
70. In establishing these three
categories
of service, computer processing applications employed within a
carrier's
network in conjunction with 'voice' and 'basic non-voice' services can
be performed without restriction on the use of data processing
applications
utilized within the framework of these two services.60
It is primarily when carriers seek to provide 'enhanced non- voice'
service
that uncertainty arises as to the nature of the service and whether
maximum
separation applies. This is because the category of 'enhanced
non-voice'
service subsumes both regulated communications and unregulated data
processing
services. Yet, it is in this area where the potential is the
greatest
for the offering of new and innovative competitive communications
services. Within this category the rendering of a communications
or a data processing
service is primarily a factor of how computer processing applications
interact
with the user's inputted information, and it is here that the
Commission's
computer rules have delineated permissible computer processing activity
by communications common carriers.
71. Our attention, therefore, is focused
upon the establishment of a regulatory structure under which carriers
can
provide 'enhanced non-voice' services free from regulatory constraints
as to the communications or data processing nature of the
service.
In so doing, we distinguish between the three categories of service,
and
distinguish between services offered by carriers owning their own
transmission
facilities and services offered by pure resale carriers who do not own
their own facilities but, rather, acquire the necessary transmission
facilities
from an underlying carrier pursuant to tariff. We see the
separation
of 'voice' and 'basic non-voice' services from 'enhanced non-voice'
services
as being essential to the establishment of an environment conducive to
the provision of 'enhanced non-voice' services on a competitive basis.
At the heart of this separation is the need to: a) protect the
quality
and efficiency of telephone service, b) insure the availability of
transparent
common carrier transmission facilities to all on an equal basis, and c)
minimize the potential for improper cross subsidization and/or anti-
competitive
behavior. In order to provide the necessary regulatory safeguards
in these areas and still foster a competitive environment where
services
can be custom tailored to the individual needs of the user, we
conclude: First, communications common carriers owning
transmission facilities 61 used in the provision of
interstate communications services may directly
provide only 'voice' and 'basic non-voice' services. Second, carriers
owning
such transmission facilities may provide 'enhanced non-voice' services
only through a separate corporate entity on a resale basis.
Third,
the computer facilities of the underlying carrier which are used in the
interstate provision of 'voice' and 'basic non-voice' services may not
be used for those computer processing applications associated with
'enhanced
non-voice' services and which would render the service more than a
'basic
non-voice' service. In essence, the basic thrust of our
regulatory
structure is the requirement that interstate 'enhanced non-voice'
services
be provided on a resale basis where all common carrier transmission
facilities
necessary for the provision of the 'enhanced non-voice' service are
acquired
pursuant to tariff.62
72. There are significant public
interest
benefits inherent in this structure which accrue to carriers,
consumers,
and this Commission alike. With respect to carriers it provides a
regulatory environment conducive to the rendering of new and innovative
competitive communications offerings by allowing resale carriers to
take
full advantage of computer technology and its market
applications.
The resale structure allows us to do away with the 'separate
facilities'
requirement of our maximum separation policy for resale carriers.
Now both communications and data processing services may be provided
through
the computer facilities of the resale carrier. A resale carrier
need
only tariff its communication service while offering a data processing
service as a non-tariffed option. Because the provision of
'enhanced
non-voice' services is primarily a factor of the equipment design and
programming
applications which take place within the equipment attached to the
channel
of communication, services can be custom tailored to individual user
needs.
Moreover, this structure is consistent with previous policy
determinations
in that it does not extend the arm of regulation to unregulated
entities
providing data processing services. At a minimum, it allows for
the
provision of customized communication services in a competitive
environment,
where new and innovative services can be provided in response to the
demands
of the marketplace.
73. From the Commission's perspective
this resale structure enables us to meet our regulatory
responsibilities
as identified in the First Computer Inquiry, 28 FCC 2d at 302, and
minimizes
the potential for cross-subsidization and anti-competitive behavior.
The
marketing of 'enhanced non-voice' services along with the computer
equipment
and programming used in the provision of such services is isolated from
the provision of the underlying more basic common carriage
offering.
In classifying that category of services which is inextricably
intertwined
with the convergence of communications and data processing, and
requiring
that only a certain class of carriers provide such services, the
Commission
is afforded flexibility in varying the nature and degree of regulation
to be exercised over resale carriers while continuing to enforce the
traditional
regulatory controls over the underlying carriers providing basic
services
to the entire population. Moreover, an environment is created
where
the licensed transmission facilities of a carrier are available to all
providers of 'enhanced' services on the same basis, i.e. in terms of
access,
interconnection, rates, etc. The common carrier transmission
facility
necessary for the provision of an 'enhanced' service becomes a separate
part of the service which must be acquired pursuant to applicable
tariff
by any carrier entity, whether that entity is the resale entity of the
underlying carrier, an existing resale carrier, or a new entrant. Since
the transmission facilities must be acquired pursuant to tariff, the
potential
for using the transmission component of the service, to subsidize a new
or innovative service is substantially minimized. The isolation
of
the transmission component enables any carrier to provide an enhanced
non-voice
communications service on the same basis, without threat of unfair
competitive
advantage accruing to a given carrier by virtue of its control over the
underlying transmission facilities. The transmission facility would be
common to all entities and removed as a competitive element of the
service. Whatever cross-subsidization exists is limited primarily
to the competitive
portion of the service, i.e., the computer equipment and the marketing
and packaging of its processing applications, which could possibly be
addressed
if need be through the use of accounting procedures which are now
undergoing
reexamination in our Uniform System of Accounts proceeding.
74. This regulatory structure has
distinct
benefits over the existing manner in which hybrid services are
provided. It is in the 'enhanced non- voice' arena where the
existing maximum separation
policy may serve to artificially constrain or structure services and
the
use of carrier computer equipment by requiring that only regulated
services
be provided via computer equipment used in the provision of such
services.63
By separating out those services which must be provided on a 'resale'
basis,
a structure is provided whereby the concerns which prompted the maximum
separation policy are substantially minimized. It permits
'enhanced'
services to be provided under a framework which does not require
communications
and data processing services to be provided through separate entities
with
separate equipment. While this structure does not negate the need
to establish a regulatory boundary between communications and data
processing
services, since both types of service are subsumed within the
'enhanced'
non-voice category, it substantially reduces the impact any
determination
as to the communications or data processing nature of an offering would
have on the availability of services to the consumer. Whereas under the
existing rules a determination that a particular service constitutes a
data processing service would foreclose a carrier from offering the
particular
service or processing application, under this structure the data
processing
service could still be offered as a non-tariffed option by the resale
carrier.64
75. In addition, this structure requires
the facilities of the underlying carrier to be transparent to the
information
transmitted and for a carrier to provide a 'pure transmission' service
which forms the basis upon which all 'enhanced' services are provided.
This should have the added benefit of minimizing the potential for
unnecessary
duplication of network systems in order to accommodate a particular
service
that might otherwise be foreclosed if the transmission facility was
conditioned
in a manner which would inhibit the provision of the service. The
underlying carrier's transmission facilities become the basic building
block upon which computer facilities can be added to perform myriad
combinations
and permutations of processing activities.
. . . .
78. The purpose of a definitional
structure
is to establish a regulatory boundary between regulated communication
offerings
and those unregulated computer processing activities which do not
result
in the offering of a common carrier communication service. The
existing
Section 64.702(a) is inadequate in this regard primarily because it was
formulated at a time when processing capabilities were limited to
large-scale
central host computers; its inherent deficiencies rest with the fact
that
it reflects this environment. For example, in order for a service to be
considered 'hybrid' remote access data processing and message switching
must be combined to form a 'single integrated service.' In certain
situations
this determination can be made, but in reality it may simply be a
factor
of how the offering entity packages the service.66 In
addition, the standard for determining whether a service is hybrid data
processing or hybrid communications is stated in terms of whether the
message
switching being performed is 'incidental' to the data processing
function
or purpose. While this standard was useful in an environment
where
processing activities were confined to centralized computers, with the
advent of distributed processing, it is insufficient to talk solely in
terms of the message switching being 'incidental' to the data
processing
since the message switching function is an essential component to any
distributed
processing system. The regulatory focus should be upon the
service
being offered and not merely upon performance of a message switching
function.
Another deficiency is in the definition of 'data processing.'
'Data
processing' is currently defined by distinguishing it from circuit or
message
switching by essentially delineating the use of a computer for the
processing
of information for purposes other than message switching as data
processing.67 While data processing may be performed as part
of a communications service,
the current definitions focus more on the presence of various
processing
functions such as storing, merging, retrieving, etc., than on the use
to
which they are put. No attempt is made to distinguish the
legitimate
uses of data processing as part of a communications service from the
provisions
of a data processing service.
79. With the advent of distributed
processing
computer processing capabilities can be placed any where within the
network.
A revised definitional structure is needed to address this
environment.
Rather than attempting to artificially construe the present Section
64.702
in a manner suitable to present day offerings, with the prospect of
ambiguity
and uncertainty, the definitional structure of Section 64.702 should be
restructured in a manner which provides carriers with a clearer
delineation
of permissible processing activity. Moreover, it is necessary to
approach the communications/data processing controversy from a
perspective
which does not merely identify the presence of a data processing
activity
but, rather, from a perspective which identifies the regulated or
non-regulated
nature of the service provided by a carrier. There are many
market
applications of data processing which do not result in the provision of
a data processing service. For these reasons we are revising the
definitional
structure of Section 64.702(a), and more clearly stating the extent to
which carriers may engage in computer processing applications as part
of
a regulated communications offering.
--In re Amendment of Section 64.702 of the Commission's Rules and
Regulations
(Second Computer Inquiry), Docket No. 20828, Tentative Decision And
Further
Notice Of Inquiry And Rulemaking, 72 FCC2d 358 (July 2, 1979)
8. Processing activities are
characteristically
involved in the provision of both communication and data processing
services.
Since Section 64.702 only addressed the processing activities which
take
place within a central computer, we propose to enlarge the scope of
Section
64.702 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. An
appropriately
modified definition of data processing must be set forth to take into
account
the fact that processing activities are not confined solely to a
central
computer and to render Section 64.702 applicable to determinations as
to
the nature of a carrier's processing activities--regardless of location
or system structure. We therefore propose to amend Section
64.702(a)
and to modify the definition of data processing as proposed in our
original
Notice as follows:
'Data processing' is 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 programmed11 response to input
information.12
9. Processing activities which would constitute
data processing under this new definition would include, inter alia:
arithmetic processing--applications include:
general commercial accounting, inventory control, banking and
point-of-sale processing, financial and econometric modeling,
scientific calculations, etc.;
word processing--applications include: interactive
information retrieval systems, management information systems, text
editing, translation, typesetting, etc.;
process control--applications include the use of electronic
equipment to monitor and control some process which is occurring on a
continuing basis--such as nuclear-powered generating stations, an
electric power distribution
grid, an automatic machine tool, or a fire detection and control system.
Given our new definition, these processing activities would be
considered
data processing and could not be offered by a carrier except under the
maximum separation conditions of Section 64.702.
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.
Since these processing activities would not constitute data
processing,
they could be incorporated into a carrier's communications offering
without
evoking the constraints imposed by the maximum separation
requirements. Moreover, the utilization of these processing
activities in the course
of providing either a communications or a data processing service would
not necessarily, in or of itself, change the nature of that service.
11 'Programmed,' as used herein,
constitutes the means of preordaining a response to given input or
stimulus regardless of whether that means is achieved through the use
of software, hardware, firmware or fundamental equipment design.
12 The second condition (b) brings services such as
process control and proprietary information retrieval within the ambit
of the definition of data processing. 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 or stimulus--the
information request--is operated upon by the processing device and
results in an output which is the specific information requested.
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.
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.
-- 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)
16. In the new 64.702(a) we
have sought to define data processing positively, in terms of what it
is,
rather than by exception as we had previously done. By so doing
we
expect to achieve two related policy goals: (1) an objective
identification
of those uses of computers by carriers which require a separate
subsidiary,
and (2) the stimulation of economic activity in the regulated
communications
sector by removing ambiguities in the previous definition. By
defining
data processing positively, we can also approach the carriers' role
from
a different perspective--a carrier may use computers for any purpose
which
is not data processing.
17. Our new definition is
written in recognition that any computer 12 has certain
basic
processing capabilities which include:
arithmetic computation--the basic
operations of count, add, subtract, multiply, and divide
logical computation--operations
which include: AND, OR NOT, compare, and branch
storage, retrieval, and transfer--of
alphanumeric or graphical data.
These operations may be ordered and combined
into a program13 which is capable of achieving very
sophisticated
results--which may or may not constitute data processing as we have
defined
it.
18. In our new definition
we state the generic criterion for identifying the data processing
function
as:
'the use of a computer for the
purpose of processing information wherein: (a) the semantic
content, or meaning, of input data is in any way transformed, or (b)
where
the output data constitute a programmed response to input data.'14
In contrast, the generic characteristic
of the communications function is that the semantic content of
information
is not changed at the completion of a given process. A message
entering
a network is intended to arrive at its destination unchanged. Several
computer
operations, such as message and circuit switching, may be required to
permit
the message to transit the network. In this process, individual
symbols
may be processed, as in code conversion and error correction. Or
the message may be accompanied by addressing information, such as dial
pulses or message headers, which are used by the communications network
for centralized message routing. The purpose of these computer
operations
is, nevertheless, the transmission of an unaltered message through a
network
and they do not constitute a data processing service.
19. We now cite some examples
of data processing services, or functions, which exist within the
context
of our new proposed definitions. At the time of the original
Computer
Inquiry, the preponderance of data processing applications was
addressed
to the manipulation of numerical quantities. There were
ubiquitous
applications to business and scientific data processing. These
trends
continue. On a lesser scale, there were several non-computational
applications of a data processing--to information retrieval, and
transaction
oriented systems for example. These applications are much more
significant
now than in 1971.
20. Since data processing
applications now encompass a much broader range than previously, it may
be useful to accept the concept that the term 'data processing service'
comprehends at least three reasonably distinct subclasses, which may be
commingled in specific applications:
arithmetic processing--general
commercial accounting, payroll, inventory control, banking and
point-of-sale
processing, financial and econometric modeling, scientific
calculations,
etc.
word processing--a rapidly developing
application resulting from advances in mass memory technology and word
processing software. Applications include: interactive
information
retrieval systems, management information systems, text editing,
translation,
typesetting, etc.
process control--the increased
reliability and availability of computers is leading to an expansion of
applications where a computer is used to monitor and control some
process
which is occurring continuously--such as a nuclear-powered generating
station,
an electric power distribution grid, an automatic machine tool, or a
fire
detection and control system.
Given our new definition, all of these
applications would be considered data processing and could not be
offered
by carriers except under the maximum separation conditions of Section
64.702.
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.
22. The new definition provides
a demarcation between data processing services and communication
services.
By so defining data processing, we have deleted the 'hybrid service'
concept.
Henceforth a service would be characterized as either data processing
or
communications. A service or offering would be considered data
processing
if it meets the data processing criterion set forth in our new
definition.
Where such criterion is met a carrier would be required to offer the
service
subject to our maximum separation policy as enunciated in Section
64.702
of our Rules. To the extent that a service does not meet the
criterion
for data processing under our new definition then it would be
considered
a communications service or offering and subject to regulation under
Title
II.
23. Accordingly, notice is
hereby given that we propose to amend Section 64.702 of our Rules as
set
forth in Appendix A hereto by: (a) positively defining data
processing
and deleting the remaining terms and definitions contained in Section
64.702(a),
(b) deleting entirely subsections (e), (f) and (g) which deal with
hybrid
services.17 Since all references to 'hybrid' services
are being omitted, we would also delete Section 0.308 of our Rules
pertaining
to delegation of authority as to hybrid services.
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.
-- 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)
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)
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
"Basic service is the offering of a pure transmission
capability over a communications path that is virtually transparent in
terms of its interaction with customer supplied information.= Id. at
419-20." 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)
39. In Computer II, the Commission created the regulatory categories
of "basic" services and "enhanced" services in order to more clearly
distinguish
regulated common carrier services from unregulated computer-data
services. It defined basic transmission service as limited
to the Title II common
carrier offering of transmission capacity for the movement of
information.76
76 Id. at 419-20, paras. 93-96.
--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
The regulatory treatment of data communications
services is governed by the basic-enhanced service dichotomy created in
the Computer II proceeding. 4 In that proceeding, the
Commission
described "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."5
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)).
-- In re US West
Communications, Inc., Petition
for Computer III Waiver, Order, 11 FCC Rcd. 1195, para 2 (Nov 6, 1995)
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)
Of the three categories of services that we have established--'voice',
'basic non-voice', and 'enhanced non-voice'--'voice and 'basic
non-voice'
services may employ any computer processing applications as long as
they
do not change the nature of the service.
-- In re Amendment of Section 64.702 of the Commission's Rules and
Regulations (Second Computer Inquiry), Docket No. 20828, Tentative
Decision
And Further Notice Of Inquiry And Rulemaking, 72 FCC2d 358 para 77
(July
2, 1979)
Moreover, because the provider of an 'enhanced non-voice' service is
dependent upon the 'basic non-voice' services of an underlying carrier,
the transmission component is isolated such that the additional
processing
applications inherent in the provision of 'enhanced non-voice' services
will not impair the quality or efficiency of voice service, or
adversely
affect the 'basic' transmission service of the underlying carrier.
-- In re Amendment of Section 64.702 of the Commission's Rules and
Regulations (Second Computer Inquiry), Docket No. 20828, Tentative
Decision
And Further Notice Of Inquiry And Rulemaking, 72 FCC2d 358 para 77
Para
126 (July 2, 1979)
81. Rather than adopting the definition
of data processing proposed in the Notices, we are revising Section
64.702(a)
taking into consideration the comments and suggestions filed in this
proceeding.
Appendix B contains the revised Section 64.702. This definitional
structure generically describes 'computer processing'. Moreover, a
distinction
is made between the use of 'data processing' and the provision of a
'data
processing service', making it clear that data processing may be
performed
as part of a regulated communications service without necessarily
resulting
in the offering of a data processing service. The concept of
'mutually
exclusive' categories as proposed in the Notice is not retained.
Instead, a primary purpose standard is incorporated which allows for ad
hoc determinations in considering the regulated or non- regulated
nature
of a carriers offering. The 'hybrid data processing'
classification
is retained, which continues to recognize the legitimate use of
communication
facilities by unregulated entities in the provision of data processing
services. The foregoing is a more flexible approach which does
not
result in a rigid definitional structure and, we believe, provides the
needed basis for determining those computer processing applications
which
may be offered as part of a common carrier service.
82. The standard for determining
permissible
carrier activity in the present computer rules is contained in the
definition
of message switching, i.e., '. . . the transmission of messages between
two or more points, via communication facilities, wherein the content
of
the information remains unaltered.' This fundamental
characteristic
of a common carrier communications service is retained as the basis of
the definitional structure we are proposing. In essence, basic
concepts
established in the First Computer Inquiry are being applied to computer
processing applications which have developed since that time to define
what market applications may be incorporated as part of a common
carrier
communications service. The function or role of communications
common
carriage is to provide the means for transmitting subscriber initiated
messages or information between two or more points and having that
information
arrive at the destination intended by the subscriber without the
content
of the message or information being altered by the carrier in the
course
of transmission.
-- In re Amendment of Section 64.702 of the Commission's Rules and
Regulations (Second Computer Inquiry), Docket No. 20828, Tentative
Decision
And Further Notice Of Inquiry And Rulemaking, 72 FCC2d 358 para 81
(July
2, 1979)
87. Under this section a carrier may perform data
processing
as part of a communications offering as long as the data processing
directly
relates to and is for the purpose of providing a communications service
or meeting its own in- house needs. This recognizes that there
are
legitimate uses of data processing in the provision of a communications
service. Under this structure the need for a 'hybrid
communications'
category is eliminated. By stating that carriers may engage in
data
processing and communications processing in the provision of a
communications
service, explicit recognition is given to the previous classification
of
a 'hybrid communications service.' However, where the data
processing
performed does not result in the offering of a 'data processing
service'
(as defined) and, at the same time, is not directly related to or for
the
purpose of providing a communications service, then a carrier may not
engage
in such data processing as part of a regulated communications offering.
--In re Amendment of Section 64.702 of
the Commission's Rules and Regulations (Second Computer Inquiry),
Docket
No. 20828, Tentative Decision And Further Notice Of Inquiry And
Rulemaking,
72 FCC2d 358 (July 2, 1979)
Functionality
Test
We are mindful that, in order
to promote equity
and efficiency, we should avoid creating regulatory distinctions based
purely on technology. Congress did not limit "telecommunications"
to circuit-switched wireline transmission, but instead defined that
term
on the basis of the essential functionality provided to
users.
Thus, for example, we have previously required paging providers to
contribute
to universal service funding, because they are providers of
"telecommunications
service." We have also required private carriers to
contribute
to federal universal service funding, even though they are not common
carriers.
- In re Federal-State Joint Board on Universal
Service, Report to Congress, FCC 98-67 98 (April 10, 1998).
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
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).
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
13. At
least one commenter has suggested that FWD is
not an "information service" because it falls within the definition's
exception
for the "management, control or operation of a telecommunications
system
or the management of a telecommunications service."46 We disagree.
Examining
the plain language of the definition dictates a finding that the
exception
could not apply to Pulver because Pulver is not managing a
telecommunications
system or telecommunications service. Examining the history of the text
and Commission precedent supports the same result. The
telecommunications
management exception was initially included
in the definition of "information service" contained in the
Modification
of Final Judgment.47 That definition explained what services the BOCs
were
not permitted to offer while recognizing that certain computer
processing
capabilities were permitted within the provision of their regulated
services.
Thus, the telecommunications management exception permitted the BOCs to
improve their telecommunications networks without running afoul of the
restriction on providing information services.48 Prior to the MFJ and
divestiture,
the Commission had permitted certain computing capabilities to be
incorporated
into AT&T's telecommunications network to facilitate and modernize
the provision and use of basic telephone service.49 This does not mean
that when Pulver or another information services provider offers these
capabilities on a stand-alone basis that they are transformed into
telecommunications
services.50
46 See Letter from Kathleen M. Grillo, Verizon, to Marlene
H. Dortch, Secretary, Federal Communications
Commission, WC Docket No. 03-45 & 03-211 at 5 (filed Feb. 5, 2004)
(Verizon Feb. 5 Ex Parte Letter); see also supra para. 3 and n.6. In
the Non-Accounting Safeguards Order, the Commission recognized that
certain capabilities previously treated as basic services when provided
by a carrier fell within the telecommunications management exception:
adjunct-to-basic services and "no net" protocol processing.
Implementation of the Non- Accounting Safeguards of Sections 27 and 272
of the Communications Act of 1934, as amended, First Report and Order
and Further Notice of Proposed Rulemaking, 11 FCC Rcd 21905, 21957-58,
paras. 106-07 (1996) (Non- Accounting Safeguards Order), clarified in
Order on Reconsideration, 12 FCC Rcd 2297, 2298-99, para. 2 (1997).
47 See United States v. American Tel. & Tel. Co., 552 F. Supp. 131,
229 (DDC 1982) (subsequent history
omitted); Joint Managers' Statement, S. Conf. Rep. No. 104-230, 104th
Cong., 2d Sess. (1996) at 114.
48 See American Tel. & Tel., 552 F. Supp. at 227, 229.
49 See Amendment of Section 64.702 of the Commission's Rules and
Regulations (Second Computer Inquiry), Docket No. 20828, Final
Decision, 77 FCC 2d 384, 419-428 (1980) (Computer II Final Decision)
(noting those computer processing capabilities directly related to the
provision of the basic service that telephone companies were able to
provide as part of their tariffed basic service (later termed
"adjunct-to basic" services, 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, ENF 84-2, Memorandum Opinion
And Order, 101 FCC 2d 349, 358-61 (1985) (NATA Centrex)); Amendment of
Section 64.702 of the Commission's Rules and Regulations (Second
Computer Inquiry), Docket No. 20828, Memorandum Opinion And Order, 84
FCC 2d 50, 60-61 (1980) (Computer II Reconsideration Order)
(recognizing certain protocol
conversion capabilities may occur internal to a carrier's network);
Computer II Final Decision, 77 FCC 2d at 421; Communications Protocols
under Section 64.702 of the Commission's Rules and Regulations, Gen.
Docket No. 80-756, 95 FCC 2d 584, para. 29 (1983) (Protocols Order).
50 Indeed, in discussing various types of signaling that occurs within
a basic service, the Commission noted that certain protocol processing
network functions intrinsic therein "may be properly associated with
basic service without changing its nature, or with an enhanced service
without changing the classification of the latter as unregulated under
Title II of the Act." Protocols Order, 95 FCC 2d at para. 15. We note
that FWD is different from signaling networks. While FWD does provide
information that members use to initiate communications among
themselves, FWD does not manage the resulting disintermediated
communication. That is managed by the members themselves. In addition,
FWD provides many features not offered by signaling networks (e.g.,
directory look-up, voice mail, emailed responses, conferencing
capabilities,
and address repair).
-- In re Petition for Declaratory Ruling
that pulver.com's Free World Dialup
is Neither Telecommunications Nor a Telecommunications Service, WC
Docket
No. 03-45, Memorandum
Opinion And Order (FCC February 19, 2004)
73. Contrary to NYNEX's argument, we conclude that
Congress'
designation of the publishing of directories as "necessary to, or used
in" the provision of a telecommunications service does not require a
broad
reading of section 222(c)(1)(B) that encompasses all information
services.
270 We are persuaded that section 222(c)(1)(B) covers services
like
those formerly characterized as "adjunct-to-basic," in contrast to the
information services such as call answering, voice mail or messaging,
voice
storage and retrieval services, fax store and forward, and Internet
access
services, that the parties identified in the record. 271 As noted
supra, before the 1996 Act, the Commission recognized that certain
computer
processing services, although included within the literal definition of
enhanced services, were nevertheless "clearly 'basic' in purpose and
use"
because they "facilitate use of traditional telephone service."
272
Examples of adjunct-to-basic services include speed dialing, call
forwarding,
computer-provided directory assistance, call monitoring, caller ID,
call
tracing, call blocking, call return, repeat dialing, call tracking, and
certain centrex features. 273 With respect to these services, the
Commission stated that such computer processing applications were "used
in conjunction with 'voice' service" 274 and "help telephone companies
provide or manage basic telephone services," as opposed to the
information
conveyed through enhanced services. 275 Although the Commission
subsequently
recognized these adjunct-to-basic services as being telecommunications
services in the Non-Accounting Safeguards Order, their appropriate
service
classification remained unclear at the time that Congress passed the
1996
Act. Accordingly, we believe the language in section
222(c)(1)(B),
"services necessary to, or used in, the provision of such
telecommunications
service," reaches these adjunct-to-basic services, which are "used in"
the carrier's provision of its telecommunications service. On
this
basis, we agree with those parties arguing that services such as call
waiting,
276 caller I.D., 277 call forwarding, 278 SONET, 279 and ISDN 280 would
fall within the language of section 222(c)(1)(B); therefore, carriers
need
not obtain express approval from the customer to use CPNI to market
those
services. We disagree, however, that other services, now
classified
as information services, such as call answering, voice mail or
messaging,
voice storage and retrieval services, fax store and forward, and
Internet
access services, 281 would come within its meaning.
74. Our interpretation is supported by Congress' example
of the publishing of directories. The publishing of directories,
like those services formerly described as adjunct-to-basic, can
appropriately
be viewed as necessary to and used in the provision of complete and
adequate
telecommunication service. As the Commission reasoned, in
connection
with finding directory assistance to be an adjunct-to-basic
service:
"[when a customer uses directory assistance, that customer accesses
information
stored in a telephone company data base.... [Such service
provides
only that information about another subscriber's telephone number which
is necessary to allow use of the network to place a call to that other
subscriber." 282 As with directory assistance services, if
listings
are not published, many calls cannot, and will not, be made. In
this
way, the publishing of directories is likewise necessary to facilitate
call completion. This is the view taken by numerous state courts
that have explicitly found that the publishing of telephone listings is
a necessary component of the provision of basic telephone service.
283
In contrast, most information services are not "used in, or necessary
to" the provision of the carrier's telecommunications service. 284
-- In Re In The Matter Of Implementation Of The Telecommunications
Act Of 1996, CC Docket No. 96-115, Second Report and Order and Further
Notice of Proposed Rulemaking (February 26, 1998)
17. The Commission has consistently categorized a service
option or feature as adjunct to basic, and thus subject to Title II
regulation,
if that option or feature is clearly basic in purpose and use and
brings
maximum benefit to the public through its incorporation in the network.
61 For example, the Commission has addressed whether
access to a database
through directory assistance that searches for a listing by name may be
offered as an adjunct to basic telephone service. Because a
subscriber
using directory assistance retrieves information stored in a telephone
company's computer data base, directory assistance appears to fit
within
the definition of an enhanced service. The Commission, however,
found
such access to be adjunct to basic, rather than enhanced service,
because
directory assistance provides only that
information necessary for a subscriber to place a call. 62
18. OSD appear to be within the definition of adjunct
to basic services, because they are intended to facilitate the use of
traditional
telephone services for TTY-TTY calls, and do not alter the fundamental
character of TTY- TTY telephone service. The services provided by
OSD, including operator assistance with collect and third-party
billing,
emergency interrupt and busy- line verification, are intended to
facilitate
the completion of TTY-TTY calls. As discussed above, directory
assistance
is already classified an adjunct to basic service. The fact that
directory assistance is provided through OSD does not alter the nature
of the service, or, consequently, its classification as adjunct to
basic
service. We therefore conclude that the services provided through
OSD are subject to Title II regulation as adjunct to basic services. 63
61. Id. at 359.
62. Id. at 360. The Commission has also held that
electronic directory assistance is an adjunct to basic service because,
as with operator-assisted directory assistance, the purpose of the
service
is to facilitate the placement of telephone calls. Southwestern
Bell
Telephone Co., Petition for Waiver of Section 69.4(b) of the
Commission's
Rules, 5 FCC Rcd 3792, 3793 (Com. Car. Bur. 1990).
63. According to AT&T and MCI, tariffs have been filed
with the Commission for all the underlying services that are provided
through
OSD as required by Section 203(a) of the Communications Act.
--In The Matter Of Establishment Of A Funding Mechanism For Interstate
Operator Services For The Deaf, RM 8585, Memorandum Opinion and Order,
11 FCC Rcd. 6808, (February 21, 1996)
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)).
-- In re US West
Communications, Inc., Petition
for Computer III Waiver, Order, 11 FCC Rcd. 1195, para 2 (Nov 6, 1995)
26. "We conclude that the
reverse-search capability offered in conjunction with US West's EWP
offering
constitutes an enhanced service. ..."
. . . .
29. In the instant case,
US West has not made such a showing, nor does it seek to argue that its
reverse-search capability constitutes a basic service. US West's EWP
reverse-search
capability on its face meets two of the three characteristics that
define
an enhanced service because it provides additional information (name
and
address associated with a telephone number) and involves subscriber
interaction
with stored information. Satisfying any one of the characteristics
would
suffice to classify the service as enhanced.
30. We are not persuaded
by the arguments of Bell Atlantic and SWBT that the primary purpose of
the reverse-search capability is to facilitate the placement of a
telephone
call, making the service adjunct to basic pursuant to the NATA Centrex
Order. While this service enables customers to avoid calling a
number
without knowledge of the name and address of the called party, the
additional
information gained through the service -- name and address -- is not
actually
necessary to make the call.58 Although customers may place a
call to a telephone number after obtaining the associated name and
address
through a reverse-search, commenters have not demonstrated that
placement
of a telephone call would typically be the immediate next step.59
Thus, we find that the primary purpose for this service is not to
facilitate
call completion. We conclude that unlike directory assistance,
which
the Commission has found adjunct to basic because it provides
information
necessary to make a call, the reverse-search capability provides
additional
information that is not necessary to make a call (because the
subscriber
already has the telephone number) and which could be used for a number
of other purposes.
31. Because US West's reverse-search
capability meets two of the Computer III tests for an enhanced service
and does not meet the NATA Centrex Order test for an adjunct to basic
service,
we therefore conclude that the reverse-search capability offered in
conjunction
with US West's EWP offering constitutes an enhanced service pursuant to
Section 64.702 of our rules.
--In re US West Communications, Inc.,
Petition for Computer III Waiver, Order, 11 FCC Rcd. 1195 (Nov 6,
1995)
27.
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; or (2) provide the subscriber additional, different, or
restructured
information; or (3) involve subscriber interaction with stored
information.54
Notwithstanding this three-pronged test, the Commission held in the
NATA
Centrex Order that carriers may use some of the processing and storage
capabilities within their networks to offer optional tariffed features
as "adjunct to basic" services, if the services: (1) are intended
to facilitate the use of traditional telephone service; and (2) do not
alter the fundamental character of telephone service. 55
28.
Access to a data base through directory assistance that searches for a
listing by name may be offered as an adjunct to basic telephone
service,
even though a subscriber can access additional, different, or
restructured
information. The Commission found such access to be adjunct to
basic,
rather than enhanced, because directory assistance provides only that
information
necessary for a subscriber to place a call. 56 The
NATA
Centrex Order concluded that the provision of access to a data base for
purposes other than to obtain the information necessary to place a call
will generally be found to be an enhanced service. The
presumption
regarding such services, therefore, is that they are enhanced unless
they
are shown to be otherwise.57
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.
-- In re US West
Communications, Inc., Petition
for Computer III Waiver, Order, 11 FCC Rcd. 1195, para 2 (Nov 6, 1995)
Example:
Packet Switching
The synchronous X.25
interface protocol has
traditionally been the most widely recognized protocol used to
communicate
over packet-switched networks. 5 Much of the existing terminal
equipment
that customers use to originate and terminate data communications
between
their computers and other computers, however, historically has not been
designed to support the X.25 protocol. This equipment often employs an
asynchronous protocol, which is used to originate and terminate traffic
over ordinary voice communications lines. Thus, data communicated under
asynchronous protocols must be converted to data employing synchronous
X.25 protocol in order to be transmitted over a packet-switched
network.
Moreover, as the number of networking and terminal protocols has
increased
over time, so has the need to provide conversion among these protocols."
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)
- - - - - - - - - - - - -
- - - - - - -
- - - - - - - - - - - -
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.
. . . . . .
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)
- - - - - - - - - - - - -
- - - - - - -
- - - - - - - - - - - -
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)
- - - - - - -- - - -
- - - - - -
- - - - - - - - - - - - - -
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)
- - - - - - - - - - - - - -
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.
Since these processing
activities would not
constitute data processing, they could be incorporated into a carrier's
communications offering without evoking the constraints imposed by the
maximum separation requirements. Moreover, the utilization of
these
processing activities in the course of providing either a
communications
or a data processing service would not necessarily, in or of itself,
change
the nature of that service.
[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)
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).
--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
Enhanced services, which are not regulated
by the Commission under Title II of the Communications Act, use
transmission
facilities to deliver services that provide more than a basic
transmission
offering.
Bell Operating Companies' Joint Petition for Waiver of Computer
II Rules, Memorandum Opinion & Order, 10 FCC Rcd 1724 n.3
(1995)
(Interim Waiver Order); 47 C.F.R. ' 64.702(a). 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. See Bell Operating Companies
Joint
Petition for Waiver of Computer II Rules, Order, 10 FCC Rcd 13,758,
13,770-13,774, App. A (Com. Car. Bur. 1995) (BOC CEI Plan Approval
Order).
We note that the Telecommunications Act of 1996 (1996 Act) does not
utilize
the Commission's basic/enhanced terminology, but instead refers to
"telecommunications
services" and "information services." Telecommunications Act of 1996,
Pub.
L. No. 104-104, 110 Stat. 56, codified at 47 U.S.C. '' 151 et
seq;
see also Computer III Further Remand Proceedings: Bell
Operating Company Provision of Enhanced Services and 1998 Biennial
Regulatory
Review -- Review of Computer III and ONA Safeguards and Requirements,
CC Docket Nos. 95-20, 98-10, Further Notice of Proposed Rulemaking, FCC
98-8 at & 39 (rel. Jan. 30, 1998) (Computer III Further Notice).
The Commission has concluded, however, 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. SeeFederal
-State Joint Board on Universal Service, CC Docket No. 96-45,
Report
to Congress, FCC 98-67 at && 33, 39, 45-46 (rel. April 10,
1998)
(Universal Service Report to Congress).
-- 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)
16. The basic-enhanced service dichotomy was defined in
the Computer II proceeding. 57 In that proceeding,
the
Commission described "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." 58
"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. 59 Notwithstanding this
three-pronged
test, the Commission has held that carriers may use some of the
processing
and storage capabilities within their networks to offer optional
tariffed
features as "adjunct to basic" services, if the features: (1) are
intended
to facilitate the use of traditional telephone service; and (2) do not
alter the fundamental character of telephone service. 60
17. The Commission has consistently categorized a service
option or feature as adjunct to basic, and thus subject to Title II
regulation,
if that option or feature is clearly basic in purpose and use and
brings
maximum benefit to the public through its incorporation in the network.
61 For example, the Commission has addressed whether
access to a database
through directory assistance that searches for a listing by name may be
offered as an adjunct to basic telephone service. Because a
subscriber
using directory assistance retrieves information stored in a telephone
company's computer data base, directory assistance appears to fit
within
the definition of an enhanced service. The Commission, however,
found
such access to be adjunct to basic, rather than enhanced service,
because
directory assistance provides only that information necessary for a
subscriber
to place a call. 62
18. OSD appear to be within the definition of adjunct
to basic services, because they are intended to facilitate the use of
traditional
telephone services for TTY-TTY calls, and do not alter the fundamental
character of TTY- TTY telephone service. The services provided by
OSD, including operator assistance with collect and third-party
billing,
emergency interrupt and busy- line verification, are intended to
facilitate
the completion of TTY-TTY calls. As discussed above, directory
assistance
is already classified an adjunct to basic service. The fact that
directory assistance is provided through OSD does not alter the nature
of the service, or, consequently, its classification as adjunct to
basic
service. We therefore conclude that the services provided through
OSD are subject to Title II regulation as adjunct to basic services. 63
57. Amendment of Section 64.702 of the
Commission's Rules and Regulations (Second Computer 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).
58. 77 FCC 2d at 420.
59. 47 C.F.R. S 64.702(a).
60. 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).
61. Id. at 359.
62. Id. at 360. The Commission has also held that
electronic directory assistance is an adjunct to basic service because,
as with operator-assisted directory assistance, the purpose of the
service is to facilitate the placement of telephone calls.
Southwestern Bell Telephone Co., Petition for Waiver of Section 69.4(b)
of the Commission's Rules, 5 FCC Rcd 3792, 3793 (Com. Car. Bur. 1990).
63. According to AT&T and MCI, tariffs have been filed
with the Commission for all the underlying services that are provided
through
OSD as required by Section 203(a) of the Communications Act.
--In The Matter Of Establishment Of A Funding Mechanism For Interstate
Operator Services For The Deaf, RM 8585, Memorandum Opinion and Order,
11 FCC Rcd. 6808, (February 21, 1996)
The regulatory treatment of data communications services is governed
by the basic-enhanced service dichotomy created in the Computer II
proceeding.
4 In that proceeding, the Commission described "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." 5 "Enhanced services," on the other
hand,
are not regulated under Title II of the Act, and provide more than a
basic
voice transmission offering.
"Enhanced services," on the other hand,
are not regulated under Title II of the Act, and provide more than a
basic
voice transmission offering. 6
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).
-- In re US West
Communications, Inc., Petition
for Computer III Waiver, Order, 11 FCC Rcd. 1195 para 2 (Nov 6,
1995)
"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" use the telephone network to deliver services that
provide more than a basic voice transmission offering. They are
contrasted
with "basic services," such as "plain old telephone service" (POTS),
which
are regulated as tariffed services under Title II of the Communications
Act. See 47 C.F.R. S 64.702(a);
-- In The Matter Of Computer III Further Remand Proceedings: Bell
Operating
Company Provision Of Enhanced Services, CC Docket No. 95-20, 10 FCC
Rcd.
8360, February 21, 1995 (needs pinpoint cite)
Basic services, such as "plain old telephone service" (POTS), are
regulated
as tariffed services under Title II of the Communications Act. Enhanced
services use the existing telephone network to deliver services that
provide
more than a basic transmission offering, such as voice mail, E-Mail,
electronic
store-and-forward, fax store-and-forward, data processing, and gateways
to online databases.
-- In The Matter Of Bell Operating Companies' Joint Petition For Waiver
Of Computer II Rules, DA 95-36, 10 FCC Rcd. 1724, n. 3 January 11, 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
In evaluating the enhanced
services market, we determined
that it was truly competitive. 28 Because consumers
were
deriving substantial benefits from this competition, we found that
regulation
of enhanced services was unwarranted. We concluded that the basic
and enhanced service dichotomy advanced the public interest by
promoting
regulatory certainty and by comporting with the actual development of
the
enhanced services industry. In the Final Decision, we also
deregulated
the provision of CPE. 29
--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)
"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)
84. The definition of 'computer
processing'
is taken from part (b) of our proposed definition of data processing.70
In addition we define 'data processing' as that processing which acts
on
the message or information to provide different information than that
provided
by the subscriber or, without altering the content of the information,
results in the provision of additional or restructured subscriber
information.
We distinguish between data processing as a computer processing
activity
and the provision of a 'data processing service.' For example,
data
processing which is used for the purpose of transmitting and routing a
subscriber message or data information does not result in the provision
of a 'data processing service'. Under subpart (a) of the
definition
of 'data processing service' the offering of a data processing service
results when computer processing capabilities are offered for hire for
the purpose of transforming or altering the information content or
meaning
of information provided by the subscriber. Part (b) of the
definition
of 'data processing service' addresses information retrieval services
and
part (c) addresses various process control operations.
85. We recognize that a carrier may
perform information retrieval and process control operations in the
routing
of messages or information in the provision of a communications
service.
The mere performance of these operations by a carrier does not
necessarily
result in the rendering of a data processing service. The emphasis is
on
the service being offered. Part (b) of our definition of 'data
processing
service' focuses upon the presence of a data base within the carriers
network
to provide an information retrieval service or to store information
which
is not necessary for the provision of a communications service or a
carrier's
own internal management needs. Moreover, a complete prohibition
on
the use of what may be categorized as 'process control' would deny
carriers
the legitimate use of computer processing applications such as
'polling'
of communication channels and 'automatic call distribution'.
These
types of applications are not covered by the phrase 'non-
communications'
in subsection (c) of the definition of 'data processing service'.
Process control applications which constitute the rendering of a
noncommunications
process would include such applications as monitoring a nuclear-powered
generating station, eleic power distribution grids, automatic machine
tools,
etc. Thus, we distinguish between process control applications
which
monitor the flow, routing, and transmission of a subscriber's messages
into and through the communications network, and those process control
applications which are not dependent upon, or result from a subscriber
initiated message or information. An example of the former case
might
be the provision of a security alarm service where a signal is
generated
at the subscriber's premises and then routed by the carrier to the
nearest
emergency or security center. An example of the latter situation might
be where computer facilities within the carrier's network are
monitoring
a customer's premises and generating signals which are not dependent
upon
input from the customer. This latter case of process control
constitutes
unilateral action by the carrier independent of any message sent by a
subscriber,
and does not constitute a communications service wherein the carrier is
offering to carry subscriber initiated messages or information.
The
analogy may be applicable to other services where the service being
rendered
is actually dependent upon a carrier monitoring a process rather than
the
transmission of a subscriber initiated message or information.
Such
process control applications fall within the ambit of part (c) of the
definition
of 'data processing service.'
-- In re Amendment of Section 64.702 of the Commission's Rules and
Regulations (Second Computer Inquiry), Docket No. 20828, Tentative
Decision
And Further Notice Of Inquiry And Rulemaking, 72 FCC2d 358 (July 2,
1979)
Justification
Objectives
The Internet provides
citizens of the United
States with the ability to communicate across state and national
borders
in ways undreamed of only a few years ago. The Internet also is
developing
into a powerful instrumentality of interstate commerce. In 1997,
we decided that retaining the ESP exemption would avoid disrupting the
still-evolving information services industry and advance the goals of
the
1996 Act to "preserve the vibrant and competitive free market that
presently
exists for the Internet and other interactive computer services."16
This Congressional mandate underscores the obligation and commitment of
this Commission to foster and preserve the dynamic market for
Internet-related
services. We emphasize the strong federal interest in ensuring
that
regulation does nothing to impede the growth of the Internet -- which
has
flourished to date under our "hands off" regulatory approach -- or the
development of competition. We are mindful of the need to address
the jurisdictional question at issue here, and the effect the
jurisdictional
determination may have on inter-carrier compensation for ISP-bound
traffic,
in a manner that promotes efficient entry by providers of both local
telephone
and Internet access services, and that, by the same token, does not
encourage
inefficient entry.
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.").
----In Re Implementation of
the Local Competition
Provisions in the Telecommunications Act of 1996, Inter-Carrier
Compensation
for ISP-Bound Traffic, CC Docket No. 96-98, CC Docket No. 99-68,
Declaratory
Ruling 6 (February 26, 1999)
"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
3. In the Computer II Order,
the Commission
determined that it would not serve the public interest to subject
enhanced
service providers to traditional common carriage regulation under Title
II because, among other things, the enhanced services market was "truly
competitive." 7
7Computer
II Order,
77 FCC 2d at 430-33, paras. 119, 124, 128.
-- 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, ¶ 3 (March 31, 2001)
<www.fcc.gov/Bureaus/Common_Carrier/Orders/2001/fcc01098.doc>.
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)
15. In Appendix A we offer for comment a revised version
of Section 64.702. The amended section continues to maintain the
fundamental regulatory policies set forth in our original inquiry,
namely: (1) carriers may not offer data processing services
except through a separate
subsidiary organized in accordance with the separation principles
stated
in Section 64.702(c), and (2) total regulatory forebearance regarding
the
offering of data processing services.
--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)
The Commission's original objective in
the Computer Inquiries (initiated pre-Divestiture) was to distinguish
computer
related services from basic telephone services. Enhanced services
are not regulated under Title II of the Communications Act. Basic
services are regulated.
When the FCC created the notion of unregulated
enhanced services, the FCC also became concerned that the old Bell
System
companies would use their control over the network to discriminate in
favor
of their own service offerings to the detreiment of the offerings of
competing
Enhanced Service Providers ("ESPs"). To prevent this abuse of
network
control, Computer II required the RHCs to offer their enhanced services
through a separate subsidiary. this is known as a "structural
safeguard."
--Henry M. Rivera and Laura Johnson, Patents,
Copyrights, Trademarks and Literary Course Handbook: Panel on
Developments
in Manufacturing and Information/Enhanced Services, 352 PLI/Pat 27,
44-45
(Dec. 3-4, 1992).
Avoid
Case by Case Review (Administrative Convenience)
"Alternatively, the
Commission found that
even if some enhanced services might be common carrier
communications
activities within the reach of Title II, it is not required to
identify
those services and subject them to Title II regulation.57
A policy of identifying regulable enhanced services would, in the
Commission's view, be a reversion to the futile Computer I
case-by-case
approach that inhibited technological innovation and diverted
Commission
resources from more beneficial activities." -- 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)
"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
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.64 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. 65 We again note that six Bell Operating
Companies (BOCs) treat frame relay
as a basic transport service. 66
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. 67
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).
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.
-- In re Federal-State Joint Board
on Universal Service, Report to Congress, FCC 98-67 (April 10, 1998).
"A service provided on a
common carrier basis
is one that is offered to the public on standard terms. "[A]
carrier
will not be a common carrier where its practice is to make
individualized
decisions, in particular cases, whether and on what terms to
deal."
National Ass'n of Regulatory Util Comm'rs v. FCC, 525 F.2d 630, 641
(D.C.
Cir.) (NARUC I), cert. denied, 425 U.S. 992, 96 S. Ct. 2203, 48 L.Ed.2d
816 (1976). Basic telephone services are common carrier services
because they are offered to all consumers on standardized terms.
Enhanced services, in contract, are not regarded by the FCC as common
carrier
services, because they are "custom tailor[ed] . . . to the
particularized
needs of the [] individual customers." Computer II Final
Decision,
77 FCC2d at 431."
--People of the State of California v.
FCC, 905 F.2d 1217, 1240 n. 32 (9th Cir. 1990).
"In Computer II the Commission found that
enhanced services are not the kind of general public offerings
this
court regarded as common carriage in NARUC I. Inherent in
enhanced
service offerings is the ability of vendors to tailor their
services
to meet the particularized needs of individual customers. 62
In the Commission's view, this characteristic distinguishes
enhanced
services from basic services, which are subject to traditional Title
II
regulation...it is reasonable to find that providers of these services
generally are not common carriers because they will "make
individualized
decisions in particular cases whether and on what terms to serve."" 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)
"the Commission found that the provision
of an enhanced service is not a common carrier activity and,
thus,
is outside the scope of Title II." 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)
Findings by Federal Communications Commission
that combined data processing and communication services plus customer
premises equipment were not common-carrier communication activities
within
this section and that even if some such services could be classified so
as to be subject to regulation under this section it was not required
to
do so, were reasonable, thereby supporting Commission's decision not to
subject such services to regulation under this section. --Computer
and Communications Industry Ass'n v. FCC, 693 F.2d 198, 224 U.S.
App. D.C. 83, cert. denied, 103 S. Ct. 2109, 461 U.S. 938, 77 L.Ed.2d
313.
Under our
framework, Internet
service providers are not treated as carriers for purposes of
interstate
access charges, interconnection rights under section 251, and universal
service contribution requirements. This treatment admittedly
provides
some benefits to such companies, but it also imposes limitations.
Internet service providers are not entitled under section 251 to
purchase
unbundled network elements or discounted wholesale services from
incumbent LECs, they are not entitled to federal universal service
support
for serving high-cost and rural areas, and they are not entitled to
reciprocal
compensation for terminating local telecommunications
traffic.
We make no determination here on the question of whether competitive
LECs
that serve Internet service providers (or Internet service providers
that
have voluntarily become competitive LECs) are entitled to reciprocal
compensation
for terminating Internet traffic. That issue, which is now before
the Commission, does not turn on the status of the Internet service
provider
as a telecommunications carrier or information service provider.
See Pleading Cycle Established for Comments on Request by ALTS for
Clarification
of the Commission's Rules Regarding Reciprocal Compensation for
Information
Service Provider Traffic, Public Notice, CCB/CPD 97-30 (released July
2,
1997). As we discuss below, the one case in which Internet
service
providers and carriers enjoy similar treatment is in the provision of
certain
services to schools and libraries at discounted rates. In
that
case, Congress expressly directed the Commission to create
"competitively
neutral rules" to facilitate "access to advanced telecommunications and
information services." There is no necessary connection
between
those who contribute to universal service funding and those entitled to
receive support. For example, contributions to the fund are
primarily derived from interexchange carriers, but the companies that
receive
high-cost support are LECs. Paging providers are required to
contribute
to universal service, but have limited opportunity to receive
support.
We realize that Congress carefully balanced several competing concerns
when it crafted the universal service provisions of the 1996 Act.
After reviewing our implementation of those provisions, and considering
novel issues such as the status of IP telephony, we believe that we are
being faithful to the balance struck by Congress. - In re
Federal-State
Joint Board on Universal Service, Report to Congress, FCC 98-67
106
(April 10, 1998).
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.
commitments
with regard to the extent of their liberalization efforts.
-- In re Federal-State Joint Board
on Universal Service, Report to Congress, FCC 98-67 (April 10, 1998).
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).
"We conclude that entities providing pure
transmission capacity to Internet access or backbone providers provide
interstate "telecommunications." Internet service providers
themselves
generally do not provide telecommunications. In those cases where
an Internet service provider owns transmission facilities, and engages
in data transport over those facilities in order to provide an
information
service, we do not currently require it to contribute to universal
service
mechanisms. We believe it may be appropriate to reconsider that
result,
as it would appear in such a case that the Internet service provider is
furnishing raw transmission capacity to itself. Finally, we consider
the
regulatory status of various forms of "phone-to-phone IP telephony"
service
mentioned generally in the record. The record currently before us
suggests that certain of these services lack the characteristics that
would
render them "information services" within the meaning of the statute,
and
instead bear the characteristics of "telecommunications
services."
We do not believe, however, that it is appropriate to make any
definitive
pronouncements in the absence of a more complete record focused on
individual
service offerings." -- In re Federal-State Joint Board on
Universal
Service, Report to Congress, FCC 98-67 55 (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).
"Enhanced service providers are obviously
not telecommunications carriers to the extent that they "employ
computer
processing applications that . . . provide the subscriber
additional,
different, or restructed information." See 47 C.F.R. ?
64.702(a)."
In the Matter of The Provision of Interstate and International
Enterexchange
telecommunications Service via the "Internet" by Non-Tarriffed,
Uncertified
Entities, Reply Comments of the Interactive Services Association 3 n 6
(June 10, 1996).
"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
56 We note that the phrase "mixed or hybrid
services," as used in the Appropriations Act, does not appear in the
text
of the 1996 Act. We understand this term to refer to services in
which a provider offers a capability for generating, acquiring,
storing,
transforming, processing, retrieving, utilizing or making available
information
via telecommunications, and as an inseparable part of that service
transmits
information supplied or requested by the user.
57 It follows from the
statutory
analysis set out in Part III.C of this Report that hybrid services are
information services, and are not telecommunications
services.
Because information services are offered "via telecommunications," they
necessarily require a transmission component in order for users to
access
information. Accordingly, if we interpreted the statute as
breaking
down the distinction between information services and
telecommunications
services, so that some information services were classed as
telecommunications
services, it would be difficult to devise a sustainable rationale under
which all, or essentially all, information services did not fall into
the
telecommunications service category. As noted in the
previous
section, we find strong support in the text and legislative history of
the 1996 Act for the view that Congress intended "telecommunications
service"
and "information service" to refer to separate categories of services.
58 The Commission has considered the
question of hybrid services since Computer I, when it first sought to
distinguish
"communications" from "data processing." Computer II
provided
a framework for classifying such services, under which the offering of
enhanced functionality led to a service being treated as "enhanced"
rather
than "basic." An offering that constitutes a single service
from the end user's standpoint is not subject to carrier regulation
simply
by virtue of the fact that it involves telecommunications
components. As we have explained above, we find that
Congress intended to leave this
general approach intact when it adopted the 1996 Act.
59 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." If we decided that any offering that "included
telecommunications"
was a telecommunications service, we would need some test to determine
whether the transmission component was "included" as part of the
service.
Based on our analysis of the statutory definitions, we conclude that an
approach in which "telecommunications" and "information service" are
mutually
exclusive categories is most faithful to both the 1996 Act and the
policy
goals of competition, deregulation, and universal service.
60 We recognize that the question may not
always be straightforward whether, on the one hand, an entity is
providing
a single information service with communications and computing
components,
or, on the other hand, is providing two distinct services, one of which
is a telecommunications service. It is plain, for example, that
an
incumbent local exchange carrier cannot escape Title II regulation of
its
residential local exchange service simply by packaging that service
with
voice mail. Since Computer II, we have made it clear that
offerings
by non-facilities-based providers combining communications and
computing
components should always be deemed enhanced. But the matter
is more complicated when it comes to offerings by facilities-based
providers.
We noted recently in the Universal Service Fourth Order on
Reconsideration,
considering a related question, that "[t]he issue is whether,
functionally,
the consumer is receiving two separate and distinct services."
-- 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
Non-facilities
based provider + computing = enhanced
"Since Computer II, we have
made it clear
that offerings by non-facilities-based providers combining
communications
and computing components should always be deemed enhanced." 121
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).]
-- In re Federal-State Joint
Board on Universal
Service, Report to Congress, FCC 98-67 60 (April 10, 1998).
Examples
of Enhanced Services
"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).
"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).
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
FN498 The term "enhanced services," which includes access to the
Internet
and other interactive computer networks, as well as telemessaging,
alarm
monitoring, and other services, appears to be quite similar to the term
"information services" in the 1996 Act. "Enhanced services" are defined
in § 64.702(a) of our rules: "For the purposes of this subpart,
the
term enhanced services 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, 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." The 1996
Act
defines "information services" as offering the capability for
"generating,
acquiring, storing, transforming, processing, retrieving, utilizing, or
making available information via telecommunications." 47 U.S.C. §
153(20). For purposes of this order, providers of enhanced services and
providers of information services are referred to as ISPs. -- In
Re Access Charge Reform, CC Docket No. 96-262, 1997 WL 268841 (FCC),
12 FCCR. 15,982, 12 FCC Rcd. 15,982, 7 Communications Reg. (P&F)
1209, First Report and Order (May 16, 1997)
284. Beginning with the Computer II proceeding in the 1970s, we have
distinguished between basic and enhanced communications services.
[FN376]
The category of enhanced services, which includes access to the
Internet
and other interactive computer networks, as well as telemessaging,
alarm
monitoring, and other services, appears to be quite similar to the term
"information services" in the 1996 Act. [FN377] In the 1983 Access
Charge
Reconsideration Order, we decided that, although enhanced service
providers
(ESPs) may use incumbent LEC facilities to originate and terminate
interstate
calls, ESPs should not be required to pay interstate access charges.
[FN378]
-- In re Access Charge Reform, CC Docket No. 96-262, Usage of the
Public
Switched Network by Information Service and Internet Access Providers,
CC Docket No. 96-263, 1996 WL 733469 (FCC), 11 FCCR. 21,354, 11
FCC
Rcd. 21,354, 5 Communications Reg. (P&F) 604, Notice of Proposed
Rulemaking,
Third Report and Order, and Notice of Inquiry (December 24, 1996)
7. We disagree with PanAmSat's assertion that the Commission has
determined
that Internet access, by definition, is an enhanced service. [FN9]
PanAmSat
relies on a series of Common Carrier Bureau decisions on enhanced
internet
access services to support its proposition. However neither the
Commission
nor the Common Carrier Bureau has *22471 determined that all internet
access
services are enhanced services. In the decisions cited by PanAmSat, the
applicants had proposed to offer enhanced services as part of the
Internet
access service. Comsat states that it does not currently have the
capability
to offer enhanced services and therefore will only offer basic
interconnection
between Internet carriers and Comsat customers. Comsat does not request
and we do not authorize the provision of enhanced services as part of
Comsat's
proposed Internet access services. - In Re Application of COMSAT Corp.,
DA 96-1961, 1996 WL 678999 (FCC), 11 FCCR. 22,468, 11 FCC Rcd.
22,468.
Order (November 25, 1996)
FN8. ITJ-America states that an ITJ-Japan subsidiary, ITJ-IT, provides
domestic and international value-added services in Japan, including
frame
relay and internet access via resold private lines. ITJ Ex Parte
Presentation
(Sept. 20, 1996). Under the framework established in International
Services,
which the Commission reaffirmed in the Foreign Carrier Entry Order, we
limit our market power inquiry to those foreign entities that provide
services
and facilities in the destination market that are of the type the
Commission
regulates in the United States as common carriage. The services
provided
by ITJ-IT via resold IPLs appear to be enhanced within the meaning of
Section
64.702(a) of the Commission's rules, and its operations as a
value-added
service provider are therefore irrelevant for purposes of assessing
ITJ-Japan's
market power. See Foreign Carrier Entry Order at ¶ 99; see also
Regulation
of International Common Carrier Services, 7 FCC Rcd 7331 at ¶ 24
(1992),
erratum, 8 FCC Rcd 452 (1993) (International Services). - IN RE
APPLICATION
OF ITJ AMERICA, INC., DA 96-1782, 1996 WL 628003 (FCC), 11 FCCR.
22,264, 11 FCC Rcd. 22,264, 5 Communications Reg. (P&F) 413, Order,
Authorization and Certificate (October 29, 1996)
1. On March 8, 1996, pursuant to the requirements established in the
Commission's Computer III rulemaking proceeding, [FN1] the Bell
Atlantic
telephone companies (Bell Atlantic) [FN2] filed *6920 a Comparably
Efficient
Interconnection (CEI) plan for its Internet Access Service (IAS). [FN3]
Under the Computer III regulatory regime, a carrier is permitted to
offer
unregulated, enhanced services if it files a CEI plan demonstrating
that
the underlying regulated basic services are available on an equivalent
basis to unaffiliated enhanced services providers (ESPs). [FN4] Prior
to
offering the enhanced service, the carrier must obtain Commission
approval
of the CEI plan. For the reasons discussed below and subject to the
conditions
set forth below, we approve Bell Atlantic's CEI plan. -- IN THE MATTER
OF BELL ATLANTIC TELEPHONE COMPANIES Offer of Comparably Efficient
Interconnection
to Providers of Internet Access Services, DA 96-891, CCBPol 96-09, 1996
WL 420198 (FCC), 11 FCCR. 6919, Order (June 6, 1996)
49. The BOC CEI plans and amendments filed pursuant to the Interim
Waiver Order, discussed briefly below, are summarized in greater detail
in Attachment A to this Order. In general, the enhanced services
addressed
by the *13766 plans fall into several categories: voicemail, protocol
processing,
electronic information services (including gateway, on-line data base,
and Internet access services), enhanced facsimile services, and voice
information
services. -- IN THE MATTER OF BELL OPERATING COMPANIES JOINT PETITION
FOR
WAIVER OF COMPUTER II RULES, DA 95-2264, 1995 WL 637904 (FCC), 10
FCCR.
13,758, 10 FCC Rcd. 13,758, 1 Communications Reg. (P&F) 690, Order
(October 31, 1995)
On August 3, 1995, Southwestern Bell Telephone Company (SWBT) filed
three Comparably Efficient Interconnection (CEI) Plans for new enhanced
services: Internet Access Service; PC Backup and Recovery Service; and
Facsimile Service. SWBT states that these enhanced services use only
tariffed
network services available to other enhanced service providers at the
same
tariffed rates, and on the same terms and conditions. SWBT requests
expedited
approval of these plans.
SWBT states that Internet Access Service will allow users to access
all services available on the Internet including access to information
resources, transfer of files, communication via E-mail and other
services
as they become available. SWBT states that the Internet Access Service
will include these individual service offerings: (1) local access,
using
the Public Switched Telephone Network or dedicated facilities; (2)
access
to end user enhanced services; (3) access to Help Desk Services; (4)
provision
of Internet software; and (5) access to Interexchange Internet Access
Providers.
-- PLEADING CYCLE ESTABLISHED FOR COMMENTS ON SWBT'S COMPARABLY
EFFICIENT
INTERCONNECTION PLANS, CCBPol 95-7, 1995 WL 472364 (FCC), 10
FCCR.
10,011, 10 FCC Rcd. 10,011, Public Notice (August 11, 1995)
72 Our thinking
relating to the Internet backbone points up
some of the limitations of our current approaches to implementing the
universal
service provisions of the 1996 Act. The technology and market
conditions
relating to the Internet backbone are unusually fluid and fast-moving,
and we are reluctant to impose any regulatory mandate that relies on
the
persistence of a particular market model or market structure in this
area.
It may be that the most successful approach in this context,
maintaining
universal service revenues while avoiding the imposition of inefficient
or innovation-discouraging obligations, would look to the actual
facilities
owners, requiring them to contribute to universal service mechanisms on
the revenues they receive. It is facilities owners that, in a
real
sense, provide the crucial telecommunications inputs underlying
Internet
service. If universal service contribution obligations, in the
context
of the Internet backbone, were based on facilities ownership rather
than
end-user revenues, then firms purchasing capacity from the facilities
owners
would still contribute indirectly, through prices that recover the
facilities
owners' contributions. This matter deserves further
consideration.
-- 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: World Wide Web
"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 facilities 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. "
--In re Federal-State Joint Board on Universal
Service, Report to Congress, FCC 98-67 ¶ 76 (April 10, 1998).
Example:
USENET
"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."
In re Federal-State Joint Board on Universal Service, Report to
Congress,
FCC 98-67 77 (April 10, 1998).
Example: E-mail
"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."
In re Federal-State Joint Board on Universal Service, Report to
Congress,
FCC 98-67 78 (April 10, 1998).
89. The question has been raised as to the regulatory
status
of computer message services. The potential exists for users of
certain
unregulated services to use a data processing system for store and
forward
message services (sometimes referred to as computer message services,
electronic
message services, 'mail-box',73 etc.). This is
particularly
applicable to time-sharing services where the computer facilities are
structured
in a manner such that the customer can write his own program and, in
effect,
use the time- sharing network for his own store and forward message
service
needs. The fact that unregulated, entities may provide
transmission
services as a part of the unregulated data processing creates the
potential
for a subscriber to use the unregulated entities computer facilities
for
service comparable to those obtainable from communication common
carriers.
90. The fundamental characteristic of a common carrier
communications service is the transmission of a subscriber's message
through
the telecommunications network without alteration of the content of the
message in the course of transmission. An entity offering a
communication
common carrier service may do so only subject to Title II of the Act
and
Commission's rules implementing Title II. There is a distinction,
however, between the offering of store and forward message service and
the offering of computer capacity which allows the users to perform a
host
of different functions depending upon the programmed instructions of
the
user. The offering of a pure store and forward message service has
traditionally
been subject to regulation under Title II of the Act. The ability to
use
the computer capacity inherent in a data processing service for the
transmission
or retrieval of unaltered messages may or may not subject the offering
entity to common carrier regulation depending upon the nature of the
service.
Determinative factors may include: whether the offering entity provides
within its facilities or offers to the user the software or programs
necessary
to use the system on a pure store and forward basis, whether the
offering
entity solicits subscribers to the service on the basis of the system's
store and forward message capabilities,74 or whether the
offering
entity sanctions directly or indirectly the use of its service for such
purposes. As in the First Computer Inquiry, we rely on competing
interests in the market place to bring to the Commission's attention
abuses
by unregulated entities in the circumvention of Commission policies and
guidelines, especially with respect to the offering of a pure store and
forward message service.
--In re Amendment of Section 64.702 of the Commission's Rules and
Regulations
(Second Computer Inquiry), Docket No. 20828, Tentative Decision And
Further
Notice Of Inquiry And Rulemaking, 72 FCC2d 358 (July 2, 1979)
FN498 The term "enhanced services," which includes access to the
Internet
and other interactive computer networks, as well as telemessaging,
alarm
monitoring, and other services, appears to be quite similar to the term
"information services" in the 1996 Act. "Enhanced services" are defined
in § 64.702(a) of our rules: "For the purposes of this subpart,
the
term enhanced services 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, 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." The 1996
Act
defines "information services" as offering the capability for
"generating,
acquiring, storing, transforming, processing, retrieving, utilizing, or
making available information via telecommunications." 47 U.S.C. §
153(20). For purposes of this order, providers of enhanced services and
providers of information services are referred to as ISPs. -- In
Re Access Charge Reform, CC Docket No. 96-262, 1997 WL 268841 (FCC),
12 FCCR. 15,982, 12 FCC Rcd. 15,982, 7 Communications Reg. (P&F)
1209, First Report and Order (May 16, 1997)
284. Beginning with the Computer II proceeding in the 1970s, we have
distinguished between basic and enhanced communications services. [376]
The category of enhanced services, which includes access to the
Internet
and other interactive computer networks, as well as telemessaging,
alarm
monitoring, and other services, appears to be quite similar to the term
"information services" in the 1996 Act. [377] In the 1983 Access Charge
Reconsideration Order, we decided that, although enhanced service
providers
(ESPs) may use incumbent LEC facilities to originate and terminate
interstate
calls, ESPs should not be required to pay interstate access charges.
[378]
-- In re Access Charge Reform, CC Docket No. 96-262, Usage of the
Public
Switched Network by Information Service and Internet Access Providers,
CC Docket No. 96-263, 1996 WL 733469 (FCC), 11 FCCR. 21,354, 11
FCC
Rcd. 21,354, 5 Communications Reg. (P&F) 604, Notice of Proposed
Rulemaking,
Third Report and Order, and Notice of Inquiry (December 24, 1996)
US Postal Service offering that used the facilites of Western Union (a title II common carrier) where "a user will
prepare its messages in electronic form and transmit them over
communications channels to Western Union;s facilites... employing its
switching and communications facilities, [it] will then transmit the
messages to the appropriate destination post offices . . . for physical
delivery by postal employees." .. . ."It is undisputed that ECOM is
designed to offer consumers a service whereby information can be
transmitted from a point of origination to one or more points of
termination by means of electronic communications facilities. We
therefore concluded that ECOM will be a communications service,
pursaunt to the statutory definition in Section 3(a) and 3(b) of the
Act." -- Request for Declaratory Ruling and Investigation by Graphnet
Systems, Incorporated, CC Docket No 79-6, Memorandum Opinion and Order,
73 FCC2d 283 (1979) [It was argued by one party before the FCC that
this case establishes that Email is a telecom service. As can be
seen by this small quotation, the FCC is putting the Graphnet service
into the category of telegraphs, not email - and telgraphs were title
II common carrier services although that classifcation had become
essentially irrelevant]
Example: Gateway
"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).
"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
26. "We conclude
that the reverse-search
capability offered in conjunction with US West's EWP offering
constitutes
an enhanced service. ..."
. . . .
29. In the instant case,
US West has not made such a showing, nor does it seek to argue that its
reverse-search capability constitutes a basic service. US West's EWP
reverse-search
capability on its face meets two of the three characteristics that
define
an enhanced service because it provides additional information (name
and
address associated with a telephone number) and involves subscriber
interaction
with stored information. Satisfying any one of the characteristics
would
suffice to classify the service as enhanced.
30. We are not persuaded
by the arguments of Bell Atlantic and SWBT that the primary purpose of
the reverse-search capability is to facilitate the placement of a
telephone
call, making the service adjunct to basic pursuant to the NATA Centrex
Order. While this service enables customers to avoid calling a
number
without knowledge of the name and address of the called party, the
additional
information gained through the service -- name and address -- is not
actually
necessary to make the call.58 Although customers may place a
call to a telephone number after obtaining the associated name and
address
through a reverse-search, commenters have not demonstrated that
placement
of a telephone call would typically be the immediate next step.59
Thus, we find that the primary purpose for this service is not to
facilitate
call completion. We conclude that unlike directory assistance,
which
the Commission has found adjunct to basic because it provides
information
necessary to make a call, the reverse-search capability provides
additional
information that is not necessary to make a call (because the
subscriber
already has the telephone number) and which could be used for a number
of other purposes.
31. Because US West's reverse-search
capability meets two of the Computer III tests for an enhanced service
and does not meet the NATA Centrex Order test for an adjunct to basic
service,
we therefore conclude that the reverse-search capability offered in
conjunction
with US West's EWP offering constitutes an enhanced service pursuant to
Section 64.702 of our rules.
--In re US West Communications, Inc.,
Petition for Computer III Waiver, Order, 11 FCC Rcd. 1195 (Nov 6,
1995)
Example:
Alarm Monitoring
FN498 The term "enhanced
services," which includes access to the Internet
and other interactive computer networks, as well as telemessaging,
alarm
monitoring, and other services, appears to be quite similar to the term
"information services" in the 1996 Act. "Enhanced services" are defined
in § 64.702(a) of our rules: "For the purposes of this subpart,
the
term enhanced services 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, 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." The 1996
Act
defines "information services" as offering the capability for
"generating,
acquiring, storing, transforming, processing, retrieving, utilizing, or
making available information via telecommunications." 47 U.S.C. §
153(20). For purposes of this order, providers of enhanced services and
providers of information services are referred to as ISPs. -- In
Re Access Charge Reform, CC Docket No. 96-262, 1997 WL 268841 (FCC),
12 FCCR. 15,982, 12 FCC Rcd. 15,982, 7 Communications Reg. (P&F)
1209, First Report and Order (May 16, 1997)
284. Beginning with the Computer II proceeding in the 1970s, we have
distinguished between basic and enhanced communications services.
[FN376]
The category of enhanced services, which includes access to the
Internet
and other interactive computer networks, as well as telemessaging,
alarm
monitoring, and other services, appears to be quite similar to the term
"information services" in the 1996 Act. [FN377] In the 1983 Access
Charge
Reconsideration Order, we decided that, although enhanced service
providers
(ESPs) may use incumbent LEC facilities to originate and terminate
interstate
calls, ESPs should not be required to pay interstate access charges.
[FN378]
-- In re Access Charge Reform, CC Docket No. 96-262, Usage of the
Public
Switched Network by Information Service and Internet Access Providers,
CC Docket No. 96-263, 1996 WL 733469 (FCC), 11 FCCR. 21,354, 11
FCC
Rcd. 21,354, 5 Communications Reg. (P&F) 604, Notice of Proposed
Rulemaking,
Third Report and Order, and Notice of Inquiry (December 24, 1996)
Example:
Protocol Conversion / Processing
49 Senators Stevens and Burns urge that
transmission services incorporating protocol processing should be
treated
as telecommunications services, and not information services.
They
note that, in enacting the 1996 Act, the conference committee declined
to adopt the Senate version of the information services definition,
derived
from the Commission's definition of enhanced services, which explicitly
referred to services that "employ computer processing applications that
act on the format, content, code, protocol or similar aspects of the
subscribers
transmitted information." Rather, the conference committee
adopted the House version, which made no explicit reference to protocol
processing. As a result, the fact that a service involves
protocol
processing, those parties urge, should not lead to its classification
as
an information service.
50 The Commission reached a different
result in the Non-Accounting Safeguards Order, in which it concluded
that
the category of information services was essentially identical to the
pre-existing
category of enhanced services. The Commission found that those
protocol
processing services that had qualified as "enhanced" should be treated
as "information services," in part because they satisfy the statutory
requirement
of offering "a capability for . . . transforming [and] processing . . .
information via telecommunications." It noted, however,
that
certain protocol processing services that result in no net protocol
conversion
to the end user are classified as basic services; those services are
deemed
telecommunications services.
51 Senators Stevens and Burns raise
a substantial point. The conference committee's decision not to
adopt
language explicitly classifying services employing protocol processing
as information services supports the inference that the conferees did
not
intend that classification. We note, however, that the
House
language, adopted by the conference committee, was derived from the
MFJ,
and that services employing protocol processing were treated as
information
services under the MFJ. Furthermore, as noted above,
services
offering net protocol conversion appear to fall within the statutory
language,
because they offer a capability for "transforming [and] processing"
information. In light of these considerations, we recognize that
the issue of the regulatory
treatment of protocol processing is a difficult one.
52 We find, however, little to no discussion
of this issue in the record. Accordingly, we do not believe that
we have an adequate basis for resolving this matter in this
Report.
Moreover, we believe that we need not resolve the issue in order to
address
the important issues raised by the Appropriations Act. The
regulatory
classification of protocol processing is significant to the provision
of
universal service only to the extent that it affects the appropriate
classification
of Internet access service and IP telephony. We find, however,
for
the reasons explained below, that Internet access services are
appropriately
classed as information services without regard to our treatment of
protocol
processing. Similarly, our discussion of the regulatory
status
of phone-to-phone IP telephony is not affected by our resolution of the
protocol processing issue. The protocol processing that
takes
place incident to phone-to-phone IP telephony does not affect the
service's
classification, under the Commission's current approach, because it
results
in no net protocol conversion to the end user. Finally,
when
a facilities owner provides leased lines to an Internet access or
backbone
provider, it does not provide protocol processing.
-- 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
Protocol
Processing: Enhanced Service
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.")
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)
17. In the Computer III proceedings the Commission
reaffirmed its treatment of protocol processing (except for the three
exemptions)
as an enhanced service. The Commission reasoned, in part, that deciding
otherwise would remove the enhanced component of VAN services, thus
eliminating
their non- carrier status under what is termed the "contamination"
theory
and subjecting them to Title II regulation.29
18. Under the contamination theory, VANs that offer
enhanced protocol processing services in conjunction with basic
transmission
services have historically been treated as unregulated enhanced service
providers. Under this theory, the enhanced component of their offerings
is viewed as "contaminating" the basic component, and as a result, the
entire offering is considered enhanced. 30
--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, ¶ 17-18 (October 18, 1995)
Protocol Processing: Basic Service
We note that, under Computer
II and Computer III, we
have treated three categories of protocol processing services as basic
services, rather than enhanced services. These categories include
protocol
processing: 1) involving communications between an end user and the
network
itself (e.g., for initiation, routing, and termination of calls) rather
than between or among users; 2) in connection with the introduction of
a new basic network technology (which requires protocol conversion to
maintain
compatibility with existing CPE); and 3) involving internetworking
(conversions
taking place solely within the carrier's network to facilitate
provision
of a basic network service, that result in no net conversion to the end
user). We agree with PacTel that analogous treatment should be extended
to these categories of protocol processing services under the statutory
regime. Because the listed protocol processing services are information
service capabilities used "for the management, control, or operation of
a telecommunications system or the management of a telecommunications
service," they are excepted from the statutory definition of
information service.
These excepted protocol conversion services constitute
telecommunications
services, rather than information services, under the 1996 Act.
- In the Matter of the Implementation of the Non-Accounting
Safeguards of Sections 271 and 272 of the Communications Act of 1934,
as
Amended, Order on Reconsideration, Docket 96-149, 1997 WL 71143
(FCC),
12 FCCR. 2297, 12 FCC Rcd. 2297, 6 Communications Reg. (P&F)
972,
¶ 2 (Feb 19, 1997)
13. Under
the Commission's Computer II decision, those carriers that own common
carrier
transmission facilities and provide enhanced services must unbundle
basic
from enhanced services and offer transmission capacity to other
enhanced
service providers under the same tariffed terms and conditions under
which
they provide such services to their own enhanced service
operations.
Section 202 of the Act also prohibits a carrier from discriminating
unreasonably
in its provision of basic services. In addition, the
Commission's
Computer III decisions subject certain carriers to further unbundling
requirements
in offering an enhanced service.
14. In the Computer
III decisions, however, the Commission reaffirmed earlier decisions
concluding
that three types of protocol processing are not enhanced services
within
the meaning of the Commission's rules.22 First, the
Commission
reaffirmed that the enhanced services definition applies only to
end-to-end
communications between or among subscribers.23 Thus,
communications
between a subscriber and the network itself (e.g. for call setup, call
routing, and call cessation) are not considered enhanced services.24
15. Second, the Commission
determined that protocol conversions necessitated by the introduction
of
new technology are also outside the ambit of the enhanced services
definition.
This circumstance arises when innovative basic network technology is
introduced
into the network in a piecemeal fashion, and conversion equipment is
used
in the network to maintain compatibility with CPE.25
16. Third, the Commission
reaffirmed that internetworking protocol conversions-those conversions
taking place solely within the network that result in no net conversion
between users-should be treated as basic services.26 This
final
exemption applies in situations where a carrier uses the protocol
conversions
merely to facilitate provision of an overall basic service.27
Thus, in a case where a carrier converts from X.25 to X.75 formatted
data
at the originating end within the network, and then converts the data
back
from X.75 to X.25 at the terminating end, the protocol conversion is
treated
as facilitating a basic X.25 service, rather than enhanced protocol
conversion.28
Accordingly, a carrier service providing one of these three exempted
forms
of protocol conversion is engaged in the provision of a basic service.
--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, ¶ 14-16 (October 18, 1995)
Protocol Conversion: Basic: X.25
"The synchronous X.25
interface protocol has traditionally
been the most widely recognized protocol used to communicate over
packet-switched
networks. 5 Much of the existing terminal equipment that
customers
use to originate and terminate data communications between their
computers
and other computers, however, historically has not been designed to
support
the X.25 protocol. This equipment often employs an asynchronous
protocol,
which is used to originate and terminate traffic over ordinary voice
communications
lines. Thus, data communicated under asynchronous protocols must be
converted
to data employing synchronous X.25 protocol in order to be transmitted
over a packet-switched network. Moreover, as the number of networking
and
terminal protocols has increased over time, so has the need to provide
conversion among these protocols."
--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)
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
--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)
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
--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)
Protocol Conversion:
ATT DataSpeed 40/4
Our recent decision4
regarding American Telephone
and Telegraph Company's (AT&T) Dataspeed 40/4 tariff revision
(Transmittal
No. 12449) illuminated the limited applicability of the present Section
64.702. The Dataspeed 40.4 offering represented an advancement in
the evolution of communications terminal devices used to interact, via
a common carrier communications network, with a host computer.
-- 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)
Protocol
Conversion: Basic: Frame Relay
"For the reasons stated
below, we conclude that frame
relay service is a basic service in accordance with the Commission's
Rules
and precedent." 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, ¶ 1 (October 18, 1995)
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. [FN8] 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.
. . . . . .
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.
--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)
Bright
Line
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)
106. While there is some agreement
among the parties as to the appropriateness of distinguishing between
basic
and enhanced services, there is no consensus that adoption of the
proposed
definitional scheme for distinguishing the communications/data
processing
nature of enhanced services would be in the public interest.
Without
exception, every element of the definitional structure we proposed was
subject to criticism by one party or another, and various changes were
suggested for rewording the definition of such terms as 'computer
processing,'
'data processing,' 'data processing service,' and 'hybrid data
processing.' Carriers argued that certain definitions should be
altered or expanded
to make clear that various computer services were communications
services;
unregulated service vendors found certain definitions too broad and
argued
that their adoption would result in regulation of data processing
services.
107. After three attempts40 to delineate a
distinction between communications and data processing services
and failing to arrive at any satisfactory demarcation point, we
conclude
that further attempts to so distinguish enhanced services would be
ultimately
futile, inconsistent with our statutory mandate and contrary to the
public
interest. In coming to this conclusion we are convinced that
pursuing
such a course of action would not accomplish the objectives of this
proceeding,
i.e., 'to (a) foster a regulatory environment conducive to the
stimulation
of economic activity in the regulated communications sector with
respect
to the provision of new and innovative communications-related
offerings;
and (b) enable the communications user to optimize his use of common
carrier
communication facilities and services by taking advantage of the ever
increasing
market applications of computer processing technology.' Tentative
Decision, at para. 59. It is apparent that, over the long run,
any
attempt to distinguish enhanced services will not result in regulatory
certainty. At most, reliance on a definitional approach which
uses
a primary purpose standard is a stop-gap measure, which--even assuming
we were able to define the services accurately--would only reflect the
differences in these services as they are configured with today's
technology.
In a market as vibrant as enhanced services, however, this distinction
may miss important new developments. Thus, the need for ad hoc
determinations
would continue. As the market applications of computer technology
continue to evolve we believe that attempts to distinguish enhanced
services
either will fail or result in an unpredictable and inconsistent scheme
of regulation. This is because a definitional structure is not
independent
of advances in computer technology and its concomitant market
applications.
A certain degree of flexibility must be maintained to accommodate these
advances. To the extent flexibility is incorporated into the
definitions,
there is a corresponding degree of uncertainty. Thus the boundary
line differentiating enhanced communications and data processing
services
can vacillate, and confidence in decisions made based on that
distinction
would be diminished.
108. In addition
to the fact that the record in this proceeding does not support the
conclusion
that greater regulatory certainty would result by adopting the proposed
definitional structure, there are other factors which militate against
classifying enhanced services for regulatory purposes. Such a
regulatory
scheme would most likely result in the direct or indirect expansion of
regulation over currently unregulated vendors of computer services and
deprive consumers of increased opportunities to have services tailored
to their individual needs.
109. To fully
appreciate the significance of this, it is helpful to understand the
dynamics
of the marketplace in light of our current regulatory scheme.
There
are literally thousands of unregulated computer service vendors
offering
competing services connected to the interstate telecommunications
network.
The services they provide are many and varied. The only
limitation
on the types of services offered are those arising from the constraints
of their own entrepreneurial capabilities and, in a very real sense,
the
implicit requirement that they structure their services so as to avoid
crossing a regulatory boundary that would subject them to
regulation. The former recognizes the fact that the potential for
new and innovative
services is merely a factor of the technical parameters of the computer
equipment and the associated applications programs employed; the latter
is a consequence of our Resale decision which subjected resale entities
providing communications services to Title II regulation, but not
vendors
of data processing services. The interaction of the implicit
requirement
to avoid crossing the regulatory boundary and the competitive nature of
the enhanced service market is crucial. Even with this barrier we have
concluded that the enhanced services market is competitive, GTE-Telenet
Merger, 72 FCC 2d 111 (1979). 41 By removing this
barrier
the entire market for enhanced services should be even more competitive
than it has been in the presence of that barrier. In the GTE- Telenet
Merger
decision at paragraph 141, we discussed several potential entrants,
large
computer time sharing companies, that faced no barrier to entry other
than
the necessity to comply with the requirements of Title II. The
record
in this proceeding makes clear that even when the Commission's stated
policies
are in favor of open entry, the very presence of Title II requirements
inhibits a truly competitive, consumer responsive market.
110. Computer
technology is increasingly removing technical limitations as to the
types
of enhanced services that may be offered. Yet, a classification
scheme
which would categorize enhanced services as either communications or
data
processing inherently limits the types of services that an unregulated
entity may offer. The reason for this is clear. Providers of data
processing and other computer services acquire the necessary
transmission
facilities from communications common carriers pursuant to tariff, and
resell this transmission capability as part of their enhanced
offering.
At the same time, an entity which acquires the same transmission
facilities
from a carrier and offers a 'communications' service is presently
regulated
as a common carrier under Title II of the Act. See Regulatory
Policies
Concerning Resale and Shared Use of Common Carrier Services and
Facilities
(Resale), Docket No. 20097, 60 FCC 2d 261 (1976), recon. 62 FCC 2d 588
(1977), aff'd AT&T v. FCC, 572 F.2d 17 (2d Cir.), cert. denied, 439
U.S. 875 (1978). Accordingly, a resale entity is regulated as a common
carrier only if it is providing a communications service.42
111. This has significant
public interest implications in terms of the types of services that may
be offered and the scope of our regulation. First, the vendor of
unregulated enhanced services may not provide an enhanced
'communications'
service. This means that its services must be artificially
structured
so as to not come under our regulatory umbrella (the guidelines for
which
we have already concluded would be less than precise). To the
extent
services must be so structured there is a corresponding inability to
fully
tailor services to consumer needs. This has the result of
artificially
restricting the supply of services provided over the telecommunications
network. In the final analysis both individual consumers and
society
in general bear unnecessary costs where such limitations exist.
This
becomes even more troublesome as new markets for enhanced services open
and new services open up. While these services traditionally have
been directed at the business sector, increasing attention is being
focused
on residential markets.43 It is apparent that technology and
enterpreneurial incentives are directed toward new markets and new
means
of serving them. Thus restrictions on output, which would result
from a classification scheme limiting those who wish to avoid the costs
and delays of regulation, will increase as these new markets open up.
112. The second public interest
implication is the increased potential for expansion of regulation over
currently unregulated providers of information or data processing
services.
We noted in the Tentative Decision, at para. 152, that the tentative
conclusion
that a resale carrier would be able to offer both regulated and
unregulated
enhanced services (with the unregulated services offered on a
nontariffed
basis) carried with it significant regulatory and market implications
for
presently unregulated firms. A resale carrier could offer any enhanced
service, whereas the unregulated vendor of computer services may offer
only those enhanced services that are not regulated as
'communications.'
The effect of this is that '. . . the communication common carrier
would
have tremendous flexibility to provide new and innovative services and
to tailor these services to individual user needs, much more so than a
currently unregulated entity. One result may be an indirect
forcing
of currently unregulated entities to acquire common carrier status in
order
to obtain the same degree of flexibility afforded a resale common
carrier.'
Id. We perceive that the impetus for this to happen will increase as
the
computer processing applications and technologies continue to evolve
and
grow. In addition to increasing the scope of Commission
regulation,
the specter of potential regulation may impose artificial barriers to
entry. Here also, this effect may grow in significance as
technology advances.
113. We have gone to great
length in this proceeding to build a record which would best enable us
to render a decision consistent with the mandate of this Commission as
set forth in Section 1 of the Communications Act. 47 U.S.C.
151.
Based on this record, the mandate of this Commission in a rapidly
changing
technological environment, the market developments resulting from the
confluence
of technologies, the impossibility of defining at the enhanced level a
clear and stable point at which 'communications' becomes 'data
processing,'
the ever increasing dependence upon common carrier transmission
facilities
in the movement of information, the need to tailor services to
individual
user requirements, and the potential for unwarranted expansion of
regulation,
we conclude that the public interest would not be served by any
classification
scheme that attempts to distinguish enhanced services based on the
communications
or data processing nature of the computer processing activity
performed. Accordingly, we conclude that all enhanced computer
services should be
accorded the same regulatory treatment and that no regulatory scheme
could
be adopted which would rationally distinguish and classify enhanced
services
as either communications or data processing.
. . . . .
116. From the perspective
of the regulator, a major benefit in not classifying services within
the
enhanced category is that the scope of Commission regulation is focused
on those services which are clearly within the contemplation of the
Communications
Act and which serve as the foundation for all enhanced services.
Moreover, the extent of our regulatory authority is not automatically
expanded
with advances in technology and the types of enhanced services that can
be offered. Semantic distinctions are avoided as to whether a
given
service is data processing, information processing, process control,
communications
processing, or some other category. As such, the potential for
the
development of an inconsistent regulatory scheme to accommodate these
services
is eliminated; all enhanced services are accorded the same regulatory
treatment.
To the extent uncertainty creates a regulatory barrier to entry, that
barrier
is also removed. With the nonregulation of all enhanced services,
FCC regulations will not directly or indirectly inhibit the offering of
these services, nor will our administrative processes be interjected
between
technology and its marketplace applications. This structure
enables
us to direct our attention to the regulation of basic services and to
assuring
nondiscriminatory access to common carrier telecommunications
facilities
by all providers of enhanced services.
117. Service vendors also
benefit under this structure. Providers of enhanced services are
afforded
tremendous flexibility because there is no restriction on the types of
services they may provide, except those imposed by the demands of their
customers. The boundary between basic and enhanced services raises no
such
barrier since we believe we have identified a common necessary element
in our definition of basic services. The trend in technology is
toward
new and innovative enhancements that build upon basic services.
For
computer vendors and entrepreneurs the momentum is away from basic
communications
services, rather than toward it. As a result, the types of enhanced
services
they may provide is limited only by their entrepreneurial ingenuity and
competitive market constraints. Services need not be artificially
structured
or limited so as to avoid transgressing a regulatory boundary.
118. The benefit to consumers
is that services which depend on the electronic movement of information
can be custom-tailored to individual subscriber needs. Moreover,
information
systems can be programmed so that users dictate the nature and extent
of
computer processing applications to be performed on any given amount of
information. As greater flexibility is offered consumers to
tailor
their services, a broader spectrum of the marketplace can be expected
to
take advantage of information processing services. To the extent
regulatory barriers to entry are removed and restrictions on services
are
lifted there is a corresponding potential for greater utilization of
the
telecommunications network through greater access to new and innovative
service by a larger segment of the populace. Finally, this
structure
creates the proper economic incentives for vendors to segregate their
services
such that consumers need pay only for those services necessary for
their
own information processing requirements.
. . . .
120. We have described our
repeated unsuccessful efforts to identify a discrete communications
component
(after the fashion of the First Computer Inquiry) in what we have
finally
come to label 'enhanced service.' We are faced with the reality
that
technology and consumer demand have combined to so overrun the
definitions
and regulatory scheme of the First Computer Inquiry that today no
comparable,
minimally enduring line of demarcation can be drawn. In enhanced
services,
communications and data processing technologies have become intertwined
so thoroughly as to produce a form different from any explicitly
recognized
in the Communications Act. The forms of the Act should not
control
either the substance of enhanced service offerings to the public or the
manner in which they are made available.
. . . . .
130. We appreciate there can
be disagreement as to the line we have drawn between basic and enhanced
services. Plausible arguments can be tendered for drawing it
elsewhere.
At the margin, some enhanced services are not dramatically dissimilar
from
basic services or dramatically different from communications as defined
in Computer Inquiry I. But any attempt to draw the line at this
margin
potentially could subject both the enhanced services providers and us
to
the prospect of literally hundreds of adjudications over the status of
individual service offerings. We have noted the danger that such
proceedings could lead to unpredictable or inconsistent regulatory
definitions.
See para. 107 supra. Such proceedings also could consume a very
significant
proportion of the resources of this agency. The requirement to
devote
significant resources to try to make individual service distinctions
would
necessarily reduce the resources available for regulating basic
services
and ensuring non-discriminatory access to common carrier
telecommunications
facilities.
131. We have tried to draw
the line in a manner which distinguishes wholly traditional common
carrier
activities, regulable under Title II of the Act, from historically and
functionally competitive activities not congruent with the Act's
traditional
forms. We believe that the Communications Act and the
jurisprudence
which has grown up around it make it plain that Congress intended that
substance not form govern the treatment of services within the Act's
reach. We have acted upon the belief by applying traditional
Title II regulatory
mechanisms to basic services and applying no direct regulatory
mechanism
for 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)
Contamination
Theory
See also Hybrid Services
17. In the
Computer III proceedings the
Commission reaffirmed its treatment of protocol processing (except for
the three exemptions) as an enhanced service. The Commission reasoned,
in part, that deciding otherwise would remove the enhanced component of
VAN services, thus eliminating their non- carrier status under what is
termed the "contamination" theory and subjecting them to Title II
regulation.29
18. Under the contamination theory,
VANs that offer enhanced protocol processing services in conjunction
with
basic transmission services have historically been treated as
unregulated
enhanced service providers. Under this theory, the enhanced component
of
their offerings is viewed as "contaminating" the basic component, and
as
a result, the entire offering is considered enhanced. 30
--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, ¶ 17-18 (October 18, 1995)
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
106. While there is some agreement
among the parties as to the appropriateness of distinguishing between
basic
and enhanced services, there is no consensus that adoption of the
proposed
definitional scheme for distinguishing the communications/data
processing
nature of enhanced services would be in the public interest.
Without
exception, every element of the definitional structure we proposed was
subject to criticism by one party or another, and various changes were
suggested for rewording the definition of such terms as 'computer
processing,'
'data processing,' 'data processing service,' and 'hybrid data
processing.' Carriers argued that certain definitions should be
altered or expanded
to make clear that various computer services were communications
services;
unregulated service vendors found certain definitions too broad and
argued
that their adoption would result in regulation of data processing
services.
107. After three attempts40 to delineate a
distinction between communications and data processing services
and failing to arrive at any satisfactory demarcation point, we
conclude
that further attempts to so distinguish enhanced services would be
ultimately
futile, inconsistent with our statutory mandate and contrary to the
public
interest. In coming to this conclusion we are convinced that
pursuing
such a course of action would not accomplish the objectives of this
proceeding,
i.e., 'to (a) foster a regulatory environment conducive to the
stimulation
of economic activity in the regulated communications sector with
respect
to the provision of new and innovative communications-related
offerings;
and (b) enable the communications user to optimize his use of common
carrier
communication facilities and services by taking advantage of the ever
increasing
market applications of computer processing technology.' Tentative
Decision, at para. 59. It is apparent that, over the long run,
any
attempt to distinguish enhanced services will not result in regulatory
certainty. At most, reliance on a definitional approach which
uses
a primary purpose standard is a stop-gap measure, which--even assuming
we were able to define the services accurately--would only reflect the
differences in these services as they are configured with today's
technology.
In a market as vibrant as enhanced services, however, this distinction
may miss important new developments. Thus, the need for ad hoc
determinations
would continue. As the market applications of computer technology
continue to evolve we believe that attempts to distinguish enhanced
services
either will fail or result in an unpredictable and inconsistent scheme
of regulation. This is because a definitional structure is not
independent
of advances in computer technology and its concomitant market
applications.
A certain degree of flexibility must be maintained to accommodate these
advances. To the extent flexibility is incorporated into the
definitions,
there is a corresponding degree of uncertainty. Thus the boundary
line differentiating enhanced communications and data processing
services
can vacillate, and confidence in decisions made based on that
distinction
would be diminished.
108. In addition
to the fact that the record in this proceeding does not support the
conclusion
that greater regulatory certainty would result by adopting the proposed
definitional structure, there are other factors which militate against
classifying enhanced services for regulatory purposes. Such a
regulatory
scheme would most likely result in the direct or indirect expansion of
regulation over currently unregulated vendors of computer services and
deprive consumers of increased opportunities to have services tailored
to their individual needs.
109. To fully
appreciate the significance of this, it is helpful to understand the
dynamics
of the marketplace in light of our current regulatory scheme.
There
are literally thousands of unregulated computer service vendors
offering
competing services connected to the interstate telecommunications
network.
The services they provide are many and varied. The only
limitation
on the types of services offered are those arising from the constraints
of their own entrepreneurial capabilities and, in a very real sense,
the
implicit requirement that they structure their services so as to avoid
crossing a regulatory boundary that would subject them to
regulation. The former recognizes the fact that the potential for
new and innovative
services is merely a factor of the technical parameters of the computer
equipment and the associated applications programs employed; the latter
is a consequence of our Resale decision which subjected resale entities
providing communications services to Title II regulation, but not
vendors
of data processing services. The interaction of the implicit
requirement
to avoid crossing the regulatory boundary and the competitive nature of
the enhanced service market is crucial. Even with this barrier we have
concluded that the enhanced services market is competitive, GTE-Telenet
Merger, 72 FCC 2d 111 (1979). 41 By removing this
barrier
the entire market for enhanced services should be even more competitive
than it has been in the presence of that barrier. In the GTE- Telenet
Merger
decision at paragraph 141, we discussed several potential entrants,
large
computer time sharing companies, that faced no barrier to entry other
than
the necessity to comply with the requirements of Title II. The
record
in this proceeding makes clear that even when the Commission's stated
policies
are in favor of open entry, the very presence of Title II requirements
inhibits a truly competitive, consumer responsive market.
110. Computer
technology is increasingly removing technical limitations as to the
types
of enhanced services that may be offered. Yet, a classification
scheme
which would categorize enhanced services as either communications or
data
processing inherently limits the types of services that an unregulated
entity may offer. The reason for this is clear. Providers of data
processing and other computer services acquire the necessary
transmission
facilities from communications common carriers pursuant to tariff, and
resell this transmission capability as part of their enhanced
offering.
At the same time, an entity which acquires the same transmission
facilities
from a carrier and offers a 'communications' service is presently
regulated
as a common carrier under Title II of the Act. See Regulatory
Policies
Concerning Resale and Shared Use of Common Carrier Services and
Facilities
(Resale), Docket No. 20097, 60 FCC 2d 261 (1976), recon. 62 FCC 2d 588
(1977), aff'd AT&T v. FCC, 572 F.2d 17 (2d Cir.), cert. denied, 439
U.S. 875 (1978). Accordingly, a resale entity is regulated as a common
carrier only if it is providing a communications service.42
111. This has significant
public interest implications in terms of the types of services that may
be offered and the scope of our regulation. First, the vendor of
unregulated enhanced services may not provide an enhanced
'communications'
service. This means that its services must be artificially
structured
so as to not come under our regulatory umbrella (the guidelines for
which
we have already concluded would be less than precise). To the
extent
services must be so structured there is a corresponding inability to
fully
tailor services to consumer needs. This has the result of
artificially
restricting the supply of services provided over the telecommunications
network. In the final analysis both individual consumers and
society
in general bear unnecessary costs where such limitations exist.
This
becomes even more troublesome as new markets for enhanced services open
and new services open up. While these services traditionally have
been directed at the business sector, increasing attention is being
focused
on residential markets.43 It is apparent that technology and
enterpreneurial incentives are directed toward new markets and new
means
of serving them. Thus restrictions on output, which would result
from a classification scheme limiting those who wish to avoid the costs
and delays of regulation, will increase as these new markets open up.
112. The second public interest
implication is the increased potential for expansion of regulation over
currently unregulated providers of information or data processing
services.
We noted in the Tentative Decision, at para. 152, that the tentative
conclusion
that a resale carrier would be able to offer both regulated and
unregulated
enhanced services (with the unregulated services offered on a
nontariffed
basis) carried with it significant regulatory and market implications
for
presently unregulated firms. A resale carrier could offer any enhanced
service, whereas the unregulated vendor of computer services may offer
only those enhanced services that are not regulated as
'communications.'
The effect of this is that '. . . the communication common carrier
would
have tremendous flexibility to provide new and innovative services and
to tailor these services to individual user needs, much more so than a
currently unregulated entity. One result may be an indirect
forcing
of currently unregulated entities to acquire common carrier status in
order
to obtain the same degree of flexibility afforded a resale common
carrier.'
Id. We perceive that the impetus for this to happen will increase as
the
computer processing applications and technologies continue to evolve
and
grow. In addition to increasing the scope of Commission
regulation,
the specter of potential regulation may impose artificial barriers to
entry. Here also, this effect may grow in significance as
technology advances.
113. We have gone to great
length in this proceeding to build a record which would best enable us
to render a decision consistent with the mandate of this Commission as
set forth in Section 1 of the Communications Act. 47 U.S.C.
151.
Based on this record, the mandate of this Commission in a rapidly
changing
technological environment, the market developments resulting from the
confluence
of technologies, the impossibility of defining at the enhanced level a
clear and stable point at which 'communications' becomes 'data
processing,'
the ever increasing dependence upon common carrier transmission
facilities
in the movement of information, the need to tailor services to
individual
user requirements, and the potential for unwarranted expansion of
regulation,
we conclude that the public interest would not be served by any
classification
scheme that attempts to distinguish enhanced services based on the
communications
or data processing nature of the computer processing activity
performed. Accordingly, we conclude that all enhanced computer
services should be
accorded the same regulatory treatment and that no regulatory scheme
could
be adopted which would rationally distinguish and classify enhanced
services
as either communications or data processing.
. . . . .
116. From the perspective
of the regulator, a major benefit in not classifying services within
the
enhanced category is that the scope of Commission regulation is focused
on those services which are clearly within the contemplation of the
Communications
Act and which serve as the foundation for all enhanced services.
Moreover, the extent of our regulatory authority is not automatically
expanded
with advances in technology and the types of enhanced services that can
be offered. Semantic distinctions are avoided as to whether a
given
service is data processing, information processing, process control,
communications
processing, or some other category. As such, the potential for
the
development of an inconsistent regulatory scheme to accommodate these
services
is eliminated; all enhanced services are accorded the same regulatory
treatment.
To the extent uncertainty creates a regulatory barrier to entry, that
barrier
is also removed. With the nonregulation of all enhanced services,
FCC regulations will not directly or indirectly inhibit the offering of
these services, nor will our administrative processes be interjected
between
technology and its marketplace applications. This structure
enables
us to direct our attention to the regulation of basic services and to
assuring
nondiscriminatory access to common carrier telecommunications
facilities
by all providers of enhanced services.
117. Service vendors also
benefit under this structure. Providers of enhanced services are
afforded
tremendous flexibility because there is no restriction on the types of
services they may provide, except those imposed by the demands of their
customers. The boundary between basic and enhanced services raises no
such
barrier since we believe we have identified a common necessary element
in our definition of basic services. The trend in technology is
toward
new and innovative enhancements that build upon basic services.
For
computer vendors and entrepreneurs the momentum is away from basic
communications
services, rather than toward it. As a result, the types of enhanced
services
they may provide is limited only by their entrepreneurial ingenuity and
competitive market constraints. Services need not be artificially
structured
or limited so as to avoid transgressing a regulatory boundary.
118. The benefit to consumers
is that services which depend on the electronic movement of information
can be custom-tailored to individual subscriber needs. Moreover,
information
systems can be programmed so that users dictate the nature and extent
of
computer processing applications to be performed on any given amount of
information. As greater flexibility is offered consumers to
tailor
their services, a broader spectrum of the marketplace can be expected
to
take advantage of information processing services. To the extent
regulatory barriers to entry are removed and restrictions on services
are
lifted there is a corresponding potential for greater utilization of
the
telecommunications network through greater access to new and innovative
service by a larger segment of the populace. Finally, this
structure
creates the proper economic incentives for vendors to segregate their
services
such that consumers need pay only for those services necessary for
their
own information processing requirements.
. . . .
120. We have described our
repeated unsuccessful efforts to identify a discrete communications
component
(after the fashion of the First Computer Inquiry) in what we have
finally
come to label 'enhanced service.' We are faced with the reality
that
technology and consumer demand have combined to so overrun the
definitions
and regulatory scheme of the First Computer Inquiry that today no
comparable,
minimally enduring line of demarcation can be drawn. In enhanced
services,
communications and data processing technologies have become intertwined
so thoroughly as to produce a form different from any explicitly
recognized
in the Communications Act. The forms of the Act should not
control
either the substance of enhanced service offerings to the public or the
manner in which they are made available.
. . . . .
130. We appreciate there can
be disagreement as to the line we have drawn between basic and enhanced
services. Plausible arguments can be tendered for drawing it
elsewhere.
At the margin, some enhanced services are not dramatically dissimilar
from
basic services or dramatically different from communications as defined
in Computer Inquiry I. But any attempt to draw the line at this
margin
potentially could subject both the enhanced services providers and us
to
the prospect of literally hundreds of adjudications over the status of
individual service offerings. We have noted the danger that such
proceedings could lead to unpredictable or inconsistent regulatory
definitions.
See para. 107 supra. Such proceedings also could consume a very
significant
proportion of the resources of this agency. The requirement to
devote
significant resources to try to make individual service distinctions
would
necessarily reduce the resources available for regulating basic
services
and ensuring non-discriminatory access to common carrier
telecommunications
facilities.
131. We have tried to draw
the line in a manner which distinguishes wholly traditional common
carrier
activities, regulable under Title II of the Act, from historically and
functionally competitive activities not congruent with the Act's
traditional
forms. We believe that the Communications Act and the
jurisprudence
which has grown up around it make it plain that Congress intended that
substance not form govern the treatment of services within the Act's
reach. We have acted upon the belief by applying traditional
Title II regulatory
mechanisms to basic services and applying no direct regulatory
mechanism
for 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)
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