BEFORE THE PUBLIC SERVICE COMMISSION
OF THE STATE
OF MISSOURI
Staff of the Public Service Commission of the )
State of Missouri, )
)
Complainant, )
)
v. ) Case No. TC‑2007‑0111
)
Comcast IP Phone, LLC, )
)
Respondent. )
Table of Contents
Appearances.............................................................................................................................. 1
Findings of Fact......................................................................................................................... 2
Procedural
History.............................................................................................................. 2
Comcast IP
Phone and the Services it Offers.............................................................. 4
Conclusions of Law................................................................................................................
6
Decision ................................................................................................................................... 12
Ordered Paragraphs.............................................................................................................
13
Appearances
William K. Haas, Deputy General Counsel,
Missouri Public Service Commission, Post Office Box 360,
Jefferson City, Missouri 65102, for
the Staff of the Missouri Public Service Commission.
Mark P. Johnson and Roger W. Steiner,
Sonnenschein Nath & Rosenthal LLP, 4520 Main Street, Suite 1100, Kansas
City, Missouri 64111, for Comcast IP Phone, LLC.
Michael Dandino, Deputy Public Counsel,
Post Office Box 2230, Jefferson City, Missouri 65102, for the Office of the
Public Counsel.
Craig S. Johnson, Attorney at
Law, 1648-A East Elm Street, Jefferson City, Missouri 65101, for the Missouri
Independent Telephone Company Group.
REGULATORY
LAW JUDGE: Morris
L. Woodruff, Deputy Chief Regulatory Law Judge
REPORT AND ORDER
FINDINGS OF FACT
The Missouri Public Service Commission,
having considered all the competent and substantial evidence upon the whole
record, makes the following findings of fact.
The positions and arguments of all of the parties have been considered
by the Commission in making this decision.
Failure to specifically address a piece of evidence, position, or
argument of any party does not indicate that the Commission has failed to
consider relevant evidence, but indicates rather that the omitted material was
not dispositive of this decision.
Procedural History
On September 21, 2006, the Staff of the Commission
filed a complaint against Comcast IP Phone, LLC. Staff’s complaint alleges Comcast IP Phone is
offering local exchange and interexchange telecommunications services in Missouri without a certificate of service authority from
the Commission, in violation of Missouri
law.
By a notice issued on September 26, 2006, pursuant
to Commission Rule 4 CSR 240-2.070(7), the Commission served a copy of Staff’s
complaint on Comcast IP Phone. Comcast
IP Phone responded on October 26, 2006, contesting the Commission’s
jurisdiction in a motion asking the Commission to dismiss Staff’s
complaint. The Commission denied the
motion to dismiss on December 5, 2006, and directed Comcast IP Phone to file
its answer to Staff’s complaint. Comcast
IP Phone filed a timely answer on December 26, 2006.
Meanwhile, on October 30, 2006, the Missouri
Independent Telephone Company Group, (MITG) an affiliation of six small rural
incumbent local exchange companies, filed an application to intervene in
support of Staff’s complaint. The Commission granted MITG’s application to
intervene on November 7, 2006.
The Commission established a procedural schedule
that required the parties to prefile direct, rebuttal, and surrebuttal
testimony. The Commission conducted an
evidentiary hearing for the purpose of cross-examination of those witnesses on
July 25, 2007. The parties filed initial
post-hearing briefs on September 14, 2007, followed by reply briefs on October
12, 2007. In addition, the Commission
received amicus curiae briefs from the
Small Telephone Company Group, Embarq Missouri, Inc., d/b/a Embarq, and
AT&T Missouri.
Comcast
IP Phone and the Services it Offers
Comcast IP Phone, the respondent in this
complaint, is a direct subsidiary of Comcast Cable Communications, LLC,
which is primarily a cable television provider.
Comcast IP Phone, has never applied for, nor been granted, a certificate
of service authority to provide either basic local or interexchange
telecommunications services in Missouri.
Since April 17, 2006, Comcast IP Phone has offered
an all-distance Voice over Internet Protocol (VoIP) telecommunications service
to customers in multiple municipalities in Missouri. Comcast IP Phone calls its VoIP service
Comcast Digital Voice, and offers that service in several communities located near
Kansas City.
Comcast IP Phone provides its Comcast Digital
Voice customers with equipment that allows the customer to plug their home
phone into the coaxial cable that delivers cable television into the home. That equipment converts phone signals and
voice into IP voice packets and IP data packets destined for the internet, which
are transmitted to equipment at Comcast’s end of the cable. Voice packets are delivered to a soft switch
that routes them to their destination.
If the call is destined for a customer of another phone company, the IP
packets must be converted to TDM (Time Division Multiplex) signals so they can
be sent to the public switched telephone network. That conversion is called a net protocol
change. If a call is destined for another Comcast
Digital Voice customer, even a customer in another state, the signal may not be
converted and would not pass over the public switched telephone network.
Comcast IP Phone’s Comcast Digital Voice customers
use that service to transmit information by wire, radio, and optical cable
between points within an exchange defined by AT&T as the incumbent local exchange
carrier. Similarly, the Comcast Digital Voice service
is used to transmit information by wire, radio, and optical cable between
points in two or more exchanges defined by AT&T.
Comcast Digital Voice is a fixed VoIP
service. That means the service is
available only over the fixed coaxial cable connected to the customer’s home or
business. As a fixed VoIP service, Comcast Digital Voice
differs from the VoIP telecommunications service offered by providers such as
Vonage. Vonage does not own a coaxial
cable or other means of providing a high-speed connection to its
customers. Therefore, it offers its VoIP
service to customers who establish their broadband connection with another
service provider. Since Vonage’s service
relies on third-party broadband connections, that service is not tied to a
specific location. A Vonage customer can
make a phone call from anywhere in the world that has access to a broadband
connection to the internet. Furthermore,
a Vonage customer can choose a phone number from a variety of U.S. rate centers. In contrast, a Comcast Digital Voice customer
is required to use a primary phone number that correlates to the physical
location of the connection to Comcast’s cable.
The differences between Comcast Digital Voice’s
fixed VoIP service and the nomadic VoIP service offered by Vonage are important
because the Federal Communications Commission (FCC) has declared that the
services offered by Vonage are subject to the exclusive jurisdiction of the FCC
and that the various states cannot regulate those services. The question of whether the states can
regulate fixed VoIP services, such as Comcast Digital Voice, is still
undecided. That question will be further
addressed in the Commission’s Conclusions of Law.
CONCLUSIONS OF LAW
The Missouri Public Service Commission
has reached the following conclusions of law regarding Staff’s complaint:
1. Comcast
IP Phone is a “Telecommunications Company” and “Public Utility,” as those terms
are defined at Subsections 386.020 (51) and (42), RSMo Supp. 2006. As such, it is subject to regulation by this
Commission.
2. Subsection
386.390.1, RSMo 2000, authorizes the Commission to bring a complaint against a
public utility on its own motion.
3. As
the party bringing a complaint, Staff has the burden of proving its
allegations.
4. Section
386.360.1, RSMo 2000, provides:
[w]henever
the commission shall be of the opinion that a public utility, municipal gas
system, person or corporation is failing or omitting or about to fail or omit
to do anything required of it by law or by order or decision of the commission,
or is doing anything or about to do anything or permitting anything or about to
permit anything to be done, contrary to or in violation of law or of any order
or decision of the commission, it shall direct the general counsel to the
commission to commence an action or proceeding in any circuit court of the
state of Missouri in the name of the commission for the purpose of having such
violations or threatened violations stopped and prevented either by mandamus or
injunctions.
5. Section
386.570.1, RSMo 2000, provides that any public utility that fails to comply
with any provision of law, or with any “order, decision, decree, rule,
direction, demand or requirement” of the Commission “is subject to a penalty of
not less than one hundred dollars nor more than two thousand dollars for each
offense.”
6. The
General Counsel of the Commission is authorized by Section 386.600, RSMo 2000,
to bring an action in circuit court to recover a penalty against a public
utility.
7. Section
392.410.2, RSMo (Supp. 2006), states as follows:
No telecommunications company offering or
providing, or seeking to offer or provide, any interexchange telecommunications
shall do so until it has applied for and received a certificate of
interexchange service authority pursuant to the provisions of subsection 1 of
this section. No telecommunication
company offering or providing, or seeking to offer or provide, any local
exchange telecommunications service shall do so until it has applied for and
received a certificate of local exchange service authority pursuant to the
provisions of section 392.420.
8. Section
386.020(53), RSMo (Supp. 2006), defines “telecommunications service” as “the
transmission of information by wire, radio, optical cable, electronic impulses,
or other similar means.”
9. Section
386.020(24), RSMo (Supp. 2006), defines “interexchange telecommunications
service” as “telecommunications service between points in two or more
exchanges.”
10. Section
386.020(31), RSMo (Supp. 2006), defines “local exchange telecommunications
service” as “telecommunications service between points within an exchange.”
11. The
Commission has found as a fact, that the Comcast Digital Phone service offered
by Comcast IP Phone is used by customers to “transmit information by wire,
radio and optical cable” both within and between exchanges. Therefore, Comcast Digital Phone service
meets the statutory definition of a telecommunications service and under Missouri’s statutes;
Comcast IP Phone must have a certificate of service authority before offering
that service to its customers.
12. Missouri’s
statutes and regulatory scheme are not, however, the only factors at play in
this case. The FCC also regulates
telecommunications services at the federal level. Consistent with the Supremacy Clause of the
United States Constitution, the FCC has the authority to preempt state
regulation that would conflict with federal regulation of telecommunications
services. In general, the FCC regulates interstate telecommunications services,
while local and intrastate services are left to be regulated by the various
states. Therefore, the Commission may be
preempted from exercising regulatory authority over some telecommunications
services that would meet the definitions established by Missouri’s statutes.
13. The
FCC has explicitly preempted state regulation of nomadic VoIP service. The Minnesota Public Utility Commission had
sought to regulate Vonage’s DigitalVoice VoIP service. In its decision preempting the Minnesota
PUC’s order, the FCC held that the Minnesota Commission “may not require Vonage
to comply with its certification, tariffing or other related requirements as
conditions to offering DigitalVoice in that state.”
In making its decision to preempt Minnesota’s regulation
of DigitalVoice, the FCC found that as a practical matter, because calls could
originate from anywhere in the world where a broadband connection could be
made, it was impossible to separate the intrastate calls made using DigitalVoice
from interstate calls. Thus precluding
dual state and federal regulation of that VoIP service. On that basis of impossibility, the FCC found
that federal regulation must prevail to preempt state regulation.
As described in the Findings of Fact section of
this order, the Comcast Digital Voice service offered by Comcast IP Phone is a
fixed VoIP service that differs from the nomadic VoIP DigitalVoice service
offered by Vonage. Since a call using a
fixed VoIP service must originate from a fixed connection to a cable, the difficulty
of separating intrastate calls from interstate calls that led the FCC to
preempt state regulation of the services offered by Vonage does not apply to a
fixed VoIP service. Therefore, the FCC’s
Vonage decision has not explicitly
preempted state regulation of fixed VoIP service.
14. In
its Vonage decision, the FCC predicted
that it would likely also preempt state regulation of fixed VoIP services if
that issue were presented to it in a future case. In the conclusion section of the Vonage decision, the FCC stated:
Moreover,
for services having the same capabilities as DigitalVoice, the regulations of
other states must likewise yield to important federal objectives. To the extent other entities, such as cable
companies, provide VoIP services, we would preempt state regulation to an
extent comparable to what we have done in this Order.
However, when the Vonage decision was appealed to the U.S. 8th
Circuit Court of Appeals, the New York
Public Service Commission challenged the portion of the FCC’s order that
suggested state regulation of fixed VoIP service was likely to be
preempted. In defending its order, the
FCC argued that the question of preemption of state regulation over fixed VoIP
service was not yet ripe for judicial review.
The court agreed, stating:
We
conclude the NYPSC’s challenge to the FCC’s order is not ripe for review. The order only suggests the FCC, if faced
with the precise issue, would preempt fixed VoIP services. Nonetheless, the order does not purport to
actually do so and until that day comes it is only a mere prediction. . . . As
a consequence, NYPSC’s contention that state regulation of fixed VoIP services
should not be preempted remains an open issue.
Thus, it is clear that the FCC has not yet preempted state
regulation of fixed VoIP service of the sort offered in Missouri by Comcast IP Phone.
15. The
FCC opened a rulemaking docket in 2004 to ultimately determine how all
IP-enabled services, including fixed VoIP services, should be regulated. However, the FCC has not yet issued any rules
and has not indicated when, if ever, it will do so. Even if the FCC eventually indicates an
intent to preempt state regulation of fixed VoIP services, that decision will
likely be subject to lengthy judicial appeals.
Therefore, the Commission will not defer its decision on the regulation
of fixed VoIP service while waiting for the FCC to act.
16. Comcast
IP Phone also contends the Commission has already issued a decision in an
arbitration case finding that internet protocol to public switched telephone
network (IP-PSTN) traffic is an enhanced information service and not a
telecommunications service under the Telecommunications Act because such
traffic undergoes a net-protocol change. In the context of that arbitration decision,
that means IP-PSTN traffic is subject to intercarrier compensation at
reciprocal compensation rates rather than switched access charges. Comcast IP Phone contends the principle that
IP-PSTN traffic, which includes VoIP traffic, is an information service, not a
telecommunications service, would preclude state regulation of that service.
However, the FCC has not yet classified VoIP
traffic as either an information service or a telecommunications service. That is one of the issues remaining to be
decided in the FCC’s pending rulemaking proceeding. The fact that this Commission made that
finding in the narrow context of an arbitration decision regarding intercarrier
compensation does not bind the Commission to reach the same conclusion in the
broader context of this decision. The
Commission concludes that its earlier decision in the arbitration case does not
preclude it from addressing anew the question of its jurisdiction over a fixed
VoIP service.
17. Assuming
the Commission finds that it has the legal authority to regulate Comcast
Digital Voice, Comcast IP Phone urges the Commission to refrain from exercising
that authority while the question of state jurisdiction is before the FCC. Comcast IP Phone suggests there is no pressing
need for state regulation of its VoIP service because it is a competitive
service being offered in a competitive market.
According to Comcast IP Phone, market forces are sufficient to protect Missouri’s consumers
without the need for regulation. Furthermore, Comcast IP Phone complains it
would incur substantial expenses to modify its billing system to meet state
requirements if it is found to be subject to state regulation.
The problem with Comcast IP Phone’s request that
the Commission refrain from regulating the services it offers is that the
controlling statute does not give the Commission the discretion to decide not
to regulate a service that the legislature has determined should be regulated. The Comcast Digital Phone service that Comcast
IP Phone offers meets the statutory definition of a telecommunications service
subject to regulation by the Commission.
The Commission cannot ignore the requirements of the statute and
therefore, Comcast IP Phone must apply for a certificate of service authority
to provide that service. If Comcast IP
Phone believes that application of particular Commission Rules or state
statutes would be unduly burdensome, it may request waiver of those rules or
statutes pursuant to Section 392.361.5, RSMo 2000. So that Comcast IP Phone will have an
opportunity to seek appropriate waivers before complying with this order, the
Commission will give this order a sixty-day effective date.
DECISION
Based on the facts as it has found them, and its
conclusions of law, the Commission finds that Comcast IP Phone is offering and
providing local exchange and interexchange telecommunications services without
a certificate of convenience and necessity in violation of Section 392.410.2,
RSMo (Supp. 2006).
Staff’s complaint asks for authority to file a
petition in circuit court to seek imposition of civil penalties against Comcast
IP Phone for its failure to obtain a certificate of convenience and necessity
before offering its Comcast Digital Phone service in Missouri.
The Commission finds that Comcast IP Phone’s failure to obtain a
certificate of convenience and necessity is due to a reasonable disagreement
regarding the Commission’s authority to regulate the services it provides, not
from any disregard for the authority of the Commission. In this circumstance, the Commission finds
that it would not be appropriate to seek civil penalties against Comcast IP
Phone at this time.
IT
IS ORDERED THAT:
BY THE COMMISSION
Colleen M. Dale
Secretary
(
S E A L )
Davis, Chm., Murray,
with separate concurrence to follow, Clayton, Jarrett, CC., concur
and
certify compliance with the
Provisions
of Section 536.080, RSMo.
Appling,
C., absent
Dated
at Jefferson City, Missouri,
on
this 1st day of November, 2007.
