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May 05, 2006

Quick Take on the CALEA Oral Argument in the DC Circuit this Morning

This morning the DC Circuit heard oral argument in the challenge of the FCC’s Order imposing CALEA lawful intercept obligations on broadband Internet access services and VoIP. pulver.com was one of the Petitioners and Jonathan Askin sat in on the argument and reported back to us:

The legal conclusions that will come out of this case could have quite profound consequences on the future of Internet technology, applications and regulation, well beyond even the immediate question over the legality of applying the CALEA statute to VoIP and broadband Internet access.

Candidly, I have serious fear that VoIP (most immediately) and all Internet-based applications (in the long run) might have been thrown under the bus in order to protect broadband Internet access services from CALEA and telecom regulation. I think it is entirely possible that the Opinion that comes from the DC Circuit might further send us down the path where the underlying telecom transmission facilities (the paradigmatic essential, bottleneck facilities within the control of too few players) will have virtually no government oversight (oversight needed to ensure competition, innovation and fair pricing), while the Internet applications (particularly the voice applications) will more and more be construed as the telecom services subject to regulatory oversight. This flips 40 years of Computer Inquiry (and 400 years of common carrier regulation) on its head.

It seemed pretty clear (although, according to Judge Edwards, he is skeptical of any attorney who prefaces argument by stating that something is “clear”) that Judges Edwards and Sentelle were quite skeptical about the FCC’s extension of the CALEA statute to services that the FCC has defined as “Information Services.” Let’s recall that the same day the FCC adopted the CALEA for VoIP Order (August 5, 2005), the FCC also adopted the Wireline Broadband Internet Access Order, which defined broadband Internet access services as “Information Services”, not “Telecom Services.” Both Judges Sentelle and Edwards took the FCC to task for the obvious disingenuity and illogic of saying that broadband Internet access services are “Information Services” for the purposes of the “Telecom Act” but “Telecom Services” for the purposes of CALEA. Judge Edwards pointed out that the FCC made an immutable “technological” determination that must apply across FCC Orders that the “Information Services” component of a broadband Internet access service cannot be “disaggregated” from the telecom transmission component and therefore the whole communication. While I tend to disagree with that FCC conclusion that the application/service cannot be “disaggregated” from the transmission facility, I, like Judge Edwards, believe that the FCC cannot have it both ways depending on how the FCC’s result-oriented objectives. The bottom-line is that the FCC dug itself a logic hole from which it cannot extricate itself (particularly with brilliant logicians on the DC Circuit watching over it).

Ever since last Summer, I have been trying to line up the logic of the FCC’s Wireline Broadband Internet Access Order with the logic of the FCC’s CALEA Order. Both were adopted on August 5, so I would think the logic for each Order should have been fresh in the minds of those who voted the items (admittedly, the CALEA Order might not have been fully fleshed out at the August 5 vote, not having been released for 7 weeks).

So until today I have been wondering about the FCC’s convoluted logic in applying telecom regulation to the Internet in order to impose social obligations (so far CALEA and E-911) on Internet communications providers, while simultaneously removing telecom regulations from wireline broadband Internet access providers in Order to relieve them of their access obligations? Any minor distinction in the definition of telecom services and information services between the Telecom Act and the CALEA statute cannot possibly justify the radically distinct regulatory approaches within the two orders and the contradictory analysis distinguishing and then analogizing broadband and narrowband and narrowband services within the two orders.

Why are broadband services construed as information services for purposes of relieving Internet access providers of access obligations, but virtually all broadband and narrowband services are construed as telecom service for purposes of CALEA (and E-911)?

So, with this confusion over the FCC’s logic, I was at first concerned when Judge Sentelle started questioning of counsel for Petitioners by suggesting that CALEA’s definition of “Information Services” could be different from the Telecom Act’s definition of “Information Service”, but I think both Judge Sentelle and Edwards essentially acknowledged that the FCC cannot play a definitional shell game and apply two technologically distinct definitions to “Information Services”, one to apply in the context of the Telecom Act and another in the context of CALEA. Judge Edwards said on more than one occasion that the FCC’s argument is laughably “disingenuous.” According to Judge Edwards, the FCC has concluded that, as a technological matter, broadband Internet access services are “Information Services.” The FCC cannot get away from that technological conclusion.

Judge Edwards also pointed out that the FCC has also concluded that the “Information Service” (e.g., email) cannot be “disaggregated” from the telecom transmission and, pursuant to Brand X, as memorialized in last Summer’s FCC Order on Wireline Broadband Internet Access Services, the entire broadband service is an “Information Service”, not a telecom service. The FCC cannot, with a straight face, talk its way around that broad technological conclusion.

Sounds good? Sort of, but I am concerned about how this ultimately plays out, first for Internet-delivered voice, and then for any Internet-delivered application.

We might have already lost the battle when the FCC “won” the Brand X case at the Supreme Court and used that Opinion as a vehicle to deregulate broadband Internet access services and remove broadband Internet access service from traditional telecom regulation. Having lost its telecom regulation hook over the telecom transmission facility, the FCC looked around for ways to reimpose regulation on communications – and the answer seems to have come in the form of regulating the application (starting with voice, at least those voice applications that “substantially replace” traditional telephony) that rides the now unregulated facilities.

Sentelle and Edwards both seemed to conceive VoIP as a “Substantial Replacement” for telephony and therefore CALEA might arguably apply to VoIP, if not to broadband Internet access services. This conclusion, if memorialized, could be devastating to Internet communications innovation. The problem seems to be that the judges and counsel did not consider how revolutionary Internet communications is (or could be under the right regulatory framework) . I think the judges were only thinking of those services that are marketing themselves as substantial replacements for traditional telephony. As I have said repeatedly, ad nauseum, if that is all VoIP is and becomes, we deserve our fate. But the law should enable us to innovate and transform communications well beyond merely serving as a replacement for plain old telephone service. Not all flavors of VoIP are mere broadband-delivered replications of POTS (e.g., FWD, Skype, GoogleTalk, yahoo!, AIM, etc., etc., etc.). I fear that we have all been lumped into the same category and it becomes a slippery slope to begin regulating one voice application that looks like POTS and down the slope to regulating P2P IM platforms that happen to have an incidental voice application.

So, Judges Edwards and Sentelle seemed to suggest that “VoIP” is a “Substantial Replacement” for telephony service, and therefore might be regulated like a telecom service that it has replaced. I am not sure how the Court or the FCC gets past the concept that the “information service”, even if it is voice, cannot be “disaggregated” from the telecom transmission. Judge Edwards clearly recognized the FCC’s logic in saying that email (if not VoIP) cannot be “disaggregated” from the telecom transmission facility. Now, just between us, I disagree with that conclusion. IP technology and Moore’s Law have allowed the application to be clearly disaggregated from the telecom transmission facility upon which it rides. But this fact draws the opposite conclusion from where the FCC has been taking us and where the DC Circuit might further drive us – regulation of the Internet applications and nonregulation of the transmission. Regulate where there is an infinite supply of innovative competitors from around the globe and beyond the jurisdiction of any national or localized regulator? Don’t regulate where there is a clear bottleneck, subject to monopoly control and within the jurisdiction of a national or local regulator? Am I the only one who thinks this is 180 degrees backwards?

Unfortunately, our counsel did not take the opportunity to address this issue over the proper regulatory treatment of Internet-delivered voice (and other) applications. Perhaps that was the right approach given the context of the oral argument. We were not here to relitigate Brand X, but I would hate to think that the end result will be the regulation of the Internet application – first VoIP where it is a “Substantial Replacement”, then voice VoIP where it is a purer disaggregated applications on a P2P network, then to all Internet-delivered applications, then to ubiquitous regulation of any application traversing the global Internet.

In any event, I fear there is potential for the worst of all possible results, and a conclusion that both defies logic and turns 40 years, maybe 400 years of common carrier regulation on its head. The essential bottleneck facility is not regulated as a telecom service, but the infinite supply of voice applications riding the facility could be regulated as a telecom service.

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(c) 2006 Jeff Pulver. All Rights Reserved.
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Posted by jeff on May 5, 2006 02:34 PM | Permalink

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Comments

From Jeff- "Regulate where there is an infinite supply of innovative competitors from around the globe and beyond the jurisdiction of any national or localized regulator"

We have seen this in open source development of encryption. The US regulates the export of encryption, so developers emerge overseas.
What's stopping Brand X voip from taking their operations (and tax revenues) just offshore, 20 milliseconds away from their US customers as the light travels, but miles from pesky regulation. I don't want anarchy, but I don't believe a full pipe of voice from Brand X into the NSA is actually offering that much protection to american citizens.

Posted by: Joseph Burdick at May 6, 2006 12:26 AM

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