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The Federal CommunicationsCommission FCC defines VoIP as atechnology that allows users to makevoice calls using a broadband Internetconnection instead of a regular (oranalog) phone line.VoIPVOICE OVERINTERNET PROTOCOLIDAHO PUBLIC UTILITIES COMMISSION

December 5, 2016Senator Brent Hill & Representative Scott BedkeIdaho State Legislature700 West Jefferson StreetBoise, Idaho 83720Dear Senator Hill and Representative Bedke,In response to a request from legislative leadership, the Idaho Public Utilities Commission (IPUC) undertook thetask of convening a group of interested parties to evaluate the status of Voice over Internet Protocol Service (VoIP)in relationship to Idaho. The report included in this package is the culmination of that effort.As background, the IPUC chose to contract with Joe Cusick to oversee this project. Mr. Cusick has decades ofexperience in the telecommunications sector, which includes professional work within the industry and as aregulator. He was instructed to develop an “honest broker” report that avoided taking a position on any optionsthat emerged.The finished report is intended to be an easily accessible assessment of VoIP in Idaho. All effort was made to avoidthe morass of acronyms and jargon that litter the telecommunications sector. Hopefully, this report willaccomplish its goal of providing an easy to digest evaluation of the current status of VoIP and the possible pathsforward.As another point of interest, the landscape at the federal level has changed dramatically since the initiation of thisproject. Most notably, the results of the November elections could lead to potential congressional and regulatoryactions that might impact the telecommunications industry. The new administration will certainly have a differentrelationship with Congress, and the composition of the Federal Communications Commission (FCC) will alsochange.While congressional action and directions are always difficult to predict, it is clear that future changes at the FCCwill have significant and more immediate impact on the telecommunications sector. Given the recent history thatmost major FCC decisions were resolved by 3-2 decisions along party lines, a change at the FCC will likely result innew directions as it relates to VoIP and other telecommunications matters. Future FCC decisions will undoubtedlyhave impacts on jurisdictional matters that are currently administered at that state level.Hopefully this report provides useful information to assist the Legislature. If additional information on this topic isrequired, the IPUC is prepared to assist.Sincerely,Paul KjellanderCommissioner1

November 30, 2016Joe Cusick916 N. Fifth St.Boise, ID, 83702President Pro Tem Hill, Speaker Bedke and Idaho Legislators,This report is submitted in response to the Legislature's request to Commissioner PaulKjellander dated March 28, 2016.In its request, the Legislature asked the Commission for its aid and expertise in advisingthe Legislature on “the question of preemption of regulation for VoIP and IP-EnabledServices and the effect that action might have on the need for revision of other Idahostatutes.”This report is divided into four sections: Definitions, Current Status of VoIP Regulation,Summary of Industry Views and Options for moving forward. Attached are copies of thedraft 2015 and 2016 AT&T proposed legislation.I have presented three options for the Legislature to consider. Option 1 is to accept allor part of AT&T's proposed legislation, Option 2 is to maintain the status quo, andOption 3 is to add clarifying language to the Title 62 statutes.As to the regulatory status if VoIP, as AT&T points out, 36 states have chosen toderegulate VoIP. It is an issue that seems to be in constant litigation, as it is currently.In Idaho, the PUC's approach to VoIP is best described as a hands-off approach.The industry's views are part varied and part consistent. The stakeholders in thisproceeding are consistent in that they all agree that they would like to see deregulation.However, they are varied in the conditions that should go along with deregulation. Ajaded view might be that deregulation is fine as long as I get what I want.The definitions section attempts to define or explain some of the acronyms whichappear in the report. The telecom industry is replete with acronyms and has long giventhe military a run for the money in this regard.I have tried to provide the Legislature with a concise, yet accurate, view on the subjectsof VoIP and IP-enabled service as they pertain to Idaho today. I have consciouslyattempted to avoid protracted and esoteric discussions on the legal status of subjectssuch as whether VoIP is an information or telecommunications service or whether it is2

under intrastate or interstate jurisdiction. If, at any point, Legislators would like todiscuss issues in further details, I remain at your disposal.Sincerely,Joseph W. CusickCurriculum Vitae Summary for Joseph W. CusickBBA Finance and Management - Idaho State UniversityManager, Regulatory Affairs US West – Retired 1990Staff Supervisor (Telecommunications) Idaho PUC – Retired 2013Former Staff Chair, US West Regional Oversight CommitteeFormer Staff Chair, NARUC Telecommunications SubcommitteeFormer Staff Chair, Joint Committee on Jurisdictional Separations3

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DEFINITIONSVoIP (Voice over Internet Protocol) – The Federal Communications Commission(FCC) defines VoIP as a technology that allows users to make voice calls using abroadband Internet connection instead of a regular (or analog) phone line. Some VoIPservices may allow users to call only other people using the same service, but othersmay allow you to call anyone who has a telephone number - including local, longdistance, mobile, and international numbers. Also, while some VoIP services work onlyover a computer or a special VoIP phone, other services allow you to use a traditionalphone connected to a VoIP adapter. The National Exchange Carrier Association(NECA) defines VoIP as a technology that allows users to make telephone calls using abroadband Internet connection instead of a regular (or analog) phone line.Within VoIP there are also two distinct services: interconnected and non-interconnected.Interconnected VoIP service - VoIP has four defining characteristics. It 1) enablesreal-time, two-way voice communications; 2) requires a broadband connection from theuser's location; 3) requires Internet protocol-compatible customer premises equipment(CPE); and 4) permits users to generally receive calls that originate on the publicswitched telephone network (PSTN) and to terminate calls to the public switchedtelephone network. Non-interconnected VoIP simply does not have the lastrequirement to originate or terminate calls on the PSTN and is not subject to stateregulation.VoIP may also be nomadic or fixed.Nomadic VoIP is intended to be used at any location where a broadband connection isavailable. A customer may use his or her service in Boise or Boston. That service isregulated on an interstate basis only.Fixed VoIP is intended to be used at the customer’s premises only and may be subjectto intrastate jurisdiction, depending on a state's statutes.(For purposes of this report, fixed-interconnected VoIP is the service that will beaddressed.)ITSAP (Idaho Telephone Service Assistance Plan) – Financial assistance is availablein Idaho to help qualified low-income individuals pay for telephone service. The programoffers a 2.50 discount on monthly telephone bills. A separate program, the federalLifeline program, offers an additional monthly discount of 9.25. Both ITSAP andLifeline are funded by a surcharge on all customers’ telephone bills.LECs (Local Exchange Carriers) – Those carriers that provide local service to enduse customers, aka telephone companies. LECs may fall into two categories: incumbentor competitive. For our purposes, incumbents are those carriers that were providinglocal service as of February 8, 1996, the implementation of the federal6

Telecommunications Act of 1996 (TA96). Competitive LECs are those companies thatstarted providing local service after that date.TRS (Telecommunications Relay Service) – TRS allows citizens who are hearing- orspeech-impaired to engage in telephone communications “in a manner functionallyequivalent to individuals without hearing or speech impairments.”USF (Universal Service Fund) – Generally refers to Idaho's state Universal ServiceFund. Established to assist high-cost rural companies to achieve a fair rate of returnwhile keeping rates affordable for rural customers. This fund currently supports eightrural companies in Idaho at an annual cost of 1,698,610.7

CURRENT STATUS OF VoIP REGULATIONAs stated in the letter asking the PUC to investigate VoIP regulation, 36 states thus farhave deregulated VoIP. One of the biggest motivators to get VoIP deregulated is theFCC's refusal to address the issue. The FCC has avoided the question of whether VoIPis a telecommunications service or an information service. That lack of action hascaused uncertainty in the market and has prompted providers, primarily AT&T, toaddress the issue on a state-by-state basis.Regardless of its regulatory status, the FCC does hold interconnected VoIP providerssubject to certain regulatory requirements, similar to other voice providers. VoIPproviders must provide:911 Services: Providers of interconnected VoIP services – which allow usersgenerally to make calls to and receive calls from the regular telephone network –do have 911 service obligations. However, 911 calls using VoIP are handleddifferently than 911 calls using regular telephone service.Portability: The FCC requires interconnected VoIP providers and telephonecompanies to comply with Local Number Portability (LNP) rules.Customer Proprietary Network Information (CPNI): The FCC limitsinterconnected VoIP providers' use of customer proprietary network information,such as telephone calling records, and requires interconnected VoIP providers toprotect them from disclosure.Universal Service: The FCC requires interconnected VoIP providers tocontribute to the Universal Service Fund, which supports communicationsservices in high-cost areas and for income-eligible telephone subscribers.Accessibility: Interconnected VoIP providers must contribute to the interstateTelecommunications Relay Services Fund used to support the provision oftelecommunications services to persons with speech or hearing disabilities andoffer 711 abbreviated dialing for access to relay services. Providers andequipment manufacturers also must ensure their services are available to andusable by individuals with disabilities, if such access is achievable.8

SUMMARY OF INDUSTRY VIEWSAlthough many, if not all, of the participants favor deregulation, they generally do so ona conditional basis. Each participant has its own interests it wants protected. Briefly,here are the various positions of the parties. For those reading an electronic version ofthis report, links to the parties’ entire comments are provided below. A complete text ofthe parties’ comments can also be accessed on the commission’s website atwww.puc.idaho.gov. Under “Hot” items, click on “VoIP Regulation.”AT&TIn its first comments, AT&T states that it believes Idaho's current practice of notregulating IP or VoIP should be codified into state law. Doing so would create a morestable regulatory environment that will promote greater investment, AT&T believes. Thecompany goes on to point out that 34 states and the District of Columbia have adoptedsuch legislation.AT&T also supports the Legislature's request to limit the scope of the review and not toundertake a broad sweeping review of Idaho's code. AT&T encourages the workinggroup to maintain a narrow focus on exempting IP and VoIP regulation.In its second set of comments, AT&T states that it agrees with Verizon and the VONCoalition on a number of matters, specifically: that VoIP is a service and not atechnology; that federal law clearly prevents state regulation of VoIP and IP enabledservices; that regulatory certainty will promote investment in VoIP and IP enabledservices; and that the report should focus on the narrow question as defined by theLegislation.A text of the parties’ comments can be accessed at www.puc.idaho.gov. Under “Hot”items, click on “VoIP Regulation.”AT&T CommentsAT&T Reply CommentsT-MobileT- Mobile is not opposed to VoIP deregulation and where market conditions justify,would support it. The company is concerned about deregulation because it affects thewholesale markets, which, T-Mobile believes, remain under monopoly control.To the extent the proposal would remove regulatory protections in these legacymonopoly wholesale markets, T-Mobile objects. Because wholesale markets remainunder monopoly control, monopoly-type protections and regulation should remain ineffect, under both federal and state law.9

T-Mobile maintains the best way to preserve these protections is to draw a distinctionbetween retail and wholesale markets and apply the deregulatory language only toretail. One could identify the specific elements of wholesale markets – such as specialaccess, interconnection and intercarrier compensation – but in order to ensure that theproposed bill includes all of the wholesale elements, the language should simply applyto only retail IP markets and not wholesale IP markets.A text of the parties’ comments can be accessed at www.puc.idaho.gov. Under “Hot”items, click on “VoIP Regulation.”T-Mobile CommentsVON CoalitionThe Voice On the Net Coalition (VON) believes that state regulation is currentlypreempted under the FCC’s Vonage Preemption Order and that the Vonage orderextended to both nomadic and non-nomadic VoIP. VON also believes that the proposedlegislation aligns with federal law, which classifies VoIP as an information service.Under federal law, information services are exempt from telecommunicationsregulations, including state regulation.VON further states that VoIP has continued to prosper under the FCC's light-touchregulatory structure. Citing FCC reports, VON points out that subscribers have grownnationally at an annual rate of 13 percent between June 2012 and June 2015.Specifically, subscribers grew from approximately 40 million in June 2012 to 57 millionin 2015.VON believes that regulatory uncertainty would decrease as a result of enacting safeharbor legislation. The Coalition also points out that 36 states have already deregulatedVoIP and that none of the states have repealed such laws once enacted.A text of the parties’ comments can be accessed at www.puc.idaho.gov. Under “Hot”items, click on “VoIP Regulation.”VON Coalition commentsVON Coalition Reply CommentsFrontier CommunicationsFrontier Communications agrees with other parties that say VoIP/IP services should notbe regulated. However, Frontier is concerned about the lack of parity caused byapplying taxes, fees and surcharges to only one small subset of providers, mostly those10

that provide local exchange service or long-distance and toll-free services. Thecompany believes this lack of parity – and the resulting higher rates their customers arerequired to pay – has led to a steady erosion in the number of lines that LECs areserving.Frontier states that if the Legislature were to pursue preemption of VoIP/IP services, itwould be a great opportunity for a simultaneous and comprehensive revision of otherstatutes that created these various funds and taxes. Such revisions could level theplaying field for all telecommunications providers, including VoIP, wireless and localexchange.A text of the parties’ comments can be accessed at www.puc.idaho.gov. Under “Hot”items, click on “VoIP Regulation.”Frontier Communications CommentsCenturyLinkCenturyLink supports the preemption of VoIP regulation at the state level, as long as thelegislation also mandates that VoIP providers and wireless providers pay the varioustaxes, fees and surcharges that telecommunication providers are required to pay.Payment of the various taxes, fees and surcharges needs to be nondiscriminatory andcompetitively and technologically neutral; neither providing a competitive advantage for,nor imposing a competitive disadvantage upon any voice service provider.CenturyLink believes that, currently, these fees are discriminatory – some voiceproviders pay and some do not. The Legislature should fix this during the 2017legislative session, at the same time it addresses the preemption of VoIP regulation.This is not only good public policy, but it can be done without a “broad sweeping rewriteof Idaho’s code related to communications or telecommunications services.”A text of the parties’ comments can be accessed at www.puc.idaho.gov. Under “Hot”items, click on “VoIP Regulation.”CenturyLink CommentsAttachment AAttachment BAttachment CAttachment DAttachment ECenturyLink Reply Comments11

Cable ProvidersBoth the Idaho Cable Telecommunications Association (ICTA) and CharterCommunications submitted comments that reflected similar views.ICTA states that in 2015 it initially opposed AT&T’s draft legislation that would havederegulated VoIP in Idaho. After revisions were made to that draft, the ICTA no longeropposed, but did not support, the legislation. The ICTA remains of the opinion thatlegislation to further deregulate VoIP services in Idaho is unnecessary.The cable providers believe that Idaho was on the forefront of deregulatingtelecommunications services with the Telecommunications Act of 1988, Idaho Code§62.601 et. seq. The Act exempts CLECs and ILECs – including those that deploy VoIPtechnology – from the more onerous or pervasive rate regulation provisions of Title 61and instead provides a very light, yet important, scheme of regulation for CLEC VoIPservices. Several of these Title 62 provisions address important intra-industry issuesthat remain relevant. In particular, statutory provisions that expressly authorize thecommission to implement and enforce federal interconnection obligations and otherwholesale rights, (§62-615), or resolve intercarrier disputes, (§62-613), could becomeclouded by new and potentially conflicting deregulatory code provisions.The cable providers believe that while AT&T has modified its proposed legislation tocarve out important areas where the commission should retain Title 62 jurisdiction, theICTA remains leery of unintended deregulatory consequences. Rather than bringingfurther legislation to deregulate VoIP and then “adding back” certain Title 62 (and othercode) provisions that are exempt from deregulation, it seems that the better system is tomaintain the status quo of Title 62’s light regulatory scheme of all CLEC providers.There is also the misconception that there was very little or no payment of state orfederal telecom fees by VoIP providers. Whether that is true or not for some CLECs,such is not the case for cable companies offering VoIP services in Idaho. Cable One, forexample, provisions its orders through Level 3 which, in turn, remits the appropriatetaxes, fees and surcharges.A text of the parties’ comments can be accessed at www.puc.idaho.gov. Under “Hot”items, click on “VoIP Regulation.”ICTA CommentsCharter Communications CommentsIdaho Telecom Alliance (ITA)The ITA, which represents rural carriers, believes that regulation should be dependent12

on the function of the service, not the technology through which it is delivered. For thisreason, the ITA's view is that voice telecommunications services provided through thepublic switched network should have equal regulatory treatment regardless of thetechnology used.The ITA is sympathetic to the desires of the proponents of VoIP deregulation proposalsto minimize regulatory costs and burdens. However, the ITA does not believe that suchlegislation is the best way to achieve these goals. ITA points out that there is already amechanism, under Title 62 of Idaho Code, to be freed from rate regulation and otherre