AT&T Petition

AT&T filed a petition charging that its phone to phone Internet protocol was exempt from the access charges that were applied to circuit switched interchanged calls.  AT&T’s calls are initiated in the same manner as a traditional interchange call, by dialing 1 and then the number from a regular phone.  Upon reaching the AT&T network, the call then changes to an IP format and transports over the AT&T Internet system.  AT&T then converts it back from the IP format and delivers it through the local exchange carrier (LEC) local business line.

In 2004, the Commission noted that in the Stevens Report its Non-Accounting Safeguards Order determined 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.”  The Commission further stated that “[t]he 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.”  Moreover, the Commission observed that “[t]he Act and the Commission’s rules impose various requirements on providers of telecommunications, including contributing to universal service mechanisms, paying interstate access charges, and filing interstate tariffs.”  

The Commission also discussed two types of IP telephony: computer-to-computer telephony and phone-to-phone telephony.  In its examination of computer-to-computer IP telephony, the Commission focused on IP telephony provided over the Internet.  In this scenario, callers use software and hardware at their premises to place calls via Internet access provided by an unregulated Internet service provider (ISP).  The ISP may not even be aware that a voice call is taking place.  Thus, the Commission found that the ISP did not appear to be providing telecommunications to its subscribers.

Here, however, the FCC found that AT&T’s IP in the middle of telephone long distance telephone services were telecommunication services instead of information services, since the Internet protocol was necessary for the user to make the call.  The FCC determined the service as a telecommunications service because, telecommunications services policy applied to all services that: “(1) use ordinary customer premises equipment with no enhanced functionality, (2) originate and terminate on the public switched telephone network (PSTN), and (3) undergo no net protocol conversion and provide no enhanced functionality to end users due to the provider’s use of IP technology.  Therefore, AT&T’s service was subject to access charges and federal taxes.

FCC Order

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