What is telecommunications? Most people will point to the Greek prefix tele, meaning “distance,” and say that telecommunications is “communications at a distance.” Dictionaries define telecommunications as the science and technology of exchanging information at a distance, however, the legal definition of the word is quite different because it represents the foundation of current U.S. regulatory policy, and holds the key to how the Internet can be regulated.

In U.S. communications law, there is a regulatory dichotomy between the class of services the U.S. Federal Communications Commission (FCC) can regulate while treating every other service outside that class as either non-regulated or lightly regulated. The regulated class of services, not surprisingly, is called “telecommunications services.” In contrast, the non-regulated class is called “information services.” Basic landline telephony, for example, is a regulated telecommunications service, while the Internet is unregulated. 

Telecommunications and Information Services

The U.S. Communications Act defines telecommunications as the transmission of information “without change in the form or content of the information.” Telecommunications services are basic transport services. A common carrier that provides telecommunications services is subject to heavy regulation. For instance, a common carrier must contribute to universal service funds, open its network to lawful intercept, pay access charges, enable its network for 911, comply with local number portability and conform to privacy regulations.

The Communications Act defines information services as “the offering of a capability for generating, storing, transforming, processing, retrieving, utilizing or making available information via telecommunications.” Information services offer a capability beyond transmission. Information service providers are not common carriers and, although subject to FCC general jurisdiction, enjoy a hands-off approach from the FCC. Examples of information services include Internet access, DSL, cable Internet, e-mail, voice mail and computer-to-computer telephony (e.g. Skype). The FCC has direct jurisdiction to regulate telecommunications services. On the other hand, the FCC can regulate specific areas of information services only where there is a clear directive from Congress, which is called the FCC’s ancillary jurisdiction. In the Comcast vs. FCC case, the D.C. Court of Appeals did not find the clear directive from Congress giving the FCC authority to regulate the network management practices of cable internet service providers. 

Why the Difference?

Why regulate some services and not others? The answer is that, with little regulation, new services are able to thrive. Initially, AT&T was confined to telecommunications services, thus allowing others to offer unregulated information services over AT&T’s transmission lines. This may have been a well-intentioned position, but how long can this guarantee last and how long can a new information service remain unregulated? A review of what occurred with VoIP gives us the answer.

The FCC initially treated VoIP as an unregulated service and preempted states from regulating it at the state level. However, the FCC never went as far as classifying VoIP as an information service. Yet, because it was not classified as a telecommunications service either, the FCC began imposing only some of the same regulatory requirements as common carriers. The FCC did this by creating a new class for VoIP services called Interconnected VoIP, a middle ground between telecommunications and information services. The moral of the story: the FCC will throw the line and allow a service to swim freely for a while but then reel it in when necessary. 

The Evolution of the Internet

If the FCC wants to regulate the network management practices of cable Internet providers it could just reclassify broadband as a telecommunications service. With the stroke of a pen, the FCC could take back control. But the fact is that technology evolves faster than regulations can anticipate. In 1966, the FCC pronounced that “data processing cannot survive … except through reliance upon and use of communications facilities.” Apparently, Bill Gates and Steve Jobs failed to read this statement. The bottom line is that technological development is encouraged by market conditions and not by its regulatory label. Regulators will then trail back trying to make sense of the whole thing.

Raul Magallanes runs a Houston-based law firm focusing on telecommunications law. He may be reached at +1 (281) 317-1397
or by email at raul@ rmtelecomlaw.com.