In the Matter of THE PROVISION OF INTERSTATE AND INTERNATIONAL INTEREXCHANGE TELECOMMUNICATIONS SERVICE VIA THE "INTERNET" BY NON-TARIFFED, UNCERTIFIED ENTITIES AMERICA'S CARRIERS TELECOMMUNICATION ASSOCIATION ("ACTA"), Petitioner PETITION FOR DECLARATORY RULING, SPECIAL RELIEF, AND INSTITUTION OF RULEMAKING AGAINST: VocalTec, Inc.; Internet Telephone Company; Third Planet Publishing Inc.; Camelot Corporation; Quarterdeck Corporation; and Other Providers of Non-tariffed, and Uncertified Interexchange Telecommunications Services, Respondents. To the Commission:

SUMMARY OF FILING America's Carriers Telecommunication Association ("ACTA"), a trade association of interexchange telecommunications companies, submits this Petition for Declaratory Ruling, for Special Relief, and for Institution of Rulemaking Proceedings. This petition concerns a new technology: a computer software product that enables a computer with Internet access to be used as a long distance telephone, carrying voice transmissions, at virtually no charge for the call. 

ACTA submits that the providers of this software are telecommunications carriers and, as such, should be subject to FCC regulation like all telecommunications cations carriers. ACTA also submits that the FCC has the authority to regulate the Internet. 

ACTA submits that it is not in the public interest to permit long distance service to be given away, depriving those who must maintain the telecommunications infrastructure of the revenue to do so, and nor is it in the public interest for these select telecommunications carriers to operate outside the regulatory requirements applicable to all other carriers. 

ACTA asks the Commission to issue a declaratory ruling confirming its authority over interstate and international telecommunications services using the Internet. 

ACTA asks the Commission, as special relief. to order the Respondents to immediately stop their unauthorized provisioning of telecommunications services pending their compliance with 47 U.S.C. Sections 203 and 214. and in order to give the Commission time for appropriate rulemaking. 

ACTA asks the Commission to institute rulemaking to govern the use of the Internet for providing telecommunications ser- vices.

PETITION FOR DECLARATORY RULING, SPECIAL RELIEF, AND INSTITUTION OF RULEMAKING 

America's Carriers Telecommunication Association ("ACTA"). by its attorneys, submits this Petition for Declaratory Ruling, for Special Relief, and for Institution of Rulemaking Proceedings. In support of this petition, the following is shown. 

STANDING 

ACTA is a national trade association of competitive interexchange, non-dominant telecommunications companies. Its members provide interexchange telecommunications services on an intrastate, interstate and international basis to the public at large. 

Some of its members also act as underlying (or wholesale) carriers providing network facilities, equipment and service to other member carriers which permits telecommunications services to be resold to the public. Other ACTA members supply facilities and equipment to member and non-member wholesale and resale carriers. 

ACTA's carrier members must be certificated and tariffed before the FCC and most state regulatory commissions in order to render their telecommunications service to the public. In addition, ACTA carrier members are subject to the requirements of the Communications Act of 1934, as amended (the "Act"), and various state laws and regulations which prohibit engaging in unreasonable practices and/or unduly discriminatory conduct. 

ACTA carrier members are required to pay, directly, or indirectly, various fees and charges in order to render their services to the public. Filing fees and annual fees are levied by the FCC and most states. 

In addition, the FCC and most states require interexchange carriers to assess and collect from the using public specific charges to support various regulatory policies and programs used to sustain and advance national and state goals for telecommunications. 

Entities, like those which are described hereinafter, which do not comply with or operate subject to the same statutory and regulatory requirements as ACTA's carrier members, distort the economic and public interest environment in which ACTA carrier members and nonmembers must operate. Continuing to allow such entities to operate without complying with or being subject to the same legal and regulatory requirements as ACTA carrier members threatens the continued viability of ACTA's members and their ability to serve the public and acquit their public interest obligations under federal and state laws. 

As the appointed representative of its members charged with advancing their economic interests and assisting in achieving and maintaining their legal and regulatory compliance, ACTA has standing to file and prosecute these petitions. 

STATEMENT OF FACTS AND BACKGROUND 

A growing number of companies are selling software for the specific purpose of allowing users of the Internet to make free or next to free local, interexchange (intraLATA, interLATA) and international telephone calls using the user's computer (Attachment 1). One of the Respondents, VocalTec, Inc., advertises the ability of its software called "Internet Phone," to connect any user of "Internet Phone" with any other user of "Internet Phone" anywhere in the world. The software enables users to audibly talk with one another in real-time. Respondents make a one-time charge for the software, but users incur no other charges for making local or long distance telephone calls to any other "Internet Phone" user in the world (except for whatever the user already pays monthly to whomever provides them Internet access). 

ASSERTION AND ENFORCEMENT OF JURISDICTION 

ACTA submits that it is incumbent upon the Commission to exercise jurisdiction over the use of the Internet for unregulated interstate and international telecommunications services. As a first step, ACTA submits that the Commission may deem it appropriate to issue a declaratory ruling officially establishing its interest in and authority over interstate and international telecommunications services using the Internet. 

Secondly, ACTA submits that the Commission has an obligation, heightened by the recent enactment of the Telecommunications Act of 1996, to address on a focused basis the on-going, unregulated and unauthorized provisioning of telecommunications services. The Commission should, as special relief, issue an order to the Respondents to immediately stop arranging for, implementing, and marketing non-tariffed, uncertified telecommunications services without complying with applicable provisions of the Act, particularly Sections 203 and 214, codified at 47 U.S.C. Sections 203 and 214. 

Further, ACTA submits that it is incumbent upon the Commission to examine and adopt rules, policies and regulations governing the uses of the Internet for the provisioning of telecommunications services. The use of the Internet to provide telecommunications services has an impact on the traditional means, methods, systems, providers, and users of telecommunications services. The unfair competition created by the current unregulated bypass of the traditional means by which long distance services are sold could, if left unchecked, eventually create serious economic hardship on all existing participants in the long distance marketplace and the public which is served by those participants. Ignored, such unregulated operations will rapidly grow and create a far more significant and difficult to control "private" operational enclave of telecommunications providers and users. Such development will clearly be detrimental to the health of the nation's telecommunications industry and the maintenance of the nation's telecommunications infrastructure. 

ARGUMENT 

Commission's Authority to Regulate the Internet. ACTA submits that the Commission has the authority to regulate the Internet under the provisions of 47 U.S.C. Section 151, which created the Commission: 

[for the purpose of regulating interstate and foreign commerce in communication by wire and radio so as to make avail able, so far as possible, to all the people of the United States a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges, for the purpose of the national defense. for the purpose of promoting safety of life and property, through the use of wire and radio communication. . . . 

The Internet is a unique form of wire communication. It is a resource whose benefits are still being explored and whose value is not fully realized. Its capacity is not, however, infinite. The misuse of the Internet as a way to bypass the traditional means of obtaining long distance service could result in a significant reduction of the Internet's ability to handle the customary types of Internet traffic. The Commission has historically protected the public interest by allocating finite communications resources/frequencies and organizing communications traffic. ACTA submits that here also it would be in the public interest for the Commission to define the type of permissible communications which may be effected over the Internet. 

Commission's Authority to Regulate Respondents as Interstate Telecommunications Carriers. ACTA submits that by both established precedents defining "common carriage" or public utility" type of operations for purposes of regulatory jurisdiction, and by statutory enactment, the Respondents, as purveyors of Internet long distance services, are interstate telecommunications carriers, subject to federal regulation. Section 3 of the new "Telecommunications Act of 1996," Pub. L. No. 104-104, 110 Stat. 56 (1996), to be codified at 47 U.S.C. Section 153, includes the following definitions: 

(48) Telecommunications.--The term "telecommunications" means the transmission, between or among points specified by the user, of information of the user's choosing, without change in the form or content of the information as sent and received. 

(49) Telecommunications Carrier.--The term "telecommunications carrier" means any provider of telecommunications services, except that such term does not include aggregators of telecommunications services (as defined in section 226). A telecommunications carrier shall be treated as a common carrier under this Act only to the extent that it is engaged in providing telecommunications services, except that the Commission shall determine whether the provision of fixed and mobile satellite service shall be treated as common carriage. 

(51) Telecommunications Service.--The term "telecommunications service" means the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used. 

It would appear that Respondents are currently operating without having complied with the requirements of the Communications Act of 1934, as amended, applicable to providing interstate and international telecommunications services. e.g., Sections 203 and 213, codified at 47 U.S.C. Sections 203 and 214. 

Case law also supports the Commission's authority to regulate the Respondents. In 1968, the Supreme Court was presented the issue of the Commission's authority to regulate the cable television industry, or CATV, then still in its infancy but growing quickly. In United States v. Southwestern Cable Co., 392 U.S. 157 (1968), the Supreme Court had to decide whether the Federal Communications Commission 1) had the authority under the Communications Act of 1934, as amended, to regulate CATV systems, a new technology and therefore not specifically discussed in the Act, and 2) if the Commission had such authority, whether it also had the authority to issue the particular prohibitory order that it had: one designed generally to preserve the status quo pending further investigation and proceedings, and not issued pursuant to the cease and desist rules of Section 312 of the Act (47 U.S.C. Section 312). 

The Supreme Court answered both questions in the affirmative. The Supreme Court stated that "the [Federal Communications] Commission has reasonably concluded that regulatory authority over CATV [was] imperative if it [was] to perform with appropriate effectiveness certain of its other responsibilities." Id. at 173. At that time, cable television characteristically neither produced its own programming nor paid producers or broadcasters for use of the programming which CATV redistributed. Id. at 162. The Court noted the Commission's concern that competition by CATV might destroy or degrade the service offered by local broadcasters and exacerbate the financial difficulties of UHF and educational television broadcasters. 

Commission's Authority to Grant Special Relief to Maintain the Status Quo. With regard to the procedural issue, the Court in Southwestern Cable upheld the authority of the Commission to issue an order maintain the status quo. The argument was made that the Commission could only issue prohibitory orders under the Act's Section 312 cease and desist provisions which, the Court assumed without finding, were only proper after a hearing or the waiver of the right to a hearing. The Court rejected that argument. stating: 

The Commission's order was thus not, in form or function, a cease-and- desist order that must issue under Sections 312(b), (c). The Commission has acknowledged that, in this area of rapid and significant change, there may be situations in which its generalized regulations are inadequate, and special or additional forms of relief are imperative. It has found that the present case may prove to be such a situation, and that the public interest demands "interim relief limiting further expansion," pending hearings to determine appropriate Commission action. Such orders do not exceed the Commission's authority. This Court has recognized that "the administrative process [must] possess sufficient flexibility to adjust itself' to the "dynamic aspects of radio transmission," F. C. C. v. Pottsville Broadcasting Co., supra, at 138, and that it was precisely for that reason that Congress declined to "stereotype the powers of the Commission to specific details......... National Broadcasting Co. v. United States, supra, at 219. 

The Commission should take the same action in 1996 with regard to the new technology of long distance calling via Internet as it did thirty years ago in 1966 with regard to the then-new technology of cable television: grant special relief to maintain the status quo so that it might carefully consider what rules are required to best protect the public interest and to carry out Its statutory duties. 

Other Issues Necessitating the Commission's Regulation of Long Distance via the Internet. The Commission has a duty to oversee and effect the Telecommunications Act of 1996 as well as its long-standing duties under 47 U.S.C. Section 151. The Commission should take action in order to preserve fair competition and the health of the Nation's telecommunications industry. Absent a healthy industry, with users paying telecommunications companies a fair price for telecommunications services, the Commission's duty to effectively promote universal service cannot be achieved. Absent action by the Commission, the new technology could be used to circumvent restrictions traditionally found in tariffs concerning unlawful uses, such as gambling, obscenity, prostitution, drug traffic, and other illegal acts. 

INFORMATION REGARDING RESPONDENTS ACTA does not possess a listing of all the companies providing free long distance calls via computer software. However, Attachment I contains some information regarding the following Internet telephone software companies and products: 

a. Company: VocalTec, Inc. 157 Veterans Drive Northvale, NJ 07647 Telephone: (201) 768-9400 Product: Internet Phone Distributors: VocalTec, Inc.; and Ventana Communications Group Research Triangle Park, NC 

b. Company: Internet Telephone Company Boca Raton, FL Telephone (407) 989-8503 Product: WebPhone 

c. Company: Third Planet Publishing Inc. a division of Camelot Corporation Product: Digiphone 

d. Company: Quarterdeck Corporation 13160 Mindanao Way, 3rd Floor Marina Del Ray, CA 90292 Telephone (310) 309-3700 Product: WebTalk 

e. Company: Unknown Product: CyberPhone 

CONCLUSION 

Permitting long distance service to be given away is not in the public interest. Therefore, ACTA urges the Federal Communications Commission ("the Commission") to exercise its jurisdiction in this matter and: issue a declaratory ruling establishing its authority over interstate and international telecommunications services using the Internet; grant special relief to maintain the status quo by immediately stop the sale of this software; and institute rulemaking proceedings defining permissible communications over the Internet. 

Respectfully submitted, AMERICA'S CARRIERS TELECOMMUNICATIONS ASSOCIATION Charles H. Helein General Counsel Of Counsel: Helein & Associates, P.C. 8180 Greensboro Drive Suite 700 McLean, Virginia 22102 (703) 714-1300 (Telephone) (703) 714-1330 (Facsimile) Dated: March 4, 1995

Footnotes: 

1 47 U.S.C. 201 et seq. 

2 The user must hook up a microphone to his computer and either a headset or speakers. 

3 ACTA asserts that Respondents are also intrastate telecommunications carriers, subject to regulation by state public utility commissions. 

4 The Commission had ordered that respondents, a cable company, generally restrict their carriage of Los Angeles signals to areas served by them on February 14, 1966, pending hearings to determine whether the carriage of such signals into San Diego contravened the public interest. The order did not prohibit the addition of new subscribers within areas served by respondents on February 15, 1966; it did not prevent service to other sub scribers who began receiving service or who submitted an accepted subscription request" between February 15, 1966, and the date of the Commission's order; and it did not preclude the carriage of San Diego and Tijuana, Mexico, signals to subscribers in new areas of service. United States v. Southwestern Cable Co., 392 U.S. 157, 180 (1968). 

5 Id. at 180.