[Federal Register Volume 70, Number 197 (Thursday, October 13, 2005)]
[Rules and Regulations]
[Pages 59664-59675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-20606]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 64
[ET Docket No. 04-295; RM-10865; FCC 05-153]
Communications Assistance for Law Enforcement Act and Broadband
Access and Services
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: In this document, the Federal Communications Commission
(Commission) adopts a rule establishing that providers of facilities-
based broadband Internet access services and providers of
interconnected voice over Internet Protocol (VoIP) services--meaning
VoIP service that allows a user generally to receive calls originating
from and to terminate calls to the public switched telephone network
(PSTN)--must comply with the Communications Assistance for Law
Enforcement Act (CALEA). This new rule will enhance public safety and
ensure that the surveillance needs of law enforcement agencies continue
to be met as Internet-based communications technologies proliferate.
DATES: Effective Date: This rule is effective November 14, 2005.
Compliance Date: Newly covered entities and providers of newly
covered services must comply with CALEA within 18 months of November
14, 2005.
ADDRESSES: Federal Communications Commission, 445 12th Street, SW.,
Washington, DC 20554.
FOR FURTHER INFORMATION CONTACT: Carol Simpson, Attorney-Advisor,
Competition Policy Division, Wireline Competition Bureau, at (202) 418-
2391.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's First
Report and Order (1st R&O) in ET Docket No. 04-295, FCC 05-153, adopted
August 5, 2005, and released September 23, 2005. The complete text of
this document is available for inspection and copying during normal
business hours in the FCC Reference Information Center, Portals II, 445
12th Street, SW., Room CY-A257, Washington, DC 20554. This document may
also be purchased from the Commission's duplicating contractor, Best
Copy and Printing, Inc., 445 12th Street, SW., Room CY-B402,
Washington, DC 20554, telephone (800) 378-3160 or (202) 863-2893,
facsimile (202) 863-2898, or via e-mail at http://www.bcpiweb.com. It
is also available on the Commission's Web site at http://www.fcc.gov.
Synopsis of the First Report and Order
1. Background. In response to concerns that emerging technologies
such as digital and wireless communications were making it increasingly
difficult for law enforcement agencies to execute authorized
surveillance, Congress enacted CALEA on October 25, 1994. CALEA was
intended to preserve the ability of law enforcement agencies to conduct
electronic surveillance by requiring that telecommunications carriers
and manufacturers of telecommunications equipment modify and design
their equipment, facilities, and services to ensure that they have the
necessary surveillance capabilities. The Commission began its
implementation of CALEA with the release of a Notice of Proposed
Rulemaking in 1997 (62 FR 63302, November 27, 1997). Since that time,
the Commission has taken several actions and released numerous orders
implementing CALEA's requirements.
2. On March 10, 2004, the Department of Justice, the Federal Bureau
of Investigation, and the Drug Enforcement Administration
(collectively, DOJ) filed a petition asking the Commission to declare
that broadband Internet access services and VoIP services are covered
by CALEA. The Petition also requested that the Commission initiate a
rulemaking proceeding to resolve, on an expedited basis, various
outstanding issues associated with the implementation of CALEA. The
Commission declined to issue a declaratory ruling, finding instead that
it was necessary to compile a more complete record on the factual and
legal issues surrounding the applicability of CALEA to broadband
Internet access services and VoIP services, and thus issued a Notice of
Proposed Rulemaking (NPRM) (69 FR 56976, September 23, 2004).
3. The Commission initiated this proceeding both to undertake a
comprehensive and thorough examination of the appropriate legal and
policy framework of CALEA, and to respond to DOJ's Petition asking the
Commission to seek comment on the various outstanding issues associated
with the implementation of CALEA, including the potential applicability
of CALEA to broadband Internet access services and VoIP services. The
NPRM indicated that the Commission would analyze the applicability of
CALEA to broadband Internet access services and VoIP services under
section 102(8)(B)(ii), a provision of CALEA upon which the Commission
had never before relied. That provision--the Substantial Replacement
Provision (SRP)--requires the Commission to deem certain service
providers to be telecommunications carriers for CALEA purposes even
when those providers are not telecommunications carriers under the
Communications Act of 1934, as amended (Communications Act). The NPRM
indicated that the Commission had never before exercised its section
102(8)(B)(ii) authority to identify additional entities that fall
within CALEA's definition of ``telecommunications carrier,'' and had
never before solicited comment on the discrete components of that
subsection.
4. The NPRM sought comment, among other things, on the Commission's
tentative conclusions that: (1) Congress intended the scope of CALEA's
definition of ``telecommunications carrier'' to be more inclusive than
that of the Communications Act; (2) facilities-based providers of any
type of broadband Internet access service are subject to CALEA; (3)
``managed'' VoIP services are subject to CALEA; and (4) the phrase ``a
replacement for a substantial portion of the local telephone exchange
service'' in section
[[Page 59665]]
102 of CALEA calls for assessing the replacement of any portion of an
individual subscriber's functionality previously provided via ``plain
old telephone service'' (POTS).
5. Discussion. In this 1st R&O, we interpret the SRP to cover
facilities-based broadband Internet access and interconnected VoIP. Our
analysis first interprets the SRP to establish a legal framework for
assessing services under CALEA, explaining the basis for all statutory
interpretations that inform this framework. Next, we apply this
framework to providers of facilities-based broadband Internet access
services and interconnected VoIP services. In each case, we find that
these providers are subject to CALEA under the SRP. We then discuss the
scope of our actions today and the relationship of these actions to the
Commission's efforts to resolve a number of outstanding issues related
to CALEA, such as assistance capability requirements, compliance,
enforcement, identification of future services and entities subject to
CALEA, and cost-related matters.
6. Legal Framework. In this section, we explain how CALEA's SRP
requires us to determine that some providers are subject to CALEA even
if they are not telecommunications carriers as defined in the
Communications Act. We further explain the relationship between the SRP
and CALEA's exclusion for information services. Because the text of
CALEA does not provide unambiguous direction, we consider the structure
and history of the relevant provisions, including Congress's stated
purposes, and interpret the statute in a manner that most faithfully
implements Congress's intent. We conclude, as we indicated in the NPRM,
that the terms ``telecommunications carrier'' and ``information
services'' in CALEA cannot be interpreted identically to the way those
terms have been interpreted under the Communications Act in light of
the statutory text as well as Congress's intent and purpose in enacting
CALEA.
7. CALEA Definition of ``Telecommunications Carrier.'' We affirm
our tentative conclusion that Congress intended the scope of CALEA's
definition of ``telecommunications carrier'' to be more inclusive than
the similar definition of ``telecommunications carrier'' in the
Communications Act. Critically, while certain portions of the
definition are the same in both statutes, CALEA's SRP ``has no
analogue'' in the Communications Act, thus rendering CALEA's definition
of ``telecommunications carrier'' broader than that found in the
Communications Act. The SRP directs the Commission to deem certain
providers to be telecommunications carriers for CALEA purposes, whether
or not they satisfy the definition of telecommunications carrier in
sections 102(8)(A) and 102(8)(B)(i). The SRP reflects Congress's intent
to ``preserve the government's ability to * * * intercept
communications that use advanced technologies such as digital or
wireless transmission.'' Under the SRP, a telecommunications carrier is
``a person or entity engaged in providing wire or electronic
communication switching or transmission service to the extent that the
Commission finds that such service is a replacement for a substantial
portion of the local telephone exchange service and that it is in the
public interest to deem such a person or entity to be a
telecommunications carrier for purposes of [CALEA].''
8. The SRP contains three components, each of which must be
satisfied before the Commission can deem a person or entity a
telecommunications carrier for purposes of CALEA. We address each of
these components in turn. First, the SRP requires that an entity be
``engaged in providing wire or electronic communication switching or
transmission service.'' In the NPRM, we interpreted the term
``switching'' in this phrase to include ``routers, softswitches, and
other equipment that may provide addressing and intelligence functions
for packet-based communications to manage and direct the communications
along to their intended destinations.'' We affirm this reading of the
statute, which has support in the record. We disagree with commenters
who claim that the term ``switching'' as used by Congress in 1994 did
not contemplate routers and softswitches, and thus suggest that the
interpretation of this term must forever be limited to the function as
it was commonly understood in 1994, namely circuit switching in the
narrowband PSTN. Our decision today is reinforced by judicial precedent
that has found CALEA to apply to certain packet-switched services.
Moreover, limiting the interpretation of ``switching'' to circuit-
switched technology would effectively eliminate any ability the
Commission may have to extend CALEA obligations under the SRP to
service providers using advanced digital technologies, in direct
contravention of CALEA's stated purpose.
9. Second, the SRP requires that the service provided be ``a
replacement for a substantial portion of the local telephone exchange
service.'' We conclude that this requirement is satisfied if a service
replaces any significant part of an individual subscriber's
functionality previously provided via circuit-switched local telephone
exchange service. This interpretation of an ambiguous statutory
provision is most consistent with the language of section
102(8)(B)(ii), the express purpose of CALEA, and its legislative
history. Congress did not enact language consistent with an
interpretation offered by some commenters that would require the
widespread use of a service before the SRP may be triggered. Instead,
the SRP's phrase ``substantial portion of the local telephone exchange
service'' indicates that the appropriate test is a functional one. It
is triggered when a service replaces a portion of traditional telephone
service, i.e., all or some of the components, or functions, of the
service. Because the statutory phrase includes the word
``substantial,'' we will require the functions being replaced to be a
significant or substantial function of traditional telephone service.
10. As we explained in the NPRM, the legacy local telephone
exchange network served two distinct purposes at the time CALEA was
enacted: it provided POTS, which enabled customers to make telephone
calls to other customers within a defined local service area; and it
was the primary, if not the only, conduit (i.e., transmission facility)
used to access many non-local exchange services such as long distance
services, enhanced services, and the Internet. The legislative history
indicates that Congress intended CALEA to cover both the ability to
``make, receive and direct calls'' (i.e., the POTS functionality) and
the transmission facilities that provide access to other services
(i.e., the access conduit functionality). In 1994, this transmission
function was commonly provided by dial-up Internet access, which shows
that Congress did not mean to limit CALEA's scope to voice service
alone. We therefore agree with DOJ that the language ``substantial
portion of the local telephone exchange service'' includes both the
POTS service and the transmission conduit functionality provided by
local telephone exchange service in 1994. Commenters have not persuaded
us otherwise.
11. The SRP's third component requires that the Commission find
that ``it is in the public interest to deem * * * a person or entity to
be a telecommunications carrier for purposes of [CALEA]'' once that
entity has met the first and second components of the SRP. We sought
comment in the NPRM
[[Page 59666]]
on how to define the ``public interest'' for purposes of CALEA, as the
statute does not explicitly define the term. We noted that the House
Report specifically identified three factors for the Commission to
consider, at a minimum, in making its public interest determination
under the SRP: whether deeming an entity a telecommunications carrier
would ``promote competition, encourage the development of new
technologies, and protect public safety and national security.'' Based
on the record before us, we conclude that it is appropriate to rely
primarily on these three factors when making our public interest
determination for purposes of the SRP. We find that consideration of
these three factors balances the goals of competition and innovation
with the needs of law enforcement.
12. CALEA Definition of ``Information Services.'' As we explained
in the NPRM, the treatment of information services under CALEA is
different from the treatment such services have been afforded under the
Communications Act. In keeping with the legislative history of the
Communications Act, the Commission interprets that Act's definitions of
``telecommunications service'' and ``information service'' to be
mutually exclusive. Moreover, because the definition of
``telecommunications service'' focuses on the character of a provider's
``offering * * * to the public,'' the Commission has concluded that the
classification of a particular service as a telecommunications service
or an information services ``turns on the nature of the functions that
the end user is offered.'' Additionally, the Communications Act's
definition of ``telecommunications'' ``only includes transmissions that
do not alter the form or content of the information sent,'' a
definition that the Commission has found to exclude Internet access
services, which ``alter the format of information through computer
processing applications.'' For these reasons, the Commission has
concluded that a single entity offering an integrated service combining
basic telecommunications transmission with certain enhancements,
specifically ``capabilities for generating, acquiring, storing,
transforming, processing, retrieving, utilizing, or making available
information,'' offers only an information service, and not a
telecommunications service, for purposes of the Communications Act if
the telecommunications and information services are sufficiently
intertwined. In other words, the Commission does not recognize the
telecommunications component of an information service as a
telecommunications service under the Communications Act.
13. In contrast with the Communications Act, CALEA does not define
or utilize the term ``telecommunications service,'' it does not adopt
the Communications Act's narrow definition of ``telecommunications,''
and it does not construct a definitional framework in which the
regulatory treatment of an integrated service depends on its
classification into one of two mutually exclusive categories, i.e.,
telecommunications service or information service. As a result,
structural and definitional features of the Communications Act that
play a critical role in drawing the Act's regulatory dividing line
between telecommunications service and information service, and that
undergird the Commission's resulting classification of integrated
broadband Internet access service as solely an information service for
purposes of the Communications Act, are absent from CALEA. Unlike the
Communications Act, CALEA's ``overall statutory scheme'' does not
require the Commission to classify an integrated service offering as
solely a telecommunications service or solely an information service
depending on ``the nature of the functions that the end user is
offered,'' and thus the classification of broadband Internet access
services under the Communications Act is not controlling under CALEA.
14. The text of the ``information services'' definition is entirely
consistent with this interpretive approach. CALEA defines ``information
services'' as the offering of a capability for manipulating and storing
information ``via telecommunications,'' but the statutory definition
does not resolve the question whether the telecommunications
functionality used to access that capability itself falls within the
information service category. Under the Communications Act's similar
definition of information service, we have resolved that ambiguity by
concluding that the telecommunications component of an integrated
information service offering falls within the information service
category, but that result is not compelled by the text of CALEA, and
thus the Act leaves the Commission free to resolve the definitional
ambiguity as appropriate in light of CALEA's purposes and the public
interest, without being bound by the approach followed under the
Communications Act.
15. We also reach that same conclusion by a separate, and
independent, route. CALEA excludes from its definition of
telecommunications carrier ``persons or entities insofar as they are
engaged in providing information services,'' and the definition of
information services in CALEA is similar to the definition in the
Communications Act. The SRP, however, adds a third category of services
to the mix. A provider of communication switching or transmission
service that is not a telecommunications service under the
Communications Act is nonetheless deemed to be a telecommunications
carrier under CALEA if the Commission finds that the service replaces a
substantial portion of local telephone exchange service and it is in
the public interest to treat the provider as a telecommunications
carrier. To give significance to the SRP, this new category of services
must include some aspects of services that may be ``information
services'' under the Communications Act. An ``irreconcilable tension''
would occur if the Commission rendered Congress's deliberate extension
of CALEA's requirements to providers satisfying the SRP insignificant
by simply applying its Communications Act interpretation of
``information services'' to CALEA. Consequently, to resolve that
tension in a manner that the Commission determines best reflects
Congressional intent under CALEA as well as the text of the statute, a
service classified as an ``information service'' under the
Communications Act may not, in all respects, be classified as an
``information service'' under CALEA.
16. In addition to constituting the most reasonable construction of
the statutory text, this conclusion is further bolstered by an
examination of the legislative history. The House Report's discussion
of information services and information service providers for CALEA
purposes pertains only to the enhancements to the transmission
capability underlying the service, that is, the computing capabilities
that transform the service from a ``telecommunications service'' under
the Communications Act and the corresponding Commission rules into an
``information service.'' For example, in discussing privacy concerns
and the scope of CALEA, the House Report indicates that ``electronic
mail providers, on-line service providers, and Internet service
providers are not subject to CALEA.'' The House Report goes on to
indicate, however, that while the storage of an e-mail message falls
within CALEA's Information Services Exclusion, the transmission of an
e-mail
[[Page 59667]]
message is subject to CALEA. Similarly, the House Report indicates that
a portion of voice mail service is also covered by CALEA: ``the
`redirection' of a voice mail message is covered by CALEA, while the
storage of the message is not.'' If an information service for purposes
of CALEA mirrored the definition and treatment of an information
service under the Communications Act, CALEA would never have been able
to reach the transmission of all e-mails or voice mails even when CALEA
was enacted.
17. That conclusion is further supported by CALEA's structure.
CALEA establishes a general rule that telecommunications carriers
(including those covered by the SRP) are subject to CALEA's assistance
capability requirements. Information services are an exception to that
general rule. It is a well recognized principle of statutory
construction that ``[w]here a general provision in a statute has
certain limited exceptions, all doubts should be resolved in favor of
the general provision rather than the exceptions.'' Accordingly, it is
appropriate to give the Information Services Exclusion a narrow
construction in order to give full effect to CALEA's general rule.
18. We thus find that the classification of a service as an
information service under the Communications Act does not necessarily
compel a finding that the service falls within CALEA's Information
Service Exclusion. Decisions about the applicability of CALEA must be
based on CALEA's definitions alone, not on the definitions in the
Communications Act. Equally important, the classification of a service
provider as a telecommunications carrier under CALEA's SRP does not
limit the Commission's options for classifying that provider or service
under the Communications Act. In the sections below, we apply this
legal framework to providers of facilities-based broadband Internet
access and interconnected VoIP services.
19. Applicability of CALEA to Broadband Internet Access Services.
In this section, we find that facilities-based providers of any type of
broadband Internet access service, including but not limited to
wireline, cable modem, satellite, wireless, fixed wireless, and
broadband access via powerline are subject to CALEA. In finding these
providers to be subject to CALEA under the SRP, we reiterate that we do
not disturb the Commission's prior decisions that CALEA unambiguously
applies to all ``common carriers offering telecommunications services
for sale to the public,'' as so classified under the Communications
Act. Thus, to the extent that any facilities-based broadband Internet
access service provider chooses to offer such service on a common
carrier basis, that provider is subject to CALEA pursuant to section
102(8)(A), the Common Carrier Provision.
20. Applying the legal framework set forth above, we determine that
facilities-based broadband Internet access providers satisfy each of
the three prongs of the SRP: (1) They are providing a switching or
transmission functionality; (2) this functionality is a replacement for
a substantial portion of the local telephone exchange service,
specifically, the portion used for dial-up Internet access; and (3)
public interest factors weigh in favor of subjecting broadband Internet
access services to CALEA.
21. Broadband Internet Access Service Providers Are
``Telecommunications Carriers'' Under CALEA: Broadband Internet Access
Service Includes Switching or Transmission. We find that facilities-
based broadband Internet access service providers are ``engaged in
providing wire or electronic communication switching or transmission
service'' and therefore meet the first prong of the SRP. As discussed
above, we interpret the ``switching or transmission'' component of the
SRP broadly to capture not only transmission or transport capabilities,
but also new packet-based equipment and functionalities that direct
communications to their intended destinations. No commenter suggests
that facilities-based broadband Internet access providers do not
provide a transmission or transport function. Indeed, commenters
providing broadband Internet access service today describe the
underlying transport component of their service as ``switching and
forwarding data.''
22. Broadband Internet Access Service Replaces a Substantial
Portion of the Local Telephone Exchange Service. We next conclude that
facilities-based broadband Internet access service providers provide a
replacement for a substantial portion of the local telephone exchange
service, specifically, the portion of local telephone exchange service
that provides subscribers with dial-up Internet access capability.
Broadband Internet access service unquestionably ``replaces'' a portion
of the functionality that the traditional local telephone exchange
service provides--namely, the ability to access the Internet. CALEA's
legislative history supports our conclusion that broadband Internet
access service was intended to be covered by CALEA, as are both dial-up
and common carrier DSL transport services. That history explains the
distinction between the portion of e-mail service that was subject to
CALEA (a service that was accessible only over the Internet) and the
portion that was not. The only way that the ``transmission of an E-mail
message'' could have been captured under CALEA in 1994 was through the
dial-up facilities and capabilities of narrowband local telephone
exchange service. Thus, to the extent that dial-up capabilities are
``replaced'' today by broadband Internet access service, we ensure that
the ``transmission of an E-mail message'' continues to be subject to
CALEA by finding that the SRP covers the transmission component of
broadband Internet access service.
23. Public Interest Factors Weigh in Favor of Subjecting Broadband
Internet Access Service to CALEA. We further find that it is in the
public interest to deem facilities-based broadband Internet access
service providers to be ``telecommunications carriers'' for purposes of
CALEA under the SRP. The public interest factors that we consider in
reaching this determination--the effect on competition, the development
and provision of new technologies and services, and public safety and
national security--on balance, support this finding.
24. One of the cornerstones of the Commission's broadband policy is
achieving the goal of developing a consistent regulatory framework
across all broadband platforms by treating providers in the same manner
with respect to broadband services providing similar functionality.
Because all facilities-based providers of broadband Internet access
services will be covered by CALEA, our finding today will have no
skewing effect on competition. In addition, covering all broadband
Internet access service providers prevents migration of criminal
activity onto less regulated platforms.
25. We further determine that our actions today will not hinder the
development of new services and technologies. While our action today
brings much needed certainty to the application of CALEA to the
development of new services and technologies, it does not favor any
particular technology over another. Furthermore, nothing in this item
will substantially change the deployment incentives currently faced by
providers. Broadband Internet access service providers today are
already subject to a number of electronic surveillance statutes that
compel their cooperation with law enforcement agencies. In
[[Page 59668]]
addition, it has been over a year since the Commission issued its
tentative conclusion that broadband Internet access service providers
would be covered by CALEA. During that time, we have seen an increase
in broadband build-out, undermining any arguments that development of
these systems would be stifled. In contrast, many commenters have
indicated they are currently cooperating with law enforcement agencies
to provide CALEA-like capabilities today.
26. The overwhelming importance of CALEA's assistance capability
requirements to law enforcement efforts to safeguard homeland security
and combat crime weighs heavily in favor of the application of CALEA
obligations to all facilities-based broadband Internet access service
providers. It is clearly not in the public interest to allow terrorists
and criminals to avoid lawful surveillance by law enforcement agencies
by using broadband Internet access services as a substitute for dial-up
service.
27. Finally, in finding CALEA's SRP to cover facilities-based
providers of broadband Internet access service, we conclude that
establishments that acquire broadband Internet access service from a
facilities-based provider to enable their patrons or customers to
access the Internet from their respective establishments are not
considered facilities-based broadband Internet access service providers
subject to CALEA under the SRP. We note, however, that the provider of
underlying facilities to such an establishment would be subject to
CALEA, as discussed above. Furthermore, providers of Personal Area
Networks (e.g., cordless phones, PDAs, home gateways) are not intended
to be covered by our actions today. We find that these services are
akin to private networks, which are excluded from CALEA requirements.
28. CALEA's Information Services Exclusion Does Not Apply to
Broadband Internet Access Providers. We find that providers of
broadband Internet access service are not relieved of CALEA obligations
as a result of CALEA's Information Services Exclusion. As we have
noted, our interpretation of the term information services in CALEA
differs from our interpretation of that term in the Communications Act.
Thus, the fact that broadband Internet access service may be classified
as an information service under the Communications Act does not
determine its classification for CALEA purposes. The appropriate focus
of our analysis must be on the meaning of the term in CALEA, and for
that, as we have explained, we look to the text of CALEA and its
legislative history for guidance. As noted above, the legislative
history indicates that under CALEA, telecommunications components are
separable for regulatory purposes from information service components
within a single service.
29. Our interpretation of the relationship between information
services under the Communications Act and the Information Services
Exclusion under CALEA does not eviscerate the Information Services
Exclusion, as certain commenters claim. Rather, this approach gives
meaning to the Information Services Exclusion, as intended by Congress,
while reconciling the fact that Congress included the SRP specifically
to empower the Commission to bring services such as broadband Internet
access within CALEA's reach if appropriate. A facilities-based
broadband Internet access service provider continues to have no CALEA
obligations with respect to, for example, the storage functions of its
e-mail service, its web-hosting and DNS lookup functions or any other
ISP functionality of its Internet access service. It is only the
``switching and transmission'' component of its service that is subject
to CALEA under our finding today.
30. Applicability of CALEA to VoIP Services. We conclude that CALEA
applies to providers of ``interconnected VoIP services,'' which include
those VoIP services that: (1) Enable real-time, two-way voice
communications; (2) require a broadband connection from the user's
location; (3) require IP-compatible customer premises equipment; and
(4) permit users to receive calls from and terminate calls to the PSTN.
We find that providers of interconnected VoIP services satisfy CALEA's
definition of ``telecommunications carrier'' under the SRP and that
CALEA's Information Services Exclusion does not apply to interconnected
VoIP services. To be clear, a service offering is ``interconnected
VoIP'' if it offers the capability for users to receive calls from and
terminate calls to the PSTN; the offering is covered by CALEA for all
VoIP communications, even those that do not involve the PSTN.
Furthermore, the offering is covered regardless of how the
interconnected VoIP provider facilitates access to and from the PSTN,
whether directly or by making arrangements with a third party.
31. In reaching our conclusion, we abandon the distinction the NPRM
drew between ``managed'' and ``non-managed'' VoIP services as the
dividing line between VoIP services that are covered by CALEA and those
that are not. The record has overwhelmingly convinced us that this
distinction is unadministrable; even DOJ expressed an openness to a
different way of identifying those VoIP services that CALEA covers. We
find that using ``interconnected VoIP services'' to define the category
of VoIP services that are covered by CALEA provides a clearer, more
easily identifiable distinction that is consistent with recent
Commission orders addressing the appropriate regulatory treatment of
IP-enabled services. Interconnected VoIP services today include many of
the types of VoIP offerings that DOJ's Petition indicates should be
covered by CALEA, and is thus responsive to DOJ's needs at this time.
32. Interconnected VoIP Providers Are ``Telecommunications
Carriers'' Under CALEA: Interconnected VoIP Includes Switching or
Transmission. We find that providers of interconnected VoIP satisfy the
three prongs of the SRP under CALEA's definition of
``telecommunications carrier.'' First, these providers are ``engaged in
providing wire or electronic communication switching or transmission
services.'' As we have explained, we interpret the term ``switching''
in the CALEA definition of ``telecommunications carrier'' to include
``routers, softswitches, and other equipment that may provide
addressing and intelligence functions for packet-based communications
to manage and direct the communications along to their intended
destinations.'' Interconnected VoIP service providers use these
technologies to enable their subscribers to make, receive, and direct
calls. The record reflects that any VoIP provider that is
interconnected to the PSTN ``must necessarily'' use a router or other
server to do so. Thus, even VoIP providers that do not own their own
underlying transmission facilities nonetheless are engaged in providing
``switching'' services to their customers.
33. Interconnected VoIP Replaces a Substantial Portion of the Local
Telephone Exchange Service. Second, interconnected VoIP satisfies the
``replacement for a substantial portion of the local telephone exchange
service'' prong of the SRP because it replaces the legacy POTS service
functionality of traditional local telephone exchange service. As we
explained in our recent VoIP E911 Order (70 FR 37273, June 29, 2005),
customers who purchase interconnected VoIP service receive a service
that ``enables a customer to do everything (or nearly everything) the
customer could do using an analog telephone.'' We determine that a
service
[[Page 59669]]
that is increasingly used to replace analog voice service is exactly
the type of service that Congress intended the SRP to reach.
34. Public Interest Factors Weigh in Favor of Subjecting
Interconnected VoIP Providers to CALEA. Finally, we find that it is in
the public interest to deem an interconnected VoIP service provider a
telecommunications carrier for purposes of CALEA. In reaching this
conclusion, we examine the three prongs of the public interest analysis
that the NPRM proposed to consider: promotion of competition,
encouragement of the development of new technologies, and protection of
public safety and national security. These three factors compel a
finding that CALEA should apply to interconnected VoIP. First, our
finding today will not have a deleterious effect on competition because
all providers of interconnected VoIP will be covered by CALEA. Singling
out certain technologies or categories of interconnected VoIP providers
would be more harmful to competition than applying CALEA requirements
to all providers of interconnected VoIP services, as we do today.
Second, we are confident that our decision today will not discourage
the development of new technologies and services. Interconnected VoIP
providers are already obligated to cooperate with law enforcement
agencies under separate electronic surveillance laws. We have seen no
evidence that these requirements have deterred the development of new
VoIP technologies and services in the period of time since the
Commission issued its tentative conclusion that some types of VoIP
service are covered by CALEA. Instead, we have seen an increasing
effort on the part of many interconnected VoIP providers to develop
CALEA capabilities, and the record indicates that VoIP providers are
already modifying their operations to ensure that they are able to
comply with CALEA. Industry solutions appear to be readily available.
Finally, the protection of public safety and national security compels
us to apply CALEA to interconnected VoIP service providers. Excluding
interconnected VoIP from CALEA coverage could significantly undermine
law enforcement's surveillance efforts. Further, broadband Internet
access providers alone might not have reasonable access to all of the
information that law enforcement needs. Specifically, call management
information (such as call forwarding and conference call features) and
call set-up information (such as real-time speed dialing information
and post-dial digit extraction information) are unlikely to be
reasonably available to a broadband Internet access provider. The
record thus indicates that the broadband Internet access provider and
the interconnected VoIP provider must both be covered by CALEA in order
to ensure that law enforcement agencies' surveillance needs are met.
35. CALEA's Information Services Exclusion Does Not Apply to
Interconnected VoIP. We find that interconnected VoIP service is not
subject to the Information Services Exclusion in CALEA. The regulatory
classification of interconnected VoIP under the Communications Act is
not determinative with regard to this inquiry. Indeed, the Commission
has yet to determine the statutory classification of providers of
interconnected VoIP for purposes of the Communications Act, but nowhere
does CALEA require such a determination before analyzing a service
provider under the SRP. Instead, the appropriate focus is on the
meaning of the term in CALEA. As we have explained, CALEA's legislative
history contains much discussion of ``information services,'' but not
once did Congress contemplate that any type of voice service would fall
into that category. Most significantly, Congress explicitly
distinguished between ``information services'' that are not covered by
CALEA and ``services or facilities that enable the subscriber to make,
receive or direct calls,'' which are covered. Congress intended the
capability to make what appear to the consumer to be ordinary voice
calls--regardless of the technology involved--to fall outside the
category of excluded information services under CALEA.
36. Scope of Commission Action. Our action in this 1st R&O is
limited to establishing that CALEA applies to facilities-based
broadband Internet access providers and interconnected VoIP service
providers. The NPRM raised important questions regarding the ability of
broadband Internet access providers and VoIP providers to provide all
of the capabilities that are required by section 103 of CALEA,
including what those capability requirements mean in a broadband
environment. The NPRM also sought comment on a variety of issues
relating to identification of future services and entities subject to
CALEA, compliance extensions, cost recovery, and enforcement. We will
address all of these matters in a future order. Because we acknowledge
that providers need a reasonable amount of time to come into compliance
with all relevant CALEA requirements, we establish a deadline of 18
months from the effective date of this 1st R&O, by which time newly
covered entities and providers of newly covered services must be in
full compliance.
Final Paperwork Reduction Act Analysis
37. This document does not contain proposed information
collection(s) subject to the Paperwork Reduction Act of 1995 (PRA),
Public Law 104-13. In addition, therefore, it does not contain any new
or modified ``information collection burden for small business concerns
with fewer than 25 employees,'' pursuant to the Small Business
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C.
3506(c)(4).
Final Regulatory Flexibility Certification
38. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated in the NPRM in this proceeding. The Commission sought
written public comment on the proposals in the NPRM, including comment
on the IRFA. This Final Regulatory Flexibility Certification (FRFC) is
limited to the matters raised in the NPRM relating to the applicability
of CALEA to providers of broadband Internet access services and VoIP
services. The present FRFC addresses comments on the IRFA concerning
only those issues and conforms to the RFA.
1. Need for, and Objectives of, the Rules
39. Advances in technology, most notably the introduction of
digital transmission and processing techniques and the proliferation of
wireless and Internet services such as broadband Internet access
services and VoIP, have challenged the ability of the law enforcement
agencies (LEAs) to conduct lawful surveillance. In light of these
difficulties, the Department of Justice, the Federal Bureau of
Investigation, and the Drug Enforcement Administration (collectively,
DOJ) filed a joint petition for expedited rulemaking in March 2004. In
its petition, DOJ asked the Commission immediately to declare that
broadband Internet access services and VoIP services are covered by
CALEA.
40. In this 1st R&O, we conclude that facilities-based broadband
Internet access providers and providers of interconnected VoIP service
are subject to CALEA as telecommunications carriers under CALEA's
Substantial Replacement Provision (SRP). Because we acknowledge that
providers need a reasonable amount of time to come into compliance with
all relevant CALEA
[[Page 59670]]
requirements, we establish a deadline of 18 months from the effective
date of the 1st R&O, by which time newly covered entities and providers
of newly covered services must be in full compliance. This 1st R&O is
the first critical step needed to apply CALEA obligations to new
technologies and services that are increasingly relied upon by the
American public to meet their communications needs.
2. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA
41. In this section, we respond to commenters who filed directly in
response to the IRFA. To the extent we received comments raising
general small business concerns during this proceeding, those comments
are discussed throughout the 1st R&O and are also summarized in part E,
below.
42. The Office of Advocacy, U.S. Small Business Administration
(SBA) and the National Telecommunications Cooperative Association
(NTCA) filed comments directly in response to the IRFA. We note that
both commenters raise various concerns about issues that were raised in
the NPRM in this proceeding but are not addressed in this 1st R&O. In
this FRFC, we address their comments only to the extent that they
relate to the applicability of CALEA's SRP to broadband Internet access
and VoIP service, as all other concerns will be addressed in the
subsequent order.
43. We reject SBA's argument that the Commission failed to analyze
the compliance requirements and impacts on small carriers in the IRFA.
The SBA argues that this failure made it difficult for small entities
to comment on possible ways to minimize any impact. Although the
Commission did not list the exact costs, in the NPRM we identified all
the potential carriers that may be required to be CALEA compliant under
the SRP, described in great detail what these carriers would be
required to do if they were subject to CALEA, and requested comment on
how the Commission could address the needs of small businesses. Indeed,
far from discouraging small entities from participating, the NPRM
elicited extensive comment on issues affecting small businesses.
Therefore, we believe that small entities received sufficient notice of
the implications of CALEA compliance addressed in today's 1st R&O, and
a revised IRFA is not necessary.
44. We also reject NTCA and SBA's contention that the Commission
failed to include in the IRFA significant alternatives to minimize
burdens on small entities. First, NTCA argues that the Commission
failed to identify in the IRFA that small entities may be exempted
under the SRP's public interest clause. In the NPRM, however, we asked
for comment as to whether there are discrete groups of entities for
which the public interest may not be served by including them under the
SRP. We noted that small businesses that provide wireless broadband
Internet access to rural areas may be one example of such a discrete
group. In response to the NPRM, several small carriers filed comments
claiming that the public interest would not be served by subjecting
these providers to CALEA under the SRP. Second, SBA claims the
Commission failed to identify in the IRFA the option of granting an
extended transition period for small carriers. In the NPRM, however, we
specifically invited comment from all entities on the appropriate
amount of time to give newly covered entities to comply with CALEA.
While we recognize that we did not specifically list in the IRFA the
potential exclusion of small businesses under the SRP's public interest
clause or the option of extending the time period for small carriers,
the IRFA in this proceeding combined with the NPRM appropriately
identified all the ways in which the Commission could lessen the
regulatory burdens on small businesses in compliance with our RFA
obligations.
3. Description and Estimate of the Number of Small Entities to Which
Rules Will Apply
45. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated in the NPRM in this proceeding. The Commission sought
written public comment on the proposals in the NPRM, including comment
on the IRFA. This present FRFC is limited to the matters raised in the
NPRM relating to the applicability of Communications Assistance for Law
Enforcement Act (CALEA) to providers of broadband Internet access
services and VoIP services. The present FRFC addresses comments on the
IRFA concerning only those issues and conforms to the RFA.
a. Telecommunications Service Entities
46. Wireline Carriers and Service Providers. We have included small
incumbent local exchange carriers in this present RFA analysis. As
noted above, a ``small business'' under the RFA is one that, inter
alia, meets the pertinent small business size standard (e.g., a
telephone communications business having 1,500 or fewer employees), and
``is not dominant in its field of operation.'' The SBA's Office of
Advocacy contends that, for RFA purposes, small incumbent local
exchange carriers are not dominant in their field of operation because
any such dominance is not ``national'' in scope. We have therefore
included small incumbent local exchange carriers in this RFA analysis,
although we emphasize that this RFA action has no effect on Commission
analyses and determinations in other, non-RFA contexts.
47. Incumbent Local Exchange Carriers (LECs). Neither the
Commission nor the SBA has developed a small business size standard
specifically for incumbent local exchange services. The appropriate
size standard under SBA rules is for the category Wired
Telecommunications Carriers. Under that size standard, such a business
is small if it has 1,500 or fewer employees. According to Commission
data, 1,303 carriers have reported that they are engaged in the
provision of incumbent local exchange services. Of these 1,303
carriers, an estimated 1,020 have 1,500 or fewer employees and 283 have
more than 1,500 employees. Consequently, the Commission estimates that
most providers of incumbent local exchange service are small businesses
that may be affected by our action. In addition, limited preliminary
census data for 2002 indicate that the total number of wired
communications carriers increased approximately 34 percent from 1997 to
2002.
48. Competitive Local Exchange Carriers, Competitive Access
Providers (CAPs), ``Shared-Tenant Service Providers,'' and ``Other
Local Service Providers.'' Neither the Commission nor the SBA has
developed a small business size standard specifically for these service
providers. The appropriate size standard under SBA rules is for the
category Wired Telecommunications Carriers. Under that size standard,
such a business is small if it has 1,500 or fewer employees. According
to Commission data, 769 carriers have reported that they are engaged in
the provision of either competitive access provider services or
competitive local exchange carrier services. Of these 769 carriers, an
estimated 676 have 1,500 or fewer employees and 93 have more than 1,500
employees. In addition, 12 carriers have reported that they are
``Shared-Tenant Service Providers,'' and all 12 are estimated to have
1,500 or fewer employees. In addition, 39 carriers have reported that
they are ``Other Local Service Providers.'' Of the 39, an estimated 38
have 1,500 or fewer employees and one has more than 1,500 employees.
Consequently, the
[[Page 59671]]
Commission estimates that most providers of competitive local exchange
service, competitive access providers, ``Shared-Tenant Service
Providers,'' and ``Other Local Service Providers'' are small entities
that may be affected by our action. In addition, limited preliminary
census data for 2002 indicate that the total number of wired
communications carriers increased approximately 34 percent from 1997 to
2002.
49. Payphone Service Providers (PSPs). Neither the Commission nor
the SBA has developed a small business size standard specifically for
payphone services providers. The appropriate size standard under SBA
rules is for the category Wired Telecommunications Carriers. Under that
size standard, such a business is small if it has 1,500 or fewer
employees. According to Commission data, 654 carriers have reported
that they are engaged in the provision of payphone services. Of these,
an estimated 652 have 1,500 or fewer employees and two have more than
1,500 employees. Consequently, the Commission estimates that the
majority of payphone service providers are small entities that may be
affected by our action. In addition, limited preliminary census data
for 2002 indicate that the total number of wired communications
carriers increased approximately 34 percent from 1997 to 2002.
50. Interexchange Carriers (IXCs). Neither the Commission nor the
SBA has developed a small business size standard specifically for
providers of interexchange services. The appropriate size standard
under SBA rules is for the category Wired Telecommunications Carriers.
Under that size standard, such a business is small if it has 1,500 or
fewer employees. According to Commission data, 316 carriers have
reported that they are engaged in the provision of interexchange
service. Of these, an estimated 292 have 1,500 or fewer employees and
24 have more than 1,500 employees. Consequently, the Commission
estimates that the majority of IXCs are small entities that may be
affected by our action. In addition, limited preliminary census data
for 2002 indicate that the total number of wired communications
carriers increased approximately 34 percent from 1997 to 2002.
51. Operator Service Providers (OSPs). Neither the Commission nor
the SBA has developed a small business size standard specifically for
operator service providers. The appropriate size standard under SBA
rules is for the category Wired Telecommunications Carriers. Under that
size standard, such a business is small if it has 1,500 or fewer
employees. According to Commission data, 23 carriers have reported that
they are engaged in the provision of operator services. Of these, an
estimated 20 have 1,500 or fewer employees and three have more than
1,500 employees. Consequently, the Commission estimates that the
majority of OSPs are small entities that may be affected by our action.
In addition, limited preliminary census data for 2002 indicate that the
total number of wired communications carriers increased approximately
34 percent from 1997 to 2002.
52. Prepaid Calling Card Providers. Neither the Commission nor the
SBA has developed a small business size standard specifically for
prepaid calling card providers. The appropriate size standard under SBA
rules is for the category Telecommunications Resellers. Under that size
standard, such a business is small if it has 1,500 or fewer employees.
According to Commission data, 89 carriers have reported that they are
engaged in the provision of prepaid calling cards. Of these, 88 are
estimated to have 1,500 or fewer employees and one has more than 1,500
employees. Consequently, the Commission estimates that all or the
majority of prepaid calling card providers are small entities that may
be affected by our action.
53. Wireless Telecommunications Service Providers. Below, for those
services subject to auctions, we note that, as a general matter, the
number of winning bidders that qualify as small businesses at the close
of an auction does not necessarily represent the number of small
businesses currently in service. Also, the Commission does not
generally track subsequent business size unless, in the context of
assignments or transfers, unjust enrichment issues are implicated.
54. Wireless Service Providers. The SBA has developed a small
business size standard for wireless firms within the two broad economic
census categories of ``Paging'' and ``Cellular and Other Wireless
Telecommunications.'' Under both SBA categories, a wireless business is
small if it has 1,500 or fewer employees. For the census category of
Paging, Census Bureau data for 1997 show that there were 1,320 firms in
this category, total, that operated for the entire year. Of this total,
1,303 firms had employment of 999 or fewer employees, and an additional
17 firms had employment of 1,000 employees or more. Thus, under this
category and associated small business size standard, the majority of
firms can be considered small. For the census category Cellular and
Other Wireless Telecommunications, Census Bureau data for 1997 show
that there were 977 firms in this category, total, that operated for
the entire year. Of this total, 965 firms had employment of 999 or
fewer employees, and an additional 12 firms had employment of 1,000
employees or more. Thus, under this second category and size standard,
the majority of firms can, again, be considered small. In addition,
limited preliminary census data for 2002 indicate that the total number
of paging providers decreased approximately 51 percent from 1997 to
2002. In addition, limited preliminary census data for 2002 indicate
that the total number of cellular and other wireless telecommunications
carriers increased approximately 321 percent from 1997 to 2002.
55. Cellular Licensees. The SBA has developed a small business size
standard for wireless firms within the broad economic census category
``Cellular and Other Wireless Telecommunications.'' Under this SBA
category, a wireless business is small if it has 1,500 or fewer
employees. For the census category Cellular and Other Wireless
Telecommunications firms, Census Bureau data for 1997 show that there
were 977 firms in this category, total, that operated for the entire
year. Of this total, 965 firms had employment of 999 or fewer
employees, and an additional 12 firms had employment of 1,000 employees
or more. Thus, under this category and size standard, the great
majority of firms can be considered small. Also, according to
Commission data, 437 carriers reported that they were engaged in the
provision of cellular service, Personal Communications Service (PCS),
or Specialized Mobile Radio (SMR) Telephony services, which are placed
together in the data. We have estimated that 260 of these are small,
under the SBA small business size standard.
56. Common Carrier Paging. The SBA has developed a small business
size standard for wireless firms within the broad economic census
category, ``Cellular and Other Wireless Telecommunications.'' Under
this SBA category, a wireless business is small if it has 1,500 or
fewer employees. For the census category of Paging, Census Bureau data
for 1997 show that there were 1,320 firms in this category, total, that
operated for the entire year. Of this total, 1,303 firms had employment
of 999 or fewer employees, and an additional 17 firms had employment of
1,000 employees or more. Thus, under this category and associated small
business size standard, the majority of
[[Page 59672]]
firms can be considered small. In the Paging Third Report and Order, we
developed a small business size standard for ``small businesses'' and
``very small businesses'' for purposes of determining their eligibility
for special provisions such as bidding credits and installment
payments. A ``small business'' is an entity that, together with its
affiliates and controlling principals, has average gross revenues not
exceeding $15 million for the preceding three years. Additionally, a
``very small business'' is an entity that, together with its affiliates
and controlling principals, has average gross revenues that are not
more than $3 million for the preceding three years. The SBA has
approved these small business size standards. An auction of
Metropolitan Economic Area licenses commenced on February 24, 2000, and
closed on March 2, 2000. Of the 985 licenses auctioned, 440 were sold.
Fifty-seven companies claiming small business status won. Also,
according to Commission data, 375 carriers reported that they were
engaged in the provision of paging and messaging services. Of those, we
estimate that 370 are small, under the SBA-approved small business size
standard.
57. Wireless Communications Services. This service can be used for
fixed, mobile, radiolocation, and digital audio broadcasting satellite
uses. The Commission established small business size standards for the
Wireless Communications Services (WCS) auction. A ``small business'' is
an entity with average gross revenues of $40 million for each of the
three preceding years, and a ``very small business'' is an entity with
average gross revenues of $15 million for each of the three preceding
years. The SBA has approved these small business size standards. The
Commission auctioned geographic area licenses in the WCS service. In
the auction, there were seven winning bidders that qualified as ``very
small business'' entities, and one that qualified as a ``small
business'' entity.
58. Wireless Telephony. Wireless telephony includes cellular,
Personal Communications Services (PCS), and Specialized Mobile Radio
(SMR) telephony carriers. As noted earlier, the SBA has developed a
small business size standard for ``Cellular and Other Wireless
Telecommunications'' services. Under that SBA small business size
standard, a business is small if it has 1,500 or fewer employees.
According to Commission data, 437 carriers reported that they were
engaged in the provision of wireless telephony. We have estimated that
260 of these are small under the SBA small business size standard.
59. Broadband Personal Communications Service. The broadband
Personal Communications Service (PCS) spectrum is divided into six
frequency blocks designated A through F, and the Commission has held
auctions for each block. The Commission defined ``small entity'' for
Blocks C and F as an entity that has average gross revenues of $40
million or less in the three previous calendar years. For Block F, an
additional classification for ``very small business'' was added and is
defined as an entity that, together with its affiliates, has average
gross revenues of not more than $15 million for the preceding three
calendar years.'' These standards defining ``small entity'' in the
context of broadband PCS auctions have been approved by the SBA. No
small businesses, within the SBA-approved small business size standards
bid successfully for licenses in Blocks A and B. There were 90 winning
bidders that qualified as small entities in the Block C auctions. A
total of 93 small and very small business bidders won approximately 40
percent of the 1,479 licenses for Blocks D, E, and F. On March 23,
1999, the Commission re-auctioned 347 C, D, E, and F Block licenses.
There were 48 small business winning bidders. On January 26, 2001, the
Commission completed the auction of 422 C and F Broadband PCS licenses
in Auction No. 35. Of the 35 winning bidders in this auction, 29
qualified as ``small'' or ``very small'' businesses. Subsequent events,
concerning Auction 35, including judicial and agency determinations,
resulted in a total of 163 C and F Block licenses being available for
grant.
b. Cable Operators
60. Cable and Other Program Distribution. This category includes
cable systems operators, closed circuit television services, direct
broadcast satellite services, multipoint distribution systems,
satellite master antenna systems, and subscription television services.
The SBA has developed small business size standard for this census
category, which includes all such companies generating $12.5 million or
less in revenue annually. According to Census Bureau data for 1997,
there were a total of 1,311 firms in this category, total, that had
operated for the entire year. Of this total, 1,180 firms had annual
receipts of under $10 million and an additional 52 firms had receipts
of $10 million or more but less than $25 million. Consequently, the
Commission estimates that the majority of providers in this service
category are small businesses that may be affected by the rules and
policies adopted herein.
61. Cable System Operators (Rate Regulation Standard). The
Commission has developed its own small business size standard for cable
system operators, for purposes of rate regulation. Under the
Commission's rules, a ``small cable company'' is one serving fewer than
400,000 subscribers nationwide. The most recent estimates indicate that
there were 1,439 cable operators who qualified as small cable system
operators at the end of 1995. Since then, some of those companies may
have grown to serve over 400,000 subscribers, and others may have been
involved in transactions that caused them to be combined with other
cable operators. Consequently, the Commission estimates that there are
now fewer than 1,439 small entity cable system operators that may be
affected by the rules and policies adopted herein.
62. Cable System Operators (Telecom Act Standard). The
Communications Act of 1934, as amended, also contains a size standard
for small cable system operators, which is ``a cable operator that,
directly or through an affiliate, serves in the aggregate fewer than 1
percent of all subscribers in the United States and is not affiliated
with any entity or entities whose gross annual revenues in the
aggregate exceed $250,000,000.'' The Commission has determined that
there are 67,700,000 subscribers in the United States. Therefore, an
operator serving fewer than 677,000 subscribers shall be deemed a small
operator, if its annual revenues, when combined with the total annual
revenues of all its affiliates, do not exceed $250 million in the
aggregate. Based on available data, the Commission estimates that the
number of cable operators serving 677,000 subscribers or fewer, totals
1,450. The Commission neither requests nor collects information on
whether cable system operators are affiliated with entities whose gross
annual revenues exceed $250 million, and therefore are unable, at this
time, to estimate more accurately the number of cable system operators
that would qualify as small cable operators under the size standard
contained in the Communications Act of 1934.
c. Internet Service Providers
63. Internet Service Providers. The SBA has developed a small
business size standard for Internet Service Providers (ISPs). ISPs
``provide clients access to the Internet and generally provide related
services such as web hosting, web page designing, and
[[Page 59673]]
hardware or software consulting related to Internet connectivity.''
Under the SBA size standard, such a business is small if it has average
annual receipts of $21 million or less. According to Census Bureau data
for 1997, there were 2,751 firms in this category that operated for the
entire year. Of these, 2,659 firms had annual receipts of under $10
million, and an additional 67 firms had receipts of between $10 million
and $24,999,999. Consequently, we estimate that the majority of these
firms are small entities that may be affected by our action. In
addition, limited preliminary census data for 2002 indicate that the
total number of Internet service providers increased approximately five
percent from 1997 to 2002.
4. Description of Projected Reporting, Recordkeeping and Other
Compliance Requirements
64. The 1st R&O requires all facilities-based broadband Internet
access providers and providers of interconnected VoIP service to be
CALEA compliant. Our decision today does not impose reporting or
recordkeeping requirements that would be subject to the Paperwork
Reduction Act. Pursuant to CALEA both small and large carriers must
design their equipment, facilities, and services to ensure that they
have the required surveillance capabilities. We note that a subsequent
order will address other important issues under CALEA, such as
compliance extensions and exemptions, cost recovery, identification of
future services and entities subject to CALEA, and enforcement.
5. Steps Taken To Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
65. The RFA requires an agency to describe any significant
alternatives that it has considered in reaching its proposed approach,
which may include (among others) the following four alternatives: (1)
The establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance or reporting requirements under the rule for small entities;
(3) the use of performance, rather than design, standards; and (4) an
exemption from coverage of the rule, or any part thereof, for small
entities.
66. In the 1st R&O, we conclude that facilities-based broadband
Internet access providers and providers of interconnected VoIP service
are ``telecommunications carriers'' under CALEA's SRP. In arriving at
these conclusions, the Commission first interprets the SRP to establish
a legal framework for assessing services under CALEA, explaining the
basis for all statutory interpretations that inform this framework. We
then apply this framework to providers of facilities-based broadband
Internet access services and interconnected VoIP services. The
Commission considered various alternatives, which it rejected or
accepted for the reasons set forth in the body of the 1st R&O. The
significant alternatives that commenters discussed and that we
considered in determining that these providers are ``telecommunications
carriers'' under CALEA's SRP are as follows.
67. Legal Framework. In the 1st R&O, we affirm our tentative
conclusion that Congress intended the scope of CALEA's definition of
telecommunications carrier to be more inclusive than the similar
definition of ``telecommunications carrier'' in the Communications Act.
In reaching this conclusion, we rejected arguments that the definition
of ``telecommunications carriers'' in CALEA is functionally identical
to the definition of that term in the Communications Act. While we
recognize that a broader interpretation may include small entities
under the definition, CALEA contains several differences that support
this broader interpretation of the term ``telecommunications carrier''
under CALEA. As noted above, the most significant difference is the
SRP, which ``has no analogue'' in the Communications Act.
68. The SRP applies only to entities ``engaged in providing wire or
electronic communication switching or transmission service.'' We
conclude that the term ``switching'' in this phrase includes ``routers,
softswitches, and other equipment that may provide addressing and
intelligence functions for packet-based communications to manage and
direct the communications along to their intended destinations.'' We
considered but rejected arguments that the term ``switching'' as used
by Congress in 1994 did not contemplate routers and softswitches. For
instance, some commenters argued that this term must forever be limited
to that function as it was commonly understood in 1994, namely circuit
switching in the narrowband PSTN. We believe that interpreting CALEA's
inclusion of the word ``switching'' to describe a function that
Congress intended to be covered--regardless of the specific technology
employed to perform that function--is the interpretation most
consistent with the purpose of the statute. The alternative approach
would effectively eliminate any ability the Commission may have to
extend CALEA obligations under the SRP to service providers using
advanced digital technologies, in direct contravention of CALEA's
stated purpose.
69. The SRP requires that the service provided be ``a replacement
for a substantial portion of the local telephone exchange service.'' We
affirmed our tentative conclusion that this requirement is satisfied if
a service replaces any significant part of an individual subscriber's
functionality previously provided via circuit-switched local telephone
exchange service. We considered various interpretations. For example,
we considered, but declined to adopt, an interpretation that would
require the service to be capable of replacing all of the
functionalities of local exchange service. Instead, we agree with DOJ
that the language ``substantial portion of the local telephone exchange
service'' includes both the POTS service and the transmission conduit
functionality provided by local telephone exchange service in 1994.
While our interpretation will most likely cover small entities,
commenters have not persuaded us to adopt a different interpretation.
70. The SRP also requires that the Commission find that ``it is in
the public interest to deem * * * a person or entity to be a
telecommunications carrier for purposes of [CALEA].'' We conclude that
the Commission will consider three factors in its public interest
analysis: (1) Promotion of competition; (2) encouragement of the
development of new technologies; and (3) protection of public safety
and national security. We declined to identify any other specific
public interest considerations, which we recognize might benefit small
telecommunications carriers.
71. We conclude, as we indicated in the NPRM, that the terms
``telecommunications carrier'' and ``information services'' in CALEA
cannot be interpreted identically to the way those terms have been
interpreted under the Communications Act in light of Congress's intent
and purpose in enacting CALEA. As explained above, we disagree with
commenters who argue that we should interpret the statute to narrow the
scope of services that are covered today to a more narrow group of
services than those covered when CALEA was enacted, particularly in
light of CALEA's stated purpose to ``preserve the government's ability
to * * * intercept communications that use advanced technologies such
as digital or wireless transmission.'' While
[[Page 59674]]
we recognize that small entities might benefit by an interpretation
that would narrow the scope of services subject to CALEA, we believe
that decisions about the applicability of CALEA must be based on
CALEA's definitions alone, not on the definitions in the Communications
Act.
72. Facilities-Based Broadband Internet Access Service Providers.
We apply our conclusions concerning the legal framework to providers of
facilities-based broadband Internet access services and find that these
providers are subject to CALEA under the SRP. In reaching this
decision, we considered the comments by small carriers, which generally
claimed that the public interest would not be served by subjecting
these providers to CALEA under the SRP. Based on our analysis here, we
decline to exclude any facilities-based broadband Internet access
providers from CALEA requirements at this time. We agree with DOJ that
these commenters have not provided sufficient evidence, identified the
particular carriers that should be exempted from CALEA's SRP, or
addressed law enforcement's needs. These telecommunications carriers
have several options under CALEA. We believe that these CALEA
provisions will safeguard small entities from any significant adverse
economic impacts of CALEA compliance.
73. Additionally, based on comments from these small carriers, we
adopt a Further Notice of Proposed Rulemaking (FNPRM), published
elsewhere in this issue, that seeks comment on what procedures the
Commission should adopt to implement CALEA's exemption provision, as
well as the appropriateness of requiring something less than full CALEA
compliance for certain classes or categories of providers, such as
small or rural entities. We also seek comment on the best way to impose
different compliance standards. We believe that the FNPRM will assist
the Commission in adopting streamlined exemption procedures, which will
ultimately benefit both large and small entities alike. The FNPRM is
also a concerted effort by the Commission to adopt any other rules that
will reduce CALEA burdens on small entities. We believe our approach
represents a reasonable accommodation for small carriers, and we
encourage these entities to file comments on the FNPRM to assist the
Commission in these efforts.
74. Interconnected VoIP Service. We apply our conclusions
concerning the legal framework to providers of interconnected VoIP
services and find that these providers are subject to CALEA under the
SRP. We considered but abandoned the distinction the NPRM drew between
``managed'' and ``non-managed'' VoIP services as the dividing line
between VoIP services that are covered by CALEA and those that are not.
The record convinced us that this distinction is unadministrable; even
DOJ expressed an openness to a different way of identifying those VoIP
services that CALEA covers. We believe that the alternative approach,
using ``interconnected VoIP services'' to define the category of VoIP
services that are covered by CALEA, provides a clearer, more easily
identifiable distinction that is consistent with recent Commission
orders addressing the appropriate regulatory treatment of IP-enabled
services.
75. As a result, certain VoIP service providers are not subject to
CALEA obligations imposed in today's 1st R&O. Specifically, the 1st R&O
does not apply to those entities not fully interconnected with the
PSTN. Because interconnecting with the PSTN can impose substantial
costs, we anticipate that many of the entities that elect not to
interconnect with the PSTN, and which therefore are not subject to the
rules adopted in today's 1st R&O, are small entities. Small entities
that provide VoIP services therefore also have some control over
whether they will have to be CALEA compliant. Small businesses may
still offer VoIP service without being subject to the rules adopted in
today's 1st R&O by electing not to provide an interconnected VoIP
service.
76. Scope of 1st R&O. Our action in the 1st R&O is limited to
establishing that CALEA applies to facilities-based broadband Internet
access providers and interconnected VoIP service providers. As noted
above, we will address in a subsequent order other important
outstanding issues under CALEA, such as compliance extensions and
exemptions, cost recovery, identification of future services and
entities subject to CALEA, and enforcement. The 1st R&O establishes a
deadline of 18 months from the effective date of the Order, by which
time newly covered entities and providers of newly covered services
must be in full compliance with CALEA. We considered various comments
advocating, for example, effective dates ranging from 12 months to 24
months. We also considered whether the Commission should grant
additional time for small carriers to become CALEA compliant. However,
as explained above, we find that 18 months is a reasonable time period
to expect all providers of facilities-based broadband Internet access
service and interconnected VoIP service to comply with CALEA. This
alternative represents a reasonable accommodation for small entities
and others, as these newly covered entities can begin planning to
incorporate CALEA compliance into their operations. Furthermore, this
approach will ensure that the appropriate parties become involved in
ongoing discussions among the Commission, law enforcement, and industry
representatives to develop standards for CALEA capabilities and
compliance.
77. Report to Congress: The Commission will send a copy of the 1st
R&O, including this FRFC, in a report to be sent to Congress and the
Government Accountability Office pursuant to the Congressional Review
Act. In addition, the Commission will send a copy of the 1st R&O,
including this FRFC, to the Chief Counsel for Advocacy of the SBA.
Ordering Clauses
78. Accordingly, it is ordered that pursuant to sections 1, 4(i),
7(a), 229, 301, 303, 332, and 410 of the Communications Act of 1934, as
amended, and section 102 of the Communications Assistance for Law
Enforcement Act, 18 U.S.C. 1001, the Report and Order in ET Docket No.
04-295 is adopted.
79. It is further ordered that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of this Report and Order, including the Final Regulatory
Flexibility Certification, to the Chief Counsel for Advocacy of the
Small Business Administration.
List of Subjects in 47 CFR Part 64
Broadband Internet access services, Interconnected voice over
Internet protocol services, Telecommunications, Telephone.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
Final Rules
0
For the reasons discussed in the preamble, the Federal Communications
Commission amends 47 CFR part 64 to read as follows:
PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS
0
1. The authority citation for part 64 continues to read as follows:
Authority: 47 U.S.C. 154, 254(k); secs. 403(b)(2)(B), (c),
Pub.L. 104-104, 110 Stat. 56. Interpret or apply 47 U.S.C. 201, 218,
222, 225, 226, 228, and 254(k) unless otherwise noted.
[[Page 59675]]
0
2. Section 64.2102 is amended by adding paragraph (d) to read as
follows:
Sec. 64.2102 Definitions.
* * * * *
(d) Telecommunications Carrier. The term Telecommunications Carrier
includes:
(1) A person or entity engaged in the transmission or switching of
wire or electronic communications as a common carrier for hire;
(2) A person or entity engaged in providing commercial mobile
service (as defined in section 332(d) of the Communications Act of 1934
(47 U.S.C. 332(d)); or
(3) A person or entity that the Commission has found is engaged in
providing wire or electronic communication switching or transmission
service such that the service is a replacement for a substantial
portion of the local telephone exchange service and that it is in the
public interest to deem such a person or entity to be a
telecommunications carrier for purposes of CALEA.
[FR Doc. 05-20606 Filed 10-12-05; 8:45 am]
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