Cooperative Federalism and the IP Transition:

The Need to Clarify Federal Jurisdiction Over IP-based Services

by

Sarah K. Leggin *

Last week the National Association of Regulatory Commissioners (NARUC) held its 125^th annual meeting. The NARUC Committee on Telecommunications unanimously passed a resolution adopting a white paper, which called for greater cooperation between federal and state regulators to ensure the reliability of telecommunications networks and the satisfaction of consumer needs. The resolution and white paper address timely issues, given the recent hearing by the House Subcommittee on Communications and Technology on The Evolution of Wired Communications Networks on October 23, the IP Transition Proceeding, and the ongoing debate over the extent to which IP-based services should be subject to federal or state jurisdiction.

With the transition to all digital networks rapidly progressing towards completion, the FCC should declare its exclusive jurisdiction over the economic regulation of IP-based networks. Because of the fundamentally interstate and international nature of IP-based services, and the impractical, if not impossible, task of making jurisdictional determinations regarding IP-based communications, IP-based networks should be subject to federal, not state, economic regulation. Otherwise, subjecting service providers to dual regulatory regimes will likely impede the continued upgrading and build-out of such advanced networks.

NARUC's recent resolution declared that the fundamental goals of the Telecommunications Act should continue to govern the regulation of communications networks despite the many technological developments that are underway, including the IP transition. The resolution stated, "changes to the underlying structure of the network or the technology used to carry information does not change the need for reliable, robust, affordable, and ubiquitous communications services." The resolution also proposed that any new federal legislation should focus on the principles of cooperative federalism, and should reserve a role for the states in any regulatory regime.

The white paper, released in September of this year and adopted by the resolution at NARUC's meeting last week, is entitled "Cooperative Federalism and Telecom in the 21^st Century." It was authored by NARUC's federalism task force, which was charged with evaluating the role of the states in telecommunications regulation. The task force rightly recognized that "much has changed" since its initial report on federalism was published in July of 2005. Particularly, the authors noted that the revolutionary transition to IP-based networks posed new challenges regarding the shared authority of federal and state entities.

Despite fundamental changes to the technological landscape, the task force suggested that the FCC, states, and NARUC members should continue to focus on the basic goals of the 1996 Act and the principles of cooperative federalism developed by the task force: consumer protection, interconnection and call completion, public safety, evidence based decision-making, broadband adoption, access, and affordability, and universal service. The authors also stated that the states must continue to play a substantial and collaborative role in regulating communications networks regardless of the underlying technology, which would likely include a role in regulating IP-based services.

The NARUC white paper is fine as far as it goes. There is a role for states to play in promoting intrastate communications and achieving the fundamental goals of the 1996 Act. But it is important for the FCC to declare that communications utilizing IP-based networks are interstate in nature. Given the substantial change from analog to digital services, the mode in which IP-based networks operate renders determining the origin and destination of calls burdensome and impractical if not impossible. As such, the ultimate jurisdiction over IP-based networks as far as economic regulation is concerned should be federal, subject to exclusively FCC, not state, authority. Otherwise, federal policies promoting investment in advanced digital networks are likely to be frustrated.

* Sarah K. Leggin is a Legal Fellow of the Free State Foundation, an independent, nonpartisan free market-oriented think tank located in Rockville, Maryland.