Charter Advanced Services (MN), LLC et al v. Heydinger, et al
Filing
134
MEMORANDUM OPINION AND ORDER denying 75 Motion for Summary Judgment; granting 81 Motion for Summary Judgment; denying 91 Motion to Exclude Expert Testimony(Written Opinion) Signed by Judge Susan Richard Nelson on 05/08/2017. (SMD)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Charter Advanced Services (MN), LLC,
and Charter Advanced Services VIII (MN),
LLC,
Plaintiffs,
Case No. 15-cv-3935 (SRN/KMM)
MEMORANDUM OPINION
AND ORDER
v.
Nancy Lange, in her official capacity as
Chair of the Minnesota Public Utilities
Commission, et al.,
Defendants.
Adam G. Unikowsky, David A. Handzo, Leah J. Tulin, Luke Platzer, Jenner & Block
LLP, 1099 New York Avenue Northwest, Suite 900, Washington, District of Columbia,
20001, and Steve W. Gaskins, Gaskins Bennett Birrell Schupp, LLP, 333 South Seventh
Street, Suite 3000, Minneapolis, Minnesota 55402, for Plaintiffs.
Andrew Tweeten, Minnesota Attorney General’s Office, 445 Minnesota Street, Suite
1100, St. Paul, Minnesota 55101, for Defendants.
SUSAN RICHARD NELSON, United States District Judge
I.
INTRODUCTION
Before the Court are the parties’ cross-motions for summary judgment [Doc. Nos.
75, 81], and Plaintiffs’ Motion to Exclude the Opinions of Defendants’ Expert Robert
Loube [Doc. No. 91]. For the reasons stated herein, the Court grants Plaintiffs’ summary
judgment motion—Defendants’ motion is correspondingly denied. Because the Court
concludes that no issues of material fact exist so as to preclude summary judgment even
if Defendants’ expert’s opinions are considered, the Court denies Plaintiffs’ Daubert
motion as moot.
II.
BACKGROUND
A.
Factual History
Plaintiffs Charter Advanced Services (MN), LLC and Charter Advanced Services
VIII (MN), LLC (collectively, “Charter Advanced”) are subsidiaries of Charter
Communications, Inc. (“Charter”), a national communications company that provides
services to residential and business customers—such as cable video, broadband internet
access, and voice communications—through its affiliates. (See Compl. [Doc. No. 1] ¶¶ 9,
17; Pls.’ Statement of Undisputed Material Facts [Doc. No. 84] (“SUF”) ¶¶ 1, 2.)
Defendant Nancy Lange 1 is the Chair of the Minnesota Public Utilities Commission
(“MPUC”), and is sued in her official capacity. (Defendants Dan Lipschultz, John Tuma,
Matthew Schuerger, and Katie Sieben are Commissioners of the MPUC, and are also
sued in their official capacities. 2 (See Compl. ¶¶ 10-14.)
One of the features Charter Advanced offers its customers is real-time, two-way
1
Beverly Jones Heydinger, the original lead defendant in this case, retired from her
position on January 2, 2017, and has been replaced as chair of the Minnesota Public
Utilities Commission by Nancy Lange. (See Mar. 1, 2017 Notice of Substitution of Party
[Doc. No. 133].) Pursuant to Federal Rule of Civil Procedure 25(d), Heydinger’s
replacement as a commissioner—Katie Sieben—automatically substitutes as a defendant
in this matter.
2
Throughout this Order, Defendants will be referred to interchangeably as either
“Defendants” or “MPUC.”
2
voice calling, which it currently markets as “Spectrum Voice.” 3 (See SUF ¶ 2.) Charter
Advanced provides this feature using Voice over Internet Protocol (“VoIP”) technology,
which transmits voice signals via a broadband internet connection as Internet Protocol
(“IP”) data packets.
(See id. ¶¶ 4-9.)
In contrast, traditional telephone networks
(commonly known as the “public switched telephone network” or “PSTN”) provide voice
telephony services using “circuit switching” technology, in which a dedicated pathway is
established over the line for the duration of a call. (Id. ¶ 15.) To route multiple calls over
the same PSTN, traditional telephone providers use a technique known as Time Division
Multiplexing (“TDM”). (Id. ¶ 16.)
To effect transmission of voice signals as IP data packets, Charter Advanced
provides its Spectrum Voice subscribers with a device known as an embedded
Multimedia Terminal Adapter (“eMTA”). (Id. ¶ 10.) The eMTA is housed in the same
device as the cable modem that provides access generally to Charter’s broadband internet
service. (Id. ¶ 11.) The eMTA alters the format of voice calls between an analog
electrical signal—as transmitted by the customer’s handset—and the IP data packets
transmitted over Charter Advanced’s cable network. (Id. ¶ 12-14.) When a Charter
Advanced customer calls or receives a call from a subscriber of a traditional
telecommunications carrier, the call must be converted between IP and TDM—a process
commonly referred to as “protocol conversion.” (See id. ¶ 20; Compl. ¶ 21.) Because it
offers this capability to interact seamlessly with PSTN networks, Spectrum Voice is an
3
Previous orders of this Court have variously referred to what is now known as Spectrum
Voice as “Charter Phone” or “VoIP service.”
3
“interconnected” VoIP service. Although not all Spectrum Voice calls involve protocol
conversion, the majority of Charter Advanced’s voice traffic in Minnesota currently does
so. (SUF ¶ 23.)
In addition to providing voice transmission, Spectrum Voice has the capability to
provide customers with several additional communications features. These include an
online web portal (“Voice Online Manager”) that allows customers to access voicemails
as digital audio files, convert voicemails to text, and forward them via email. (Id. ¶ 26.)
Voice Online Manager also offers the ability to review and export call logs, maintain lists
of contacts associated with call logs and voicemails, and direct numerous calling features,
such as specifying a “backup phone” that will ring in the event of an outage,
“simultaneous ring” that will cause incoming calls to ring numerous phone numbers at
once, call forwarding, selective call blocking, etc. (Id.) Spectrum Voice can also send
caller ID information to cable set-top boxes, allowing subscribers with Charter cable
video services to display call information on their televisions. (Id. ¶ 27.) Beyond these
and other current features, Charter Advanced’s IP infrastructure makes it possible to add
new features to Spectrum Voice through software and network equipment changes. (Id. ¶
27.) Anticipated new features include a “softphone” feature—allowing Spectrum Voice
subscribers to access calling features through a tablet or smartphone app—and a feature
designed to identify and block unwanted “robo” calls by simultaneously routing
incoming calls to a system that queries dynamic internet-connected databases of known
robocalling numbers, terminating calls if it finds a match. (Id. ¶ 35.)
Charter Advanced provides every Spectrum Voice subscriber with access to all
4
current additional communication features. (Id. ¶ 37.) Although subscribers can opt not
to activate or utilized certain features, and may obtain the voice calling aspect of
Spectrum Voice without its other features, Charter Advanced would need to have its
personnel deactivate those features manually. (Id. ¶¶ 38, 39.) Very few customers
request that Charter Advanced do so. (Id. ¶ 39.) Further, because Charter Advanced
must activate a broadband connection to a residence or business in order to implement
Spectrum Voice, it is not marketed as a standalone offering, but as a service option for
customers who subscribe to Charter’s broadband internet and cable television services.
Although a customer could request Spectrum Voice without internet or cable, and Charter
Advanced would supply it, such requests are “exceedingly rare.” (Id. ¶¶ 40-42.)
B.
Procedural History
Prior to March 2013, Charter offered VoIP services in Minnesota through two
affiliates—Charter Fiberlink CCO, LLC and Charter Fiberlink CC VIII, LLC
(collectively, “Charter Fiberlink”). (Comp. ¶ 26.) In March 2013, Charter Fiberlink
assigned its retail voice customers to the newly-established Charter Advanced. (Id. ¶ 27.)
The frank purpose behind the assignment was to limit the reach of state regulation,
thereby enhancing Charter’s market competitiveness. (See Tweeten Aff. [Doc. No. 78],
Ex. 9 (“Moore Dep.”) at 25:3-6, 27:11-19.) Charter Fiberlink notified its subscribers in
writing of the change a month ahead of time and advised them that they could accept the
revised terms by continuing their service. (Compl. ¶ 27.)
The Minnesota Department of Commerce (“MDOC”) responded to Charter’s
realignment on September 26, 2014, by filing a complaint with the MPUC. (Id. ¶ 28.)
5
The complaint raised fifteen separate allegations, including that Charter Advanced was in
violation of several Minnesota statutes. (See Tweeten Aff., Ex. 1 (“MDOC Compl.”) at
13-14.)
Charter Advanced responded, in part, by arguing that state regulation of
Spectrum Voice is preempted by federal law. (See Tweeten Aff., Ex. 2 (“MPUC Order”)
at 2.) The MPUC issued an order on July 28, 2015, finding that state regulation is not
preempted. (See generally id.) It ordered Charter Advanced to submit within thirty days
a proposed plan for compliance with applicable Minnesota rules and regulations. (See
id.at 15.) A final order to that effect was issued on September 24, 2015. (Compl. ¶ 29.)
Charter Advanced responded to the MPUC’s decision by instituting the present
action. Its Complaint seeks declaratory relief that state regulation of Spectrum Voice is
preempted by federal law, and injunctive relief prohibiting Defendants from seeking to
enforce that regulation of its service. (See Compl. ¶¶ 36-42.) Defendants moved to
dismiss, arguing that Charter Advanced’s VoIP service is a “telecommunications service”
for purposes of the Telecommunications Act of 1996, and therefore subject to dual state
and federal regulation. See Charter Advanced Servs. (MN), LLC v. Heydinger, 15-cv3935 (SRN/KMM), 2016 WL 3661136, at *2 (D. Minn. July 5, 2016).
On referral from this Court, United States Magistrate Judge Hildy Bowbeer issued
a Report and Recommendation (“R&R”) recommending that Defendants’ motion be
denied. (See generally R&R [Doc. No. 46].) The R&R concluded that Defendants had
not established, as a matter of law, that Spectrum Voice was not an “information service”
for which state regulation is preempted. (See id. at 44.) The MPUC timely objected, and
on independent reconsideration this Court overruled those objections and adopted the
6
R&R. See generally Charter Advanced, 2016 WL 3661136. In addition to ruling on the
legal relevance of several orders of the Federal Communications Commission (“FCC”)
and federal courts, the importance of which will become relevant as Defendants’ current
arguments are considered, the Court narrowly framed the issue for summary judgment:
whether Spectrum Voice is a telecommunications service or an information service for
purposes of the Telecommunications Act of 1996. See id. at *5. If the former, regulation
by the MPUC is permissible, if the latter, it is preempted and impermissible. The parties
having completed discovery and cross-moved under Federal Rule of Civil Procedure 56,
that issue is now ripe for resolution.
III.
DISCUSSION
A.
Standard of Review
1.
Summary Judgment Standard
Summary judgment is appropriate if “the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). A fact is “material” only if it may affect the outcome of the
lawsuit. TCF Nat’l Bank v. Mkt. Intelligence, Inc., 812 F.3d 701, 707 (8th Cir. 2016).
Likewise, an issue of material fact is “genuine” only if “the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986).
The moving party bears the burden of
establishing a lack of genuine issue of fact, Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986), and the Court must view the evidence and any reasonable inferences in the light
most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio
7
Corp., 475 U.S. 574, 587 (1986). In responding to a motion for summary judgment,
however, the nonmoving party may not rest on mere allegations or denials, but must
“demonstrate on the record the existence of specific facts which create a genuine issue for
trial.” Krenik v. Cty. of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995).
2.
Preemption and the Telecommunications Act of 1996
“When the Federal Government acts within the authority it possesses under the
Constitution, it is empowered to pre-empt state laws to the extent it is believed that such
action is necessary to achieve its purposes.” City of New York v. F.C.C., 486 U.S. 57, 63
(1988). Preemptive laws and regulations are given effect by the Supremacy Clause of the
Constitution. See id. (citing U.S. Const. art. VI, cl. 2.). While the Supreme Court has
delineated several instances in which preemption may arise, of particular relevance here
is its conclusion that federal agencies acting pursuant to their congressionally delegated
authority may preempt state regulation. Louisiana Pub. Serv. Comm’n v. F.C.C., 476
U.S. 355, 369 (1986). As this Court recognized in its Motion to Dismiss Order, there “is
simply no doubt” that the F.C.C. has this general authority. See Charter Advanced, 2016
WL 3661136, at *3 (citing 47 U.S.C. § 201(b)).
The fount of regulatory authority, in this matter, is the Telecommunications Act of
1996.
By its enactment, Congress “unquestionably” took “the regulation of local
telecommunications competition away from the States” with respect to matters covered
by the Act. AT & T Corp. v. Iowa Util. Bd., 525 U.S. 366, 378 n.6 (1999). Of particular
importance here, the Act broadly divides communication services into two main
categories: “telecommunications services,” and “information services.” See 47 U.S.C. §
8
153; see also Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967,
975-78 (2005).
Under the statutory structure, a telecommunications service is “the
offering of telecommunications 4 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.” Id. §
153(53).
An information service, by contrast, is “the offering of a capability for
generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making
available information via telecommunications, . . . but does not include any use of any
such capability for the management, control, or operation of a telecommunications
system or the management of a telecommunications service.” Id. § 153(24). As this
Court has previously recognized, telecommunications services are subject to state
regulation, while information services are not.
See Charter Advanced, 2016 WL
3661136, at *3; Vonage Holdings Corp. v. Minn. Pub. Utils. Comm’n, 290 F. Supp. 2d
993, 997 (D. Minn. 2003) (“Vonage I”); see also Minn. Pub. Utils. Comm’n v. F.C.C.,
483 F.3d 570, 580 (8th Cir. 2007) (“Vonage III”) (observing that “any regulation of an
information service conflicts with the federal policy of nonregulation”).
B.
Classifying Spectrum Voice
The Court now turns to address the central question of both parties’ summary
judgment motions: is Spectrum Voice properly considered a telecommunications service,
or an information service? In support of the latter option, Charter Advanced advances
two primary arguments. First, it argues that—in keeping with this Court’s holding in
4
The term “telecommunications” is defined as “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.” 47 U.S.C. § 153(50).
9
Vonage I—because Spectrum Voice provides subscribers with the capability to convert
calls between IP and TDM, it accomplishes a “net protocol conversion” that is
independently sufficient to render Spectrum Voice an information service. (See Pls.’
Mem. in Supp. of Mot for Summ. J. [Doc. No. 83] (“Pls.’ Mem. in Supp.”) at 2.) Second,
Charter Advanced contends that because Spectrum Voice’s advanced communications
features
(such
as
Voice
Online
Manager)
are
closely integrated
with
its
telecommunications aspect, it is an “offering” of an information service with a
telecommunications component, rather than an offering of telecommunications alone.
(Id.)
For the reasons that follow, the Court agrees with Charter Advanced that Spectrum
Voice engages in net protocol conversion, and that this feature renders it an “information
service” under applicable legal and administrative precedent. Accordingly, the Court
need not reach Charter Advanced’s second, “inextricably intertwined,” argument.
1.
Net Protocol Conversion
As noted above, Spectrum Voice is able to interface with PSTN networks because
it provides protocol conversion functionality—that is, Charter Advanced has the
capability to convert voice transmission data between IP and TDM as needed to hand a
call off to a PSTN network. At a technical level, Charter Advanced does so by routing
calls that must be converted between protocols through a “Media Gateway,” which sits
on Charter Advanced’s side of the interconnection point with a TDM-based network.
(See SUF ¶ 21.) According to Charter Advanced, because information enters its network
in one format (either IP or TDM, depending on who originated the call) and leaves in
10
another, its system offers “net” protocol conversion, which the FCC has defined as
occurring when “an end-user [can] send information into a network in one protocol and
have it exit the network in a different protocol.”
See Implementation of the Non-
Accounting Safeguards of Sections 271 and 272 of the Communications Act of 1934, As
Amended, 11 FCC Rcd. 21905, 21956, ¶ 104 (1996) (“Non-Accounting Safeguards
Order”).
In support of its argument, Charter Advanced directs the Court’s attention to
several district court opinions—including one from this district—which have concluded
that VoIP services engaged in net protocol conversion are information services for
purposes of telecommunications regulation. The seminal opinion in this regard is the
Vonage I decision. See 290 F. Supp. 2d at 993. In that case, Vonage sought to enjoin the
enforcement of an order of the MPUC requiring it to comply with Minnesota telephone
regulations. Id. at 994. Vonage argued that its VoIP service, which permitted customers
to make computer-to-computer and computer-to-phone (although not phone-to-phone)
calls from any location where broadband internet was available was an information
service because, among other things, it required net protocol conversion in order to
interface with PSTN networks. Id. at 995, 999.
This Court agreed with Vonage, finding that the need to “act on” the format and
protocol of the transferred information, inherent in the IP-TDM interface, rendered the
Vonage system an information service for purposes of the Telecommunications Act. As
Judge Davis observed:
Examining the statutory language of the Communications Act, the Court
11
concludes that the VoIP service provided by Vonage constitutes an
information service because it offers the ‘capability for generating,
acquiring, storing, transforming, processing, retrieving, utilizing, or making
available information via telecommunications.’ 47 U.S.C. § 153(20). 5 The
process of transmitting customer calls over the Internet requires Vonage to
‘act on’ the format and protocol of the information. 47 C.F.R. § 64.702(a).
For calls originating with one of Vonage’s customers, calls in the VoIP
format must be transformed into the format of the PSTN before a POTS
[Plain Old Telephone Service] user can receive the call. For calls
originating from a POTS user, the process of acting on the format and
protocol is reversed. The Court concludes that Vonage’s activities fit
within the definition of information services. Vonage’s services are closely
tied to the provision of telecommunications services as defined by
Congress, the courts and the FCC, but this Court finds that Vonage uses
telecommunications services, rather than provides them.
Id. at 999 (emphasis original).
The Vonage I decision has since formed the basis of several other district court
opinions which, having considered facts broadly similar to those presented here, have
found that the provision of IP-TDM net protocol conversion is sufficient to render an
interconnected VoIP service an information service. See, e.g., Sw. Bell Tel., L.P. v. Mo.
Pub. Serv. Comm’n, 461 F. Supp. 2d 1055, 1082 (E.D. Mo. 2006), aff’d, 530 F.3d 676
(8th Cir. 2008) (“IP-PSTN traffic is an information service . . . because it involves a net
protocol conversion from the digitized packets of the IP protocol to the TDM technology
used on the PSTN.”); PAETEC Commc’ns, Inc. v. CommPartners, LLC, No. 08-cv-397
(JR), 2010 WL 1767193, at *3 (D.D.C. Feb. 18, 2010) (adopting the reasoning of Vonage
I and Southwestern Bell in concluding that “transmissions which include net format
conversion from VoIP to TDM are information services . . . .”) Charter Advanced further
notes that these district court opinions are consistent with the FCC’s Non-Accounting
5
Now 47 U.S.C. § 153(24).
12
Safeguards Order, which determined that “protocol processing services constitute
information services under the 1996 Act.” 11 FCC Rcd. at 21956, ¶ 104.
Having reviewed the decisions cited by Charter Advanced and the relevant orders
of the FCC, the Court agrees that the logic espoused in Vonage I applies equally to the
facts of this case. 6 In this specific factual context, the touchstone of the information
services inquiry is whether Spectrum Voice acts on the customer’s information—here a
phone call—in such a way as to “transform” that information. See 47 U.S.C. § 153(24).
By altering the protocol in which that information is transmitted, Charter Advanced’s
service clearly does so. This conclusion is in line with the FCC’s determination in the
Non-Accounting Safeguards Order, which reasoned that “an end-to-end protocol
conversion service that enables an end-user to send information into a network in one
protocol and have it exit the network in a different protocol clearly ‘transforms’ user
information.” 11 FCC Rcd. at 21956, ¶ 104. Moreover, the mere fact that Spectrum
Voice calls do not always involve protocol transformation does not render the service any
6
Although the VoIP service in Vonage I offered only computer-to-computer and
computer-to-phone calling—not phone-to-phone—this distinction does not materially
affect the Court’s analysis here. As Judge Davis observed, while the FCC has tentatively
concluded that phone-to-phone IP telephony “bear[s] the characteristics of
‘telecommunication services’,” it defined “phone-to-phone’ IP telephony as a service
meeting four conditions, including (2) “it does not require the customer to use CPE
different from that CPE necessary to place an ordinary touch-tone call (or facsimile
transmission) over the public switched telephone network,” and (4) “it transmits customer
information without net change in form or content.” See Vonage I, 290 F. Supp. 2d at
999-1000 (quoting In re Federal-State Joint Board on Universal Service, 13 FCC Rcd.
11,501, 11,543-44, ¶ 88-89 (1998). For reasons discussed infra in Part III.B.2 of this
Opinion, Spectrum Voice meets neither condition. Cf. Vonage I, 290 F. Supp. 2d at 1000
(finding that Vonage’s VoIP service met neither condition (2) nor condition (4) of the
FCC’s test).
13
less of an “offering” of information services. At no point does the Telecommunications
Act suggest or require that a customer use an information service’s transformative
features all the time. Indeed, the very language of the definition of an “information
service,”—which merely mandates that there be an “offering of a capability” to, inter
alia, transform information—belies such a conclusion. 7 See, e.g., Merriam-Webster’s
Collegiate Dictionary 168 (10th ed. 1999) (defining “capability” in relevant part as “the
facility or potential for an indicated use or deployment”) (emphasis added).
2.
The Telecommunications Exception
The MPUC raises several arguments for why Charter Advanced’s reasoning—as it
applies to the net protocol conversion issue—is flawed. Two of these arguments have
already been addressed by the Court, and may be briefly disposed of here. The first is
that this Court’s decision in Vonage I has in some sense been repudiated—either by the
Eighth Circuit or by the FCC. (Defs.’ Mem. in Opp’n to Mot. for Summ. J. [Doc. No.
106] (“Defs.’ Mem. in Opp’n”) at 4.) This Court previously rejected this argument at the
motion to dismiss stage. See Charter Advanced, 2016 WL 3661136, at *1 n.3. While it
is true that subsequent decisions in the Vonage line of cases chose to classify Vonage as
an information service based on reasons different from those deployed by the Court in
Vonage I, they did not in any sense overrule that decision. See generally In the Matter of
Vonage Holdings Corp., 19 FCC Rcd. 22404 (2004) (“Vonage II”); Vonage III, 483 F.3d
at 570. Thus, while Vonage I does not control the outcome of this case, its vitality
7
Furthermore, the undisputed record indicates that the majority of Minnesota Spectrum
Voice traffic involves protocol conversion. See SUF ¶ 23.
14
remains. On careful consideration, this Court finds its reasoning persuasive.
Relatedly, Defendants contend that the Non-Accounting Safeguards Order has
been “repudiated.” (Defs.’ Mem. in Supp. of Mot. for Summ. J. [Doc. No. 83] (“Defs.’
Mem. in Supp.”) at 19.) The Court concluded otherwise in its Motion to Dismiss Order,
and it sees no reason to reconsider that determination now. See Charter Advanced, 2016
WL 3661136, at *9. 16. While the reasoning of that order, as well as the analytical
framework it proposed, may well have been supplemented in the years since its
promulgation, there is no reason to conclude it has been rejected by the FCC. Like
Vonage I, it remains relevant to decision of this matter.
Defendants’ other arguments require more careful consideration, but the Court
likewise concludes that they do not suffice to render Spectrum Voice a
telecommunications service. First among these is the contention that Charter Advanced’s
service is not an information service because it falls within the “telecommunications
system management exception.”
The Telecommunications Act’s definition of
“information services” excludes the use of any “capability for the management, control,
or operation of a telecommunications system or the management of a telecommunications
service.” 47 U.S.C. § 153(24). This exception “covers services that may fit within the
literal reading of the information services definition, but that are used to facilitate the
provision of a basic telecommunications service, without altering the character of that
service.” Non-Accounting Safeguards Order, 11 FCC Rcd. at 21965, ¶ 123.
In the Non-Accounting Safeguards Order, the FCC identified three categories of
protocol processing services that fall within the telecommunications system management
15
exception: (1) services “involving communications between an end user and the network
itself (e.g., for initiation, routing, and termination of calls) rather than between or among
users;” (2) protocol processing “in connection with the introduction of a new basic
network technology (which requires protocol conversion to maintain compatibility with
existing [Customer Premises Equipment (“CPE”)];” and (3) services “involving
internetworking (conversions taking place solely within the carrier’s network to facilitate
provision of a basic network service, that result in no net conversion to the end user).”
Id. at 21957, ¶ 106. Here, Defendants argue that all three categories apply to render
Spectrum Voice subject to the telecommunications system management exception.
On review of the record, the Court cannot agree. The first exception fairly plainly
does not apply here—the purpose of IP-TDM protocol conversion, at least as applied by
Spectrum Voice, is to facilitate communication between users of VoIP and legacy
telephony services, not simply to facilitate connection between the user and the network.
As to the second exception, Spectrum Voice does not engage in protocol conversion
simply to maintain backwards compatibility with old CPE. Indeed, it has no need to do
so, as the relevant CPE—the eMTA—is new CPE provided to the customer for the
express purpose of facilitating transmission in Charter Advanced’s chosen protocol, IP.
The net protocol conversion that occurs comes much later in the process, when the Media
Gateway acts to provide a bridge to the PSTN. Thus, maintaining compatibility with
CPE is not a concern here.
Finally, the “internetworking” exception is equally inapplicable. As this Court
explained in its Motion to Dismiss Order, that exception applies where there is no net
16
protocol conversion, such that the only conversion occurs on the carrier’s network, for
the carrier’s convenience. See Charter Advanced, 2016 WL 3661136, at *11. Thus,
where a call originates in TDM format, is converted by the provider to IP format for
transmission across its network, and is converted a final time to TDM before being
handed off to another provider, the internetworking exception would apply. See Petition
for Declaratory Ruling that AT&T’s Phone-to-Phone IP Telephony Services Are Exempt
from Access Charges, 19 FCC Rcd. 7457, 7457-58, 7465, ¶¶ 1, 12 (2004) (“AT&T
Order”).
Defendants argue that Spectrum Voice provides protocol conversion solely on
Charter Advanced’s own network, and therefore is subject to the internetworking
exception. (See Defs.’ Mem. in Opp’n at 16-17.) In their view, phone calls involving
Spectrum Voice originate in analog, when the customer places a call, and are then
converted by the eMTA—which Defendants characterize as part of Charter Advanced’s
network—to IP for transmission across the network. (Id.) Because the phone call
ultimately ends in analog when it is received by the call recipient, Defendants contend
that there is no net protocol conversion to the end user, and thus the only protocol
conversion occurs within Charter Advanced’s network (Id.)
This argument is flawed for the simple reason that it mischaracterizes the
demarcation point of Charter Advanced’s network. Under FCC precedent, CPE is, by
definition, outside the carrier’s network. See, e.g., In re Federal-State Joint Board on
Universal Service, 18 FCC Rcd. 10,958, 10,067, ¶ 18 (2003) (“Tribal Recon. Order”)
(defining CPE as “equipment that falls on the customer side of the demarcation point
17
between customer and network facilities”). There is no dispute that the eMTA is CPE.
See Vonage II, 19 FCC Rcd. at 22,407, ¶ 6 (describing Vonage’s MTA as “specialized
CPE”). Because it is at the eMTA that the customer’s voice signal is converted from
analog to IP, as a matter of law the customer’s data must enter the network in that
format. 8 (See SUF ¶ 12.) Thus, any protocol conversion occurring as data leaves Charter
Advanced’s network is net protocol conversion, and not subject to the third NonAccounting Safeguards Order exception.
The MPUC also contends that Spectrum Voice falls under the telecommunications
system management exception pursuant to the so-called “functional approach” to
classification. (Defs.’ Mem. in Supp. at 20.) As described in In re Federal-State Joint
Board on Universal Service, 13 FCC Rcd. 11,501 (1998) (“Universal Service Report”),
the functional approach classifies a communications service based on what is functionally
offered to the end user. 13 FCC Rcd. 11,501, ¶ 86. At the Motion to Dismiss stage, this
Court declined to determine whether the functional approach was a more appropriate
framework for analyzing Spectrum Voice than that propounded by the Non-Accounting
Safeguards Order, instead determining that dismissal was unwarranted under either. See
Charter Advanced, 2016 WL 3661136, at *9.
For similar reasons, the Court now finds that, even if the functional approach is
applied instead of (or in addition to) that set forth above, Spectrum Voice qualifies as an
8
On this point, the Court notes that although the MPUC characterizes determination of
the demarcation point for Charter Advanced’s network as a factual inquiry, it is actually a
legal one. (See Defs.’ Mem. in Opp’n at 16-17, 17 n.3.) Thus, even taking into
consideration the opinions of Defendants’ experts on the subject, there is no factual
dispute that would preclude entry of summary judgment here.
18
information service. As an initial matter, it is important to recognize that the vast
majority of Spectrum Voice customers do not purchase the service as a stand-alone
offering. (See SUF ¶¶ 40-42.) Rather, for most customers, Spectrum Voice is an add-on
feature on top of Charter Advanced’s broadband internet and cable offerings—each of
which is routed through the eMTA. (Id. at ¶ 11.) To these customers with broadband
internet who wish to use their internet connection for voice communication, protocol
conversion is a necessity—without it, they would be unable to interface with the PSTN.
Thus, what Charter Advanced provides these individuals is the functionality necessary to
utilize their internet connection for voice service. 9 When combined with the provisioning
of enhanced functionality (e.g., Voice Online Manager), what is “functionally offered” to
the consumer is an information service.
At a more granular level, the MPUC contends that the FCC’s recent finding that
various features provided in tandem with broadband internet service, including domain
name service (“DNS”) and caching, “fit squarely within the telecommunications systems
management exception to the definition of an ‘information service’,” mandates a similar
result here. See Protecting and Promoting the Open Internet, 30 FCC Rcd. 5601, 5758, ¶
356 (2015) (“Open Internet Order”). The Court initially rebuffed this argument at the
motion to dismiss stage, concluding that “there has been no determination that Charter’s
additional capabilities are analogous to DNS and caching.” Charter Advanced, 2016 WL
9
The fact that Charter Advanced may not specifically market Spectrum Voice’s protocol
conversion functionality does not, in this Court’s view, affect the functional analysis.
Rather, it is sufficient that Charter Advanced makes clear that its offering gives
customers the ability to use their internet connection to talk to anyone with a phone
connection.
19
3661136, at *12.
On this more developed record, the Court finds that the Open Internet Order does
not mandate the applicability of the telecommunications system management exception
to Spectrum Voice. At bottom, the FCC determined that caching and DNS were subject
to the exception because they were “simply used to facilitate the transmission of
information so that users can access other services.” Open Internet Order, 30 FCC Rcd.
at 5770, ¶ 372. The main benefit of those particular functions was enhanced network
efficiency.
See id. at 5767, ¶ 368.
By contrast, the purpose of IP-TDM protocol
conversion is not to enhance the efficient operation of Charter Advanced’s network, but
rather to allow consumers to bridge different networks. That function is critical to
Spectrum Voice’s operation, and the difference it entails is sufficient to vitiate any
relevant similarities between the factual considerations in the Open Internet Order and
the matter before the Court today.
IV.
CONCLUSION
For the above reasons, the Court concludes that Charter Advanced’s Spectrum
Voice offering in an “information service,” because inherent in its operation is the ability
to engage in protocol conversion—thereby “transforming” the customer’s information for
purposes of the Telecommunications Act of 1996.
See 47 U.S.C. § 153(24).
Accordingly, state regulation of Spectrum Voice is preempted and impermissible. See
Vonage I, 290 F. Supp. 2d at 997.
Because the Court’s conclusion that summary
judgment is warranted does not rest upon matters testified to by Defendants’ expert, Dr.
Robert Loube, Charter Advanced’s Daubert motion need not be addressed, and is
20
accordingly denied as moot.
THEREFORE, IT IS HEREBY ORDERED THAT:
1. Defendants’ Motion for Summary Judgment [Doc. No. 75] is DENIED;
2. Plaintiffs’ Motion for Summary Judgment [Doc. No. 81] is GRANTED; and
3. Plaintiffs’ Motion to Exclude Opinions of Defendants’ Expert Robert Loube [Doc.
No. 91] is DENIED as moot.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: May 8, 2017
s/Susan Richard Nelson
SUSAN RICHARD NELSON
United States District Judge
21
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