Cisco Hopes for Quick FCC Action on Appeal of USAC’s WebEx Audit

Cisco is hopeful the FCC’s Wireline Bureau will decide “quickly and properly” that the Universal Service Administrative Co. (USAC) was incorrect in determining that audio communication portions of Cisco’s WebEx conferencing service should be considered a telecommunications service, Jeffrey Campbell, Cisco’s vice president-government affairs, told us.

USAC said in early February WebEx is a set of bundled services -- an online collaboration service that it considers an information service, and its audio conferencing component that is available via VoIP or by dialing in through the public switched telephone network. USAC said it considers the audio conferencing component a telecommunications service under the 1996 Telecom Act because users can use audio conferencing without accessing the information service-designated components, meaning WebEx cannot be considered an integrated information service. The audit result required Cisco to revise its Form 499 to designate revenue from audio conferencing as being eligible to be assessed for Universal Service Fund contributions. That decision is a “significant misreading” of current law and “demonstrates a lack of understanding” of how WebEx is structured, Campbell said. Cisco argued in its Request for Review that USAC did not take into account how all of WebEx’s functions worked together in a way that made it an integrated information service (http://bit.ly/10Wvz08). USAC did not respond to requests for comment.

USAC based its decision on its interpretation of the FCC’s Prepaid Calling Card Order, Marashlian & Donahue managing partner Jonathan Marashlian told us. Marashlian said he has represented telcos and IP-based service providers before the FCC and USAC, but is not representing Cisco or other audio bridging service providers. The FCC said in that order there needed to be “functional integration” of a service’s information and telecommunications components in order to be considered an information service (CD Feb 24/05 p1). That’s a “dangerous precedent to set,” which could allow any Internet application to be separated out so associated telecommunications services could be regulated, Campbell said. “It’s bad policy and makes it difficult for people to operate in this space."

Marashlian said he views the Prepaid Calling Card Order as “an outlier,” a decision the FCC specifically meant to target enhanced prepaid calling cards. “It wasn’t intended by the commission to address the broader, global information and communications technology industry that was spawned 30 or 40 years ago and which has been incubated by policymakers ever since,” he said.

FCC and other policymakers have generally been “less than forgiving” of prepaid calling card providers, but has been “starkly different” in its handling of services like Cisco WebEx and other advanced services, Marashlian said. That’s what “makes the USAC audit decision on WebEx stand out as a watershed moment” if the FCC decides to uphold it.

Cisco’s Campbell said he believes the most important precedent the FCC should consider is its Cable Modem Order, in which the commission held that cable modem services were information services because they combine telecommunications and information services into a single offering. That order has since been interpreted to include all broadband Internet access services, he said. The order and the Supreme Court’s ruling in the Brand X case (CD June 28/05 p1) have made clear that even though it is possible to use cable modem services without the attached DNS functionality, cable modem services should still be classified as information services based on how they are offered to consumers, Campbell said.

Marashlian said he generally agrees with Cisco’s position and the positions of several telcos and industry groups that support Cisco’s view, which are based on a “much larger, deeper, more established and better reasoned body of regulatory and judicial precedent, when applied to the facts.” Verizon Communications, Sprint Nextel, the Telecommunications Industry Association and TechNet all filed comments in support of Cisco’s appeal.

Audio bridging service provider InterCall opposed Cisco’s appeal, saying the Prepaid Calling Card Order made clear that a “telecommunications service is not an integrated service where it is ‘offered to consumers ... as a separate and distinct telecommunications service that is packaged with additional capabilities” (http://bit.ly/12HvryP). InterCall was the subject of USAC and FCC rulings that its audio bridging services can be considered telecommunications services (CD July 1/08 p6). Steven Augustino, an attorney with Kelley Drye who filed InterCall’s comments in opposition to Cisco’s appeal, did not respond to a request for comment. Cisco filed an amicus brief on behalf of The Conference Group earlier this year when it appealed the InterCall ruling to the U.S. Circuit Court of Appeals for the D.C. Circuit (CD April 16 p8). Cisco’s own appeal to the FCC differs from The Conference Group case because WebEx “has a great deal of functionality and features to it that are integral to the experience of the product and for which consumers pay more than they would for an ordinary audio conference bridge,” Campbell said.

The FCC will accept reply comments on Cisco’s appeal through May 30.