The Rights of Common Carriers and the Decision Whether to Be a Common Carrier or a Non-Regulated Communications Provider

Article excerpt

I. INTRODUCTION

A new communications venture can sometimes choose between (1) accepting regulation as a common carrier, or (2) avoiding regulation almost entirely by providing service as a private carrier or an enhanced service provider. Because few businesses want to be regulated, the first reaction is often to avoid common carrier status. While the common carrier option does bring with it burdens such as certification and reporting requirements, however, it also entitles the venture to benefits, including interconnection with other carriers and access to unbundled network elements ("UNEs"). Because of these benefits, some communications businesses may find that the best choice is to provide some services as a common carrier and some services on an unregulated basis--a flexible approach specifically permitted under the Telecommunications Act of 1996 ("1996 Act").(1)

This Article principally addresses the choice between providing service (1) as a non-dominant common carrier, or (2) as an unregulated communications business, such as a private carrier or an enhanced service provider. Unless the new business is formed to acquire an existing incumbent local exchange carrier ("ILEC"), it is unlikely to face dominant common carrier regulation.

II. REGULATORY CLASSIFICATIONS AND DEFINITIONS

The definitions of "common carrier" and its new synonym "telecommunications carrier" are flexible enough to give providers discretion in structuring many communications services as either common carrier or non-common carrier services. For a service to be a common carrier service under federal law, the provider must (1) hold the service out as being available on standardized terms to the public, i.e., to all potential users of the service, and (2) transmit signals without change in form or content.(2) The Federal Communications Commission ("FCC" or "Commission") applies this test in regulating interstate, international, and sometimes intrastate communications, while the states usually follow this test in determining whether an intrastate service is a common carrier service.

The first element--holding service out as being available to the public--draws the line between common carriers subject to Title II regulation under the Communications Act of 1934 ("1934 Act") and private carriers subject only to the FCC's rarely used "ancillary" Title I jurisdiction.(3) The second element--transmission "without change in form or content," i.e., "pure transmission"--draws the line between common carriers and providers of "enhanced services" such as Internet access. The FCC has long declined to regulate enhanced service providers, now sometimes called "information service providers," as common carriers.(4)

The 1996 Act added several new terms, including "telecommunications carrier," equivalent to common carrier, and "information service," which is virtually synonymous with "enhanced service." Under the 1996 Act, a "telecommunications carrier" provides "telecommunications service."(5) "Telecommunications service" is "the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used."(6) The reference to the public or to classes of the public incorporates the "holding oneself out" element of the traditional common carrier definition. The 1996 Act also incorporates the "pure transmission" element of the traditional common carrier definition, by defining "telecommunications" 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."(7) Finally, the 1996 Act defines "information services" so as to cover communications in which the form or content of information changes.(8) Consequently, "information services provider" and "enhanced service provider" mean essentially the same thing. …