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On April 21, 2004, the Federal
Communications Commission (FCC) released an Order denying an AT&T petition for declaratory ruling that the company’s
phone-to-phone Internet protocol (IP) telephony service is exempt from terminating access charges.
AT&T’s phone-to-phone
IP telephony service involves three main steps. First, a customer initiates an
interexchange call by dialing 1+ the called number from an ordinary telephone via the public switched telephone network (PSTN). Second, AT&T converts the call into IP format and routes the call over the company’s
Internet backbone. Third, AT&T converts the call back from IP format and
routes it via the PSTN to the called party’s local exchange carrier for termination at the called number. For this third step, AT&T unilaterally decided not to pay access charges to the called party’s
local exchange carrier.
AT&T argued that it did not have to pay access charges because its IP telephony service is an unregulated “information
service” and not a “telecommunications service.” However, the
FCC was not persuaded. It concluded that AT&T’s telephony service met
the statutory definition of a “telecommunications service” because the service: “(1) uses ordinary customer
premises equipment (CPE) with no enhanced functionality; (2) originates and terminates on the public switched telephone network
(PSTN); and (3) undergoes no net protocol conversion and provides no enhanced functionality to end users due to the provider’s
use of IP technology.”
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