Google Ultimatum

In a post a few weeks ago I concluded that the FCC is very likely to rule that Google Voice is subject to regulation under US telecommunications law. Since then, the FCC has taken the next step of gathering information, including requesting information from Google by means of this letter, a letter than while widely referenced, appears to have received little direct analysis by the trade media and bloggers.

Alongside this, there is the sideshow of AT&T and others attempting to sway the FCC -- by attempting to stir up public outrage against Google -- but which are merely distractions from the main event: the legal determination of whether Google Voice should be subject to federal telecommunications regulation. While opinions and lobbying can have an impact, none of this should cloud our view of what is transpiring.

Unlike in Canada, the federal telecommunications regulator is tightly constrained by federal statutes in what they can and must do in the performance of their duties. If you were to compare US and Canadian law, one important difference is that US law goes much deeper into dictating carrier operations and, therefore, how the FCC must regulate those carriers. That is one reason why many FCC staffers are lawyers, as are the industry reps who interact with the FCC, and not incidentally, why every FCC action (and industry reply) is full of legal footnotes, just like in this letter to Google.

In Canada, the law specifies more general guidelines, leaving the CRTC free to develop telecommunications policy. A further consequence is that political direction from the government of the day is more likely in Canada; in the US, Congress and the Administration are somewhat stymied by the more detailed laws -- which they created! -- that rule the FCC's actions.

In light of this, let's look at the FCC's letter more closely so that we can understand how this public process is unfolding, and what the FCC may really be up to. I'll do this by quoting and commenting on brief extracts from the letter.

RE: Google Voice Calling Restrictions

Right up front we have the FCC's focus on a critical obligation of common carriers: non-discrimination. This is a long-standing requirement that both protects the common carrier from prosecution when their services are used in the performance of a crime and ensures universality of this important utility: where anyone can call anyone else. Importantly, the rule is also used to prevent carriers from gaming the FCC and state PUC-mandated termination fees that benefit rural local exchange carriers (LEC), which are intended to subsidize service prices in high-cost (low density) locales. This is a politically-sensitive topic for all levels of government.

...please provide answers to the following questions by close of business on Wednesday, October 28, 2009.

At present, since Google has not been determined to be a carrier, the FCC cannot demand this data, but must request it. Google is not legally obliged to respond, but refusal would stain their image and would in any case not stop the FCC from proceeding with information gleaned from other sources, including their antagonists, such as AT&T.

...please describe how the Google Voice call is routed...Does Google contract with third parties to obtain inputs for its Google Voice service, such as access to telephone numbers, transmission of telephone calls, and interconnection with local telephone networks?

In my previous post, I described how Google Voice is structured as a shell around a (partner) carrier's telephone network. FCC, of course, already knows this, but needs Google to state it explicitly. Which brings us to the following item:

Does the Google Voice service compete with any services classified as “telecommunications services” under the Act? Is Google Voice a reseller of “telecommunications services?”

The shell structure belies any Google claim that Google Voice is not a telecommunications service. Here the FCC is anticipating and likely to attack Google claims that the service is an related software or web application, or something like a PBX or other business phone which connects to a telecommunications service, and is therefore not a telecommunications service itself. The FCC's questions lead me to believe that they are ready to reject these avenues of defense.

For each functionality for which calls to particular telephone numbers are restricted, please describe the technological means by which those restrictions are implemented.

I suspect that what the FCC wants to know is if the blocking is performed in Google's own software or in their partner's network. In my previous post I speculated that the former is true; if so, they are performing a form of telephony routing, and this could hurt their case. If it is the latter, expect the FCC to dig deeper to understand how their partner decides to do the blocking: on their own or in cahoots with Google. The latter is almost certainly true since the FCC has successfully been clamping down on carriers who have recently been blocking calls to selected numbers. What I expect to hear from Google is that the carrier is performing this function on Google's request -- Google is their customer -- and not at the carrier's own initiative.

To what extent, if any, does Google charge for any of these services? Does Google intend to charge at some point for the service? How does Google currently pay for the service?

If there's money involved, that's a business, and the FCC is likely to use that as a basis to rule that Google is in the telecommunications business. While it's true that Google does not currently charge users directly for Google Voice, there is a flow of dollars. This may include ads on Google Voice's web views (even if not done today), but certainly does include payment to their carrier partner for call origination (points-of-presence and Caller Id setting) and incoming call routing (redirection from the Google Voice number to a physical phone number). The fact that Google is operating the service at a loss is not likely to be a mitigating factor since many carriers don't earn a profit.

...explain specifically what is meant by “invitation-only.” How many users of Google Voice are there at this time? Are there any plans to offer Google Voice on other than an invitation-only basis?

Here it appears that the FCC intends to puncture any defense based on Google Voice not being a generally-available public offer. This goes back to the previous discussion regarding non-discrimination. Is the invitation a marketing ploy or perhaps a means to manage service expansion? Either way, the end point is general availability, and similar Google examples such as Gmail can be referenced by the FCC to buttress this angle of attack.

If Google requests that any information or documents responsive to this letter be treated in a confidential manner...

This is a carrot to ensure Google is forthcoming with the information being requested. They are offering a blanket protection at this stage of the game, however the threshold for confidentiality will get higher should the FCC deem that Google Voice is a telecommunications service. As a common carrier, regular reporting of data, including financial data, will become mandatory, and some portion of it will become public.

All in all, Google is in a quandary. Their answers will almost certainly result in a determination that Google Voice is a telecommunications service, and therefore they will no longer be permitted to block calls. This will cause some havoc with Google's business operations. In particular, they will at a minimum be required to operate Google Voice under accounting separation from the rest of Google's business and place this segregated operation under regulatory oversight. If they are very unlucky -- although I don't believe the FCC will go this far -- Google could be required to structurally separate Google Voice, operating it as a subsidiary.

With their reply to the FCC due October 28, it won't be very long -- probably by year end -- until we know how the FCC will rule. If it goes against Google, expect an appeal: first to the FCC, and then to the courts. This matter could take some time to come to an ultimate end. The result is important to not only Google, but to every operator of similar services and VoIP providers.