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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************** Federal Communications Commission Office of Plans and Policy 1919 M Street NW Washington, DC 20554 OPP Working Paper Series 30 Internet Over Cable: Defining the Future In Terms of the Past August 1998 Barbara Esbin The FCC Office of Plans and Policy's Working Paper Series presents staff analysis and research in various states. These papers are intended to stimulate discussion and critical comment within the FCC, as well as outside the agency, on issues in telecommunications policy. Titles may include preliminary work and progress reports, as well as completed research. The analyses and conclusions in the Working Paper Series are those of the authors and do not necessarily reflect the view of other members of the Office of Plans and Policy, other Commission Staff, or the Commission itself. Given the preliminary character of some titles, it is advisable to check with authors before quoting or referencing these working papers in other publications. This document is available on the FCC's World Wide Web site at . Copies may also be purchased from International Transcription Services, Inc., 1919 M Street, NW, Room 246, Washington, DC 20554, (202) 857-3800. Copies are also available from the National Technical Information Service, 5285 Fort Royal Road, Springfield, VA 22161 (703) 487-4650. Internet Over Cable: Defining the Future in Terms of the Past Barbara Esbin* Associate Bureau Chief, Cable Service Bureau Office of Plans and Policy Federal Communications Commission Washington, DC 20554 August 1998 OPP Working Paper No. 30 * This Working Paper originated as a research project commissioned by former Cable Services Bureau Chief, Meredith J. Jones. I would like to thank her, William Johnson and JoAnn Lucanik for their helpful advice and comments in the early stages of the project. I am especially indebted to Robert Pepper, Dale Hatfield, and Stagg Newman for their guidance and assistance with the final project. The views expressed in this paper are those of the author, and do not necessarily represent the views of the Federal Communications Commission or any of its Commissioners or other staff. CONTENTS EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . i A. Background . . . . . . . . . . . . . . . . .. . i B. Summary of Contents . . . . . . . . . . . . .. . i C. Purpose of this Examination . . . . . . . . . .. .. . . vi I. INTRODUCTION . . . . . . . . . . . . . . . . . . 1 II. THE INTERNET AND THE 1996 ACT . . . . . . . . . . . 5 A. A Brief Description of the Internet . . . . . . .. .. . . 5 1. General Background. . . . . . . . . . .. .. . . 5 2. Features and Functions of Communications Over the Internet . . . . . . . . . . . . . .. . 13 B. Statutory Definitions and Policies. . . . . . . .. .. . . 22 III. VOICE AND DATA COMMUNICATIONS UNDER COMMISSION RULES . . . . . . . . . . . . . . 25 A. Computer I . . . . . . . . . . . . . . . . .. . 26 B. Computer II and Computer III . . . . . . . . . .. . 28 C. BOC Provision of Internet Access Under Computer III .. .. . .. . . 36 D. Frame Relay Order . . . . . . . . . . . . . .. . 38 IV. TELECOMMUNICATIONS AND INFORMATION SERVICES UNDER THE 1996 ACT . . . . . . . . . . . . . . .. . 41 A. Interconnection Rights and Obligations Under Section 251; Who is a "Telecommunications Carrier"? . . . . . . . . . . .. .. . . 42 B. Universal Service; Status of Internet Services and Service Providers Under Section 254 . . . . . . . . . . . . . . . .. . 43 1. Requirements of Section 254 . . . . . . . . .. .. . .. . .44 2. Section 254(c)(1) "Core" Telecommunications Services Do Not Include Internet Access . . . . . . . . . . .. . 45 3. Supportable Services for Schools and Libraries Include "Basic Conduit Access to the Internet" . . . . .. .. . .. . . 46 4. Non-Telecommunications Carriers May Receive Support for Internet Access Services Provided to Schools and Libraries .. . .. . . 47 5. Telecommunications Carriers Alone Must Contribute to Universal Service Support . . . . . . . . . . .. .. . .48 C. BOC Safeguards Under Sections 271 and 272 for InterLATA Information Services . . . . . . . . . . . . . . .. . 49 1. Enhanced Services are Information Services . .. .. . .. . . 50 2. Protocol Processing Services are Information Services. .. . .. . .. . . 51 D. BOC Safeguards Under Section 274 for Electronic Publishing .. . .. . . 53 E. Access Reform Order/Internet Usage NOI. . . . . .. .. . . 55 1. Access Charges . . . . . . . . . . . . .. . 55 2. Access Reform Order; Internet Service Providers Will Continue to be Treated as Access Service End Users . . . . . . .. .. . . 56 3. Internet Usage NOI; Inquiry Begun on Broader Issues . .. . .. . . 57 F. Report to Congress (Universal Service) . . . . . .. .. . .. . . 59 G. Summary. . . . . . . . . . . . . . . . . . .. . 66 V. EVOLUTION OF CABLE SERVICE . . . . . . . . . . . . . 66 A. Definition of "Cable Service" Under the 1984 Cable Act .. . .. . .. . . 66 B. "Cable Service" and "Cable System" Under Heritage .. .. . .. . . 72 C. Features of Internet Services Provided Over Cable Systems . .. . .. . .. . . 76 1. Advanced Cable Architecture . . . . . . . .. .. . . 76 2. Current Cable Internet Services . . . . . .. .. . . 78 VI. INTERNET SERVICE AS "CABLE SERVICE" UNDER THE 1996 ACT . . . . . . . . . . . . . . .. . 83 A. Revised Definition of "Cable Service" . . . . . .. .. . .. . . 83 B. Selected Cable Regulatory Issues . . . . . . . .. .. . . 90 1. Pole Attachments . . . . . . . . . . . .. . 90 2. Scope of Local Cable Franchises . . . . . .. .. . . 92 3. Franchise Fees . . . . . . . . . . . . .. . 93 4. Unbundling/Competitive Neutrality . . . . . .. .. . . 95 5. Resale/Interconnection of Cable Internet Access . .. . .. . .. . . 98 6. Cross-Subsidy . . . . . . . . . . . . .. . 99 7. Other Title VI Issues . . . . . . . . . .. .. . . 100 a. Regulation of Cable Facilities and Equipment . .. . . . . 101 b. Programming-Based Regulation . . .. .. . .. . . 103 c. Regulation Based on System Capacity or "Use of Channels". . . . . . . .. .. . . 104 d. Protection of Subscriber Privacy .. .. . .. . . 108 C. Summary . . . . . . . . . . . . . . . . . . 110 VII. INTERNET POLICY ISSUES AND PERSPECTIVES . . . . . . .. . 111 A. New Issues for Communications Policy . . . . . . .. .. . . 111 B. Regulatory Alternatives . . . . . . . . . . . .. . 114 VIII. CONCLUSION . . . . . . . . . . . . . . . . . 118 EXECUTIVE SUMMARY A. Background . . The Internet poses significant challenges for government policy makers and regulators. Difficult legal and policy issues arise from the fact that Internet-based services do not fit easily into the longstanding classifications for communications services under federal law or FCC regulations. Against these underlying category difficulties, the Telecommunications Act of 1996 ("the 1996 Act") radically restructured the regulatory landscape for the provision of local telephone communications services, attaching significant new consequences to statutory definitions derived from the technologies of the past. While the Internet arguably represents one form of technological and service convergence, the pro-competitive, de-regulatory program of the 1996 Act depends upon the viability of distinct regulatory categories for services, facilities, and service providers to establish the rights and obligations of carriers as competition is introduced to formerly monopoly-based markets. Integrated digital service offerings, such as those provided over the Internet, present fundamental problems to a regulatory framework dependent upon technological distinctions reflecting delivery of analog communications services. The Federal Communications Commission ("FCC") has already begun to grapple with the problems "integrated" or "converged" broadband digital services and service providers pose in terms of the two fundamental regulatory categories: "telecommunications" versus "information services." A third and equally important regulatory category is that of Title VI "cable services." The issue of the regulatory status of Internet-based services provided by cable operators over their cable systems arises as a result of revisions to the definition of "cable services" contained in the 1996 Act. This issue has yet to receive comprehensive assessment by the FCC. How the FCC resolves issues concerning Internet access and the provision of Internet-based communications services by cable operators has vast implications for both providers and consumers of Internet- based services. This Working Paper is intended to stimulate discussion and critical comment on these significant issues of regulatory classification and their consequences. It suggests, without advocating particular outcomes, that regulatory classification must be done in light of agreed- upon policy objectives. B. Summary of Contents Section I introduces the Internet regulatory classification issues arising under the 1996 Act, from the telecommunications and cable perspectives, including the FCC's historical approach to services like those now being provided by means of the Internet by enhanced service providers ("ESPs") and its current approaches implementing the provisions of the 1996 Act regarding "telecommunications" and "information services." Section II surveys the development of the Internet and its treatment in the 1996 Act.  The first portion contains a brief description of the Internet, its history and development, and identifies some of the qualities that set it apart from traditional communications networks and services. This discussion is crafted to highlight features of the Internet industry and Internet communications relevant to the legal and policy analyses that follow.  The second portion examines the 1996 Act's statutory definitions and policies that directly apply to the Internet, and the court decisions relevant to these sections.  The most significant statement of policy contained in the 1996 Act regarding the Internet is section 230(b)'s declaration that is the policy of the United States, "to promote the continued development of the Internet and other interactive computer services and other interactive media [and] to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation." Section III reviews the treatment of voice and data communications under the FCC's Computer Inquiry framework.  This series of proceedings, begun in the late 1960s, focussed on how to reconcile the convergence and interdependence of communication and data processing technologies within the strictures of Title II common carrier regulation.  The FCC established two categories of services: "basic" (telephone communications) and "enhanced" (data processing). The former when provided by telephone carriers would be regulated as common carrier telephone services under Title II; the latter would be treated as non- regulated "wire communications," subject only to the FCC's ancillary jurisdiction under Title I.  Basic telephone service would be provided as a common carrier service, subject to the FCC's Title II interconnection, tariffing, and facilities construction approval authority. Under Computer II, the subject common carriers would have to offer enhanced serviced subject to structural safeguards. Enhanced service offerings themselves would not be regulated. Competing enhanced service providers would be treated as non-carrier end users, able to purchase the underlying basic service as end users on an unbundled, tariffed basis. Computer III permitted certain dominant common carriers to provide enhanced services on an integrated basis, subject to non-structural accounting and interconnection safeguards. Section IV examines several of the key 1996 Act implementation orders the FCC issued in which it addressed the treatment of telecommunications and information services.  "Telecommunications" is defined in the 1996 Act 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 or received.  "Information service" is defined in the 1996 Act as the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing or making available information via telecommunications, and includes electronic publishing. Excluded is the use of such capability for telecommunications system or service management.  Internet-based services and Internet service providers fall within the regulatory categories of both "information" and "enhanced" services.  All of the services the FCC had previously classified as "enhanced" services would be treated as "information" services under the 1996 Act.  Information services are not telecommunications services.  Telecommunications carriers' telecommunications service offerings are subject to interconnection obligations; universal service contributions; and other common carrier obligations such as the payment of access charges for the origination and termination of long distance calls and Title II facilities-authorization requirements.  Internet service providers and other online service providers that had previously been considered as providing enhanced services under the Computer Inquiry decisions would continue to be treated as unregulated non-carriers.  In the future, certain services offered over the Internet, such as phone-to-phone Internet Protocol telephony, may be functionally indistinguishable from traditional telecommunications service offerings, and their non-regulated status may warrant re-examination. Section V addresses the evolution of cable service from its inception in the late 1950's through today. It is divided into two main portions.  The first portion discusses the definition of cable service and cable systems under the 1984 Cable Act (Title VI) and the FCC's application of these definitions in particular cases.  In 1984, "cable service" was defined as the one-way transmission to subscribers of video programming or other programming service, and any subscriber interaction required for the selection of such programming. "Video programming" is programming comparable to, or provided by, a television broadcast station. "Other programming service" is information that a cable operator makes available to all subscribers generally. Cable service was a bundled offering of transmission and content or programming.  Cable operators are not subject to interconnection or facilities unbundling requirements; they were subject to carriage requirements that require them to reserve channel capacity for certain programming provided by other entities.  The 1984 Cable Act established a fundamental distinction between a service that is provided over a cable system that is "cable service," and a broadband service provided over such a system that is not within the statutory definition.  The excluded category included two-way communications services such as e-mail, facsimile transmissions and data processing, services which are identical to those long defined by the Commission as "enhanced services" under the Computer Inquiry decisions, as well as basic telephone communications services.  The 1984 Cable Act's legislative history makes it clear that, such interactive information and enhanced services as are provided over the Internet could not come within the original definition of cable services insofar as they generally provide the subscriber with a two-way capacity to engage in transactions, or to store, transform, manipulate, or otherwise process information or data.  Prior to the 1996 Act's revision to the definition of cable service, it would not have been possible for the FCC to have interpreted the section 602(6) definition of "cable service" to include Internet-based services provided over cable systems.  The final portion of this section describes technological advances in cable system architecture that make it possible for cable operators to provide two-way, Internet-based broadband communications services. It concludes with a survey of the features of several of the major cable Internet services currently available. Section VI analyzes the significance of the revisions to the definition of cable services under the 1996 Act, and concludes that the FCC could find that Congress amended the section 602(6) definition of cable services to include certain cable-provided Internet services.  The 1996 Act added the phrase "or use," changing the definition of cable service to the: "one- way transmission to subscribers of video programming or other programming service, and subscriber interaction, if any, which is required for the selection or use of such video programming or other programming service."  The legislative history of this revision refers to cable services as now including "interactive services such as game channels and information services made available to subscribers by the cable operator, as well as enhanced services."  If cable services now include information and enhanced services, and Internet-based services such as those provided by the typical Internet service provider are enhanced/information services, then cable services may include Internet-based services "by definition."  The FCC could reasonably conclude that cable Internet-based services, such as Road Runner, @Home and like offerings, when provided by a cable operator over its cable system in its fran- chised service area, come within the definition of "cable services" under Title VI.  The result of such classification would be the creation of "parallel universes" for regulation of cable and telephony-provided Internet services. Cable operators would be permitted to provide such advanced cable services under a Title VI regime, free of interconnection and unbundling requirements, while certain telecommunications carriers would be obligated under the 1996 Act and the Commission's rules to offer network interconnection, unbundled network elements, and tariffed rates to competing enhanced and information service providers.  Whether this differing regulatory treatment is sustainable must be answered in light of congressional intent and the policy goal (or goals) to be achieved.  The remainder of the section analyzes selected regulatory issues that would flow from the classification of cable Internet services as Title VI cable services. These issues are broken down in 7 main categories: (1) pole attachments; (2) the scope of local cable franchises; (3) franchise fees; (4) unbundling/competitive neutrality; (5) resale/interconnection; (6) cross-subsidy; and (7) other issues arising under Title VI, including cable facilities and equipment regulation, programming-based regulation, system capacity issues and protection of subscriber privacy.  Issues 1, 2, 3 and 7 are discussed in terms of the "regulatory fit" of cable Internet-based services under Title VI cable television rules and requirements. The discussion highlights, where appropriate, areas of relative ease and relative difficulty that appear when old service categories are amended to incorporate new forms of service.  Issues 4 through 6 focus on certain questions of regulatory parity that would arise under Titles II and VI if the FCC were to classify cable-provided Internet services as cable services under Title VI. They highlight the tensions between the two regulatory frameworks. Section VII links the analysis of the current regulatory framework to the problems posed for communications policy by integrated networks and services.  The communications and communications services made possible by the Internet are fundamentally unlike those provided in the past over the technologically separate public switched telephone network, data networks, broadcast networks, and cable television systems, in that a single medium is capable of delivering nearly any type of communications service on an integrated basis. This renders application of existing regulatory categories difficult, if not impossible, for many forms of Internet-enabled communications. Section VIII concludes that, in the future it will become increasingly difficult to maintain that particular facilities and services are "cable" as opposed to "telecommunications."  This problem will be evident in the case of regulatory requirements written in terms of "cable operators" as opposed to "telecommunications carriers" and "information service providers."  When a single provider offers all three types of services in digital format over primarily fiber optic broadband plant, how these categories will apply is questioned. The same is true of regulatory requirements that are placed upon certain services, when a single software application together with access to the Internet makes it possible to provide voice, video or data communications, at the initiation of the end user, rather than the "network" operator.  The challenge for the regulator, at each step, is to examine the underlying purposes and policy goals behind existing regulatory categories, and to apply them only where those purposes and policy goals make sense. Any regulatory efforts in this arena should begin with an analysis of whether the operator in question exercises undue market power over an essential service or facility necessary to provide an essential service.  Ultimately, the FCC (and perhaps Congress) may need to develop a new regulatory paradigm and language that fits the new global communications medium known as the Internet. The regulatory categories, for example, of "basic" telephone and "enhanced" or "information," and "cable" services are more than twenty years old, whereas the technologies they are being applied to are new, and evolving rapidly in unforeseen and unforeseeable ways.  Although the FCC has repeatedly found that the old regulatory categories are essentially carried forward in the 1996 Act's new "telecommunications" and "information" service categories, the 1996 Act also gives the FCC the new and flexible regulatory category of "advanced telecommunications capability" in section 706.  Rather than concentrate solely on trying to squeeze the Internet and Internet-based services into familiar categories, the Working Paper suggests that the FCC might better endeavor to give full meaning and effect to this new regulatory category in its domain. C. Purpose of this Examination The Working Paper is intended to promote greater understanding on the part of both government and the private sector, of the unique policy issues that the provision of Internet-based services by cable operators raises for the FCC, local franchising authorities, and other governmental offices. The discussion of the regulatory classification issue for Internet over cable systems, and the related common carrier issues, is intended to map the contours of the legal and policy issues that surrounding the clash of new, advanced capabilities such as the Internet with the old regulatory framework. The discussion of an issue is not a suggestion that a particular outcome is either mandated or desirable. Rather, the goal of this mapping exercise is to facilitate informed discussion and decision-making in this very important area by identifying the correct coordinates and posing the relevant questions. I. INTRODUCTION The regulatory status of Internet-based services provided by cable operators over their cable systems is a significant implementation issue under the Telecommunications Act of 1996 (1996 Act), that has yet to receive comprehensive assessment by the Federal Communications Commission ("the Commission"). How the Commission resolves issues concerning Internet access and the provision of Internet-based communications services by its regulated industries has vast implications for both providers and consumers of Internet-based services. It is widely recognized that the Internet has revolutionized the computer and commu- nications industries in an unprecedented manner. According to those involved in its development, "[t]he Internet is at once a world-wide broadcasting capability, a mechanism for information dissemination, and a medium for collaboration and interaction between individuals and their computers without regard for geographic location." With respect to the Internet and related developments, traditional dividing lines become blurred as individual companies provide capacity to transmit communications for others and also provide their own content. The emergence of the Internet as a preeminent global communications medium was largely contemporaneous with the development of the 1996 Act's fundamental regulatory framework. As a result, the 1996 Act's primary approach to communications services, service providers and facilities neither fully reflects nor anticipates the impact of Internet-based communications capabilities on existing networks and the regulatory regimes that govern them. While the Internet arguably represents one form of technological and service "convergence," the 1996 Act's deregulatory, pro-competitive program depends upon the viability of distinct regulatory categories for services, facilities, and service providers to establish the rights and obligations of carriers as competition is introduced to formerly monopoly-based markets. As the Commission has recognized: "All of the specific mandates of the 1996 Act depend on application of the statutory categories established in the definitions section." The 1996 Act's distinction between "telecommunications" and "information" services, and the differing regulatory consequences that attach, largely carries forward the "basic" versus "enhanced" distinction created by the Commission during the course of its Computer Inquiry proceedings, beginning in the late 1960s. Integrated service offerings, such as those provided over the Internet, present fundamental problems to a regulatory framework dependent upon technological distinctions. As one writer recently observed, "[w]hen basic and enhanced services become intertwined and indistinguishable, the current regulatory system implodes." Currently the over-arching consensus among domestic policy makers is that the govern- ment should recognize the unique qualities of the Internet, and avoid unnecessary regulation and undue restrictions on electronic commerce conducted over the Internet. Yet regulators charged with implementing communications regulation find themselves unavoidably drawn into a process of determining the application or not, of existing rules whose terminology was established without regard to this new medium for delivering communications services. How the existing regulatory categories may be adopted to, or walled-off from, new developments such as the Internet, which fundamentally differs from existing communications capabilities, is a topic only beginning to be explored here and abroad. To date, that exploration has focused entirely on the issue from a telecommunications perspective. Future examinations must also consider the case of cable-provided Internet services. Cable service has traditionally been regulated and delivered as an integrated video, information content, and conduit service under Title VI. The regulatory model for cable services presents a particularly intriguing model in terms of current and future integrated digital communications offerings. The pre-1996 Act definition of cable services in the Communications Act was descriptive of the way cable services, which were developed to receive and transmit analog broadcast television signals by wire, were provided. Cable services have traditionally consisted of a series of channels and services largely, but not exclusively, under the control of the cable operator. The 1996 Act introduced a new component to the definition of cable services under section 602 by addition of the two words, "or use," to the provision describing subscriber interaction required for "the selection of such video programming or other programming service" found in the previous version. The legislative history states, "[t]he conferees intend the amendment to reflect the evolu- tion of cable to include interactive services such as game channels and information services made available to subscribers by the cable operator, as well as enhanced services." The Commission has only begun to evaluate the implications of Internet communications for the regulatory frameworks it administers. The Commission's examination of the 1996 Act definitions and rules relevant to the Internet has been undertaken exclusively in the context of its implementation of the Act's new regulatory regimes intended to bring competition to local telephone markets. The Commission has found that Internet-based services and Internet service providers fall within the regulatory categories of both "information" and "enhanced" services, and that information services are not telecommunications services. This classification places Internet-based communications services that utilize wireline public switched telephone network ("PSTN") connections outside the scope of Title II telecommunications common carrier regula- tion, but arguably within its Title I jurisdiction over wire communications. Cable industry representatives argue that the Commission could reasonably find that Internet-based services provided by telecommunications carriers over telecommunications facilities are information and/or enhanced services, but that Internet-based services provided over cable systems by cable operators are cable services. Among other benefits, bringing cable Internet-based services under the cable framework would provide the industry desired regulatory stability at the most fundamental level. Cable regulators and other government entities are also examining the regulatory status of cable Internet offerings. Local cable franchising officials are interested in franchising issues arising out of the introduction of Internet-based services in terms of whether such services are covered under their cable and/or telecommunications franchising authority. Similarly, Congress is currently considering legislation exempting Internet access and interactive computer on-line services from taxation generally. Whether this legislation will continuing to permit local franchising authorities to collect franchise fees on revenues derived from cable operators' provision of Internet-based services over their cable systems remains to be seen. The terms of the dialogue bear watching as they may shed additional light on Congress' view of the regulatory status of cable Internet services. The potential classification of Internet-based services as "cable services" when provided over cable systems by cable operators raises difficult definitional, jurisdictional and policy concerns. If the Commission were to classify cable-provided Internet services as cable services under Title VI, the result would be the creation of "parallel universes" for regulation of cable and telephony Internet-based services. Cable operators would be permitted to provide advanced cable services under a Title VI regime, free of interconnection and unbundling requirements, while certain telecommunications carriers would be obligated under the 1996 Act and the Commission's rules to offer network interconnection, unbundled network elements, and tariffed rates to competing enhanced and information service providers. The first portions of this paper provide a description of the Internet and how it functions; review the 1996 Act's approach to the Internet and Internet-related definitions; examine both the Commission's historical approach to services like those now being provided by Internet service providers; and review its implementation of the provisions of the 1996 Act with respect to the regulatory treatment or classification of the Internet. The final sections focus on the pre-1996 definition of cable services; the significance of the 1996 Act revision; and the specific issues raised by Congress' revision to the definition of cable services vis-a-vis Internet services, from both a definitional and policy perspective. They also discuss the regulatory consequences that would flow from a classification of cable-provided Internet services as Title VI cable services, and review several proceedings pending before the Commission. An understanding of this regulatory backdrop should provide the basis upon which informed decisions regarding Internet-based communications services may be made so that the goals of the 1996 Act, to preserve and promote the "vibrant and competitive free market that presently exists for the Internet and other interactive computer services," may be fully realized. II. THE INTERNET AND THE 1996 ACT A. A Brief Description of the Internet 1. General Background The Internet is not a single physical or tangible entity, but rather a complex series of interconnected computer networks forming a widespread information infrastructure, commonly described as a "network of networks." Such networks are connected in a manner which permits each computer in any network to communicate with computers on any other network in the system by using the non-proprietary Internet protocol ("IP"), a set of rules for exchanging data. This global web of linked networks and computers is referred to as "the Internet." Some of the computers and computer networks that make up the Internet are owned by governmental and public institutions, some are owned by non-profit organizations, and some are privately owned by corporations. The resulting whole is a decentralized, global medium of communications -- or "cyberspace" -- that links people, institutions, corporations, and governments around the world. Spiraling growth is one of the hallmarks of the Internet. By January 1997, there were over sixteen million host computers on the Internet, more than ten times the number of hosts five years earlier. Although the United States is still home to the largest proportion of Internet users and traffic, more than 175 countries are connected to the Internet. As many as 40 million people around the world were estimated to access the Internet by 1997. By 1998, the number using the Internet is estimated to have grown to over 100 million, with traffic on the Internet doubling every 200 days. "This expansion is driving dramatic increases in computer, software, services and communications investments." Origins. The Internet had its origins in 1969 as an experimental project of the U.S. Department of Defense's Advanced Research Project Agency ("ARPA"), that was called the "ARPANET." This network linked computers and computer networks owned by the military, defense contractors, and university laboratories conducting defense-related research. As ARPANET grew during the 1970s and early 1980s, several similar networks were established, primarily between universities. The Internet was based on the idea that there would be multiple independent networks of rather arbitrary design, beginning with the ARPANET as the pioneering packet switched network, but soon to include packet satellite networks, ground-based packet radio networks and other networks. A key underlying technical concept for the Internet was "open architecture networking." In an open network architecture, the individual networks may be separately designed and developed and each may have its own unique interface which it may offer to users and/or other providers, including other Internet providers. From its inception, the Internet was designed to be a decentralized, self-maintaining series of redundant links between computers and computer networks, capable of rapidly transmitting communications without direct human involvement or control, and with the automatic ability to reroute communications if one or more individual links were damaged or otherwise unavailable. Having successfully implemented a system for the reliable transfer of information over a computer network, ARPA began to support the development of communications protocols for transferring data and electronic mail (e-mail) between different types of computer networks. Recognizing the usefulness of computer networking, and especially e-mail, many universities, research facilities, and commercial entities began to develop and link together their own networks implementing these protocols. For example, the U.S. Department of Energy established "MFENET" for its researchers in Magnetic Fusion Energy; NASA Space Physicists established "SPAN," several individuals established "CSNET" for the (academic and industrial) computer science community with an initial grant from NSF, AT&T disseminated the UNIX computer operating system, which gave rise to "USENET," and the development by two individuals of the "BITNET," which linked academic mainframe computers in an "e-mail as card images" paradigm. With the exception of BITNET and USENET, many of the initial networks were intended for, and largely restricted to, closed communities of scholars and researchers in particular scientific and academic areas and there was little pressure for the individual networks to be compatible with one another. Internet Protocols. "TCP," or "Transmission Control Protocol," converts messages into streams of packets at the source, then reassembles them back into messages at the destination. "IP," or "Internet Protocol," handles the addressing, seeing to it that packets are routed across multiple nodes and even across multiple networks with multiple standards, including Ethernet, "FDDI" and X.25 protocol. The TCP/IP enables communications between distant public and private networks running over any medium: analog or digital phone lines, traditional network lines, fiber, cable television facilities and wireless systems. It is also "computer independent," running across personal computers (PCs), Macintoshes, workstations and mainframes. Other Internet protocols are the "file transfer protocol" or "ftp," which specifies how directories of files are named and exchanged among client and server computers, and "mail transfer protocols" or "MTP" are used by client computers to send and receive electronic messages -- e-mail -- through mail servers, which store, copy, distribute, and forward the messages to their destinations. Government Internet Policy. In 1985, the "NSFNET," a high-speed "backbone" network, funded and sponsored by the National Science Foundation, announced programs intended to serve the entire higher education community, regardless of discipline. A condition for a U.S. university to receive NSF funding for an NSFNET connection was that ". . . the connection must be made available to ALL qualified users on campus." That same year, NSF made a critical decision, that TCP/IP would be the mandatory protocol for the NSFNET program, in recognition of the need for a wide-area networking infrastructure to support the general academic and research community. This decision also supported the related decision to develop a strategy for establishing such infrastructure on a basis ultimately independent of direct federal funding. One step in process was to ensure the interoperability of ARPA's and NSF's pieces of the Internet by having the two organizations jointly author the formal specifications for "Internet Gateways." The military portion of ARPANET had been integrated in to the Defense Data Network by the early 1980s, and the civilian portion of ARPANET was taken out of service in 1990. By that time, the NSFNET had supplanted ARPANET as a national backbone to which smaller regional networks were connected. It is this series of linked networks (themselves linking computers and computer networks) that is today commonly known as the Internet. According to several of the developers of the Internet, in addition to selecting the critical TCP/IP protocols for the NSFNET program, federal agencies made and implemented several other policy decisions which shaped the Internet of today. These significant decisions are:  Federal agencies shared the cost of common infrastructure and jointly supported "managed interconnection points" for interagency traffic, which served as the models for the Network Access Points ("NAPs") and "*IX" facilities that are prominent features of today's Internet architecture.  To coordinate this sharing, the Federal Networking Council ("FNC") was formed. The FNC also cooperated with other international organizations, such as RARE in Europe, through the Coordinating Committee on Intercontinental Research Networking, "CCIRN," to coordinate Internet support of the research community worldwide.  This sharing and cooperation between agencies on Internet-related issues dates back to an agreement in 1981 between CSNET and the NSF, and ARPA that permitted CSNET traffic to share ARPANET infrastructure on a statistical and un- metered settlements basis.  NSF subsequently encouraged its regional (initially academic) networks of the NSFNET to seek commercial non-academic customers, expand their facilities to serve them, and exploit the resulting economies of scale to lower subscription costs for all.  On the NSFNET Backbone, the national-scale segment of the NSFNET, NSF enforced an "Acceptable Use Policy" which prohibited Backbone usage for purposes "not in support of Research and Education." The predictable and intended result of encouraging commercial network traffic at the regional and local level, while denying its access to nation-scale transport, was to stimulate the emergence and/or growth of private, competitive long-haul networks such as Performance Systems International ("PSI") and UUNet Technologies ("UUNet") and others.  The National Research Council published several reports commissioned by the NSF that laid the foundations for the concept of a future "information superhigh- way." One, in 1988, was entitled, "Towards a National Research Network," ushered in high speed networks that laid the networking foundation for the future information superhighway. Another, published in 1994, entitled, "Realizing the Information Future: The Internet and Beyond,"articulated an influential blueprint for the evolution of the information superhighway. It also anticipated the critical issues of intellectual property rights, ethics, pricing, education, architecture and regulation for the Internet.  NSF's privatization policy culminated in April, 1995, with the elimination of funding for the NSFNET Backbone. The funds recovered were competitively redistributed to regional networks to buy national-scale Internet connectivity from the now numerous, private long-haul networks. Thus, the backbone had made the transition from a network built from routers out of the research community to commercial equipment in just under nine years. Thus, while the Internet has been left unregulated in traditional terms, the federal government played a significant role in its funding and development, and through prescient and targeted policy decisions, largely shaped the Internet as we know it today. Domain Names. "Domain names" are the familiar names for Internet computers. The computer nodes on the Internet are divided into basic categories. Most in the United States are grouped into six generic "top-level domains" ("TLDs" or "gTLDs"): "gov," "mil," "edu," "com," "org," and "net;" respectively, government, military, educational, commercial, non-profit organizations, and net computers serving as gateways between networks. The names map to unique IP numbers that serve as routing addresses on the Internet. The "domain name system" or "DNS," translates Internet names into the IP numbers needed for transmission of information across the network. Currently, all Internet service providers recognize one standard for Internet addresses, known as: "Uniform Resource Locators," or "URLs." The phenomenal growth in Internet usage makes resolution of this issue of critical importance. As of December 1996, about 627,000 Internet domain names had been registered. Within one year, the number of registered domain names had nearly doubled, to reach 1.5 million. In 1993, the NSF contracted with a private entity to register three key Internet domain name addresses (.com, .org. and .net), numbering at that time in the thousands. Today, over one million domain names have been registered, and the NSF has recently announced that the commercialization of the Internet leaves the NSF less reason to stay involved, and has no plans to renew the private entity's contract to administer the names. The NSF's action regarding domain names brought to the fore the question of who has sufficient authority over the Internet to control the creation and administration of domain names remains. The Internet domain name governance issue is currently under examination both domestically and abroad. More recently, U.S. and European policy proposals on the future governance of the Internet are reported as indicating a growing consensus "that all pending decisions on Internet governance should be referred to the [a] new private-sector, self-regulatory Internet Assigned Numbers Authority (IANA)," which is to be created in the next few months. Decentralized Control. During the 1990s, the Internet expanded explosively beyond universities and scientific sites to include businesses and individual users connecting through commercial ISPs and consumer online services. By the time the federal agencies had ceased direct funding for the Internet, the TCP/IP protocols had supplanted or marginalized most other wide-area network computer protocols. Collaborative coordinating activities were responsible for much of the practical, engineering and standards-setting functions supporting Internet communications. "Because the Internet links together independent networks that merely use the same data transfer protocols, it cannot be said that any single entity or group of entities controls, or can control, the content made publicly available on the Internet, or limits or can limit, the ability of others to access public content." Rather, the Internet: exists and functions as a result of the fact that hundreds of thousands of separate operators of computers and computer networks independently decided to use common data transfer protocols to exchange communications and information with other computers (which in turn exchange communications and informa- tion with still other computers). There is no centralized storage location, control point, or communications channel for the Internet. No single government or network entity has responsibility for managing the Internet as a whole. Nonetheless, certain functions, such as domain name routing and standards setting must be coordinated to ensure technical compatibility if each network had to coordinate such issues with all others. Such coordination functions have largely been accomplished through voluntary agreements between large user organizations. As the Internet continues to evolve away from its origins as a method of linking military, scientific and academic communities to a commercial communications medium, changes in the way access and service are provided are likely to increase, which in turn are likely to result in increased calls for regulation. Defining the Internet. On October 24, 1995, the Federal Networking Council passed a resolution defining the term Internet, in consultation with members of the Internet and intellectual property rights communities. The definition is as follows: RESOLUTION: The Federal Networking Council (FNC) agrees that the following language reflects our definition of the term "Internet." "Internet" refers to the global information system that -- (i) is logically linked together by a globally unique address space based on the Internet Protocol (IP) or its subsequent exten- sions/follow-ons; (ii) is able to support communications using the Transmission Control Protocol/Internet (TCP/IP) suite or its subsequent extensions/follow-ons, and/or other IP-compatible protocols; and (iii) provides, uses or makes accessible, either publicly or privately, high level services layered on the commu- nications and related infrastructure described herein. As the foregoing definition demonstrates, it remains difficult even today to describe the Internet without lapsing into highly technical language. There are a huge variety of potential applications for the new Internet-based technologies, all of which offer broader options for global communication among telephone subscribers and computer users. Netscape has described the new paradigm of the Internet as "a connection-less protocol for communications traversing multiple interconnected carrier networks." The Internet also encompasses numerous "intranets" and sector enterprise networks which, although operated privately, use the same physical networks, technologies and protocols. Netscape argues that Internet technology is rapidly opening the way for new forms of "intermodal" competition. 2. Features and Functions of Communications Over the Internet Packet Switching. The basic operational characteristics of the Internet are that it is a distributed, interoperable, packet-switched network. It is comprised of an interconnected web of "host" computers, each of which can be accessed from virtually any point on the network. Routers (other computers) throughout the network regulate the flow of data at each connection point, in contrast to the centralized public switched telephone network, in which all users within a local exchange connect to a single switch location. The network is interoperable through use of common or open protocols, permitting many different types of networks and facilities to be transparently linked together, and over which multiple services can be provided to different users. Packet-switching splits up data transmitted over packet-switched networks into small chunks or "packets." In contrast to circuit-switched networks, it does not require a dedicated end-to-end transmission path (or circuit) to be opened for each transmission. Rather, each router calculates the best routing for a packet at a particular moment, given current traffic patterns, and send the packet to the next router, through a process known as "dynamic routing." At the destination point, packets must be reassembled, and packets that do not arrive must be resent. "This system allows for efficient use of network resources, as many different communications can be routed simultaneously over the same transmission facilities." Common Protocols. The TCP/IP protocols function by sending data packets on any available path, with dynamic self-adapting routing. The data comprising an Internet communication can therefore be handled by numerous different networks, with different portions of the communication being routed over completely different computer networks. Internet routers have no fixed routing tables, but rather dynamically update themselves by "talking" autonomously to other routers on the Internet in order to find available paths over which to transmit Internet data packets. There is no certainty that IP packets will follow the same path for a continuing stream of data or session; and if the underlying connectivity is broken or if congestion arises, an almost infinite array of alternative paths could be employed without the user or ISPs knowing it. When an end user sends information over the Internet, the data is first broken up into packets, [each of which contains] a header that indicates the point from which the data originates and the point to which it is being sent, as well as other information. TCP/IP defines locations on the Internet through use of "IP numbers." "Internet users generally do not need to specify the IP number of the destination site, because IP numbers can be represented by alphanumeric domain names such as 'fcc.gov.'" "Domain name servers throughout the network contain tables that cross reference these domain names with their underlying IP numbers;" the network "convert[s] the destination into its corresponding IP number and use[s] that for routing purposes." Internet Services. The routing mechanisms of TCP/IP do not define the actual services provided through the Internet to end users. The Internet services "depend on higher-level applications protocols, such as hypertext transport protocol ("HTTP"); file transfer protocol ("FTP"); network news transport protocol ("NNTP"), and simple mail transfer protocol ("SMTP"). "Because these protocols are independent of the Internet itself, a new application- layer protocol can be operated over the Internet through as little as one server computer that transmits the data in the proper format, and one client computer that can receive and interpret the data." By the late 1980s, the primary Internet "services" included e-mail, Telnet, FTP and USENET news. E-mail, the most widely used Internet-based service, allows users to send text-based messages to each other using a common addressing system. Telnet allows users to "log into" other proprietary networks, such as library card catalogs, through the Internet, and to retrieve data as though they were directly accessing those networks. FTP allows users to "download" files from a remote host computer onto their own system. USENET "newsgroups" enable users to spot and review messages on specific topics. World Wide Web. The World Wide Web or "Web" is one of the most well-known remote information retrieval methods. The Web began in 1989 as an experiment at CERN, the European Particle Physics Laboratory in Switzerland to enable members of CERN's widely dispersed high-energy physics community to share information readily. [It] was created to serve as the platform for a global, online store of knowledge, containing information form a diversity of sources and accessible to Internet users around the world. Though information on the Web is contained in individual computers, the fact that each of these computers is connected to the Internet through Internet protocols, allows all of the information to effectively become part of single body of knowledge. "The Web is essentially a series of documents stored in different computers all over the Internet." From the user's perspective, the Web appears as a giant global distributed database of multimedia documents. "Documents contain information stored in a variety of formats, including text, still images, sounds, and video." "An essential element of the Web is that any document has an address (rather like a telephone number). Most Web documents contain "links," which are short sections of text or image which refer to another document." "Many organizations now have 'home pages' on the Web. These are documents which provide a set of links designed to represent the organization, and through links from the home page, guide the user directly or indirectly to information about or relevant to that organization." Thus, full-scale user interfaces and complex services such as online shopping, continuously up-dated news information, and interactive games can be provided through the Internet over a non-proprietary system. Increasingly, the Web is becoming an interactive medium, where sites invite visitors to offer feedback via e-mail and to participate in online chats. The Web thus forms the foundation for virtually all of the new Internet-based services that are now under development. The Web utilizes three Internet protocols. The first, URLs, are a standard way of specify- ing a type of Web document, the domain name server where it is to be found, and the location of the document on the server's disk. The second, "Hypertext Markup Language or "HTML," is a standard format for Web documents that allows them to be formatted richly and to make references, or "Hyperlinks," using URLs, to other Web documents. The "Hypertext Transfer Protocol," or "HTTP," uses DNS to resolve URLs and uses TCP/IP to download HTML documents from servers to client browsing software. "The Web links together disparate information on an ever-growing number of Internet- linked computers by setting common information storage formats, the HTML, and a common language" or open architecture coding format that drives text and graphics for Web documents, the HTTP. "The Web was designed so that organizations with computers containing informa- tion can become part of the Web simply by attaching their computers to the Internet and running the appropriate Web software." Although from the user's perspective it may appear to be a single, integrated system, in reality it is a distributed system with no centralized control point. The Web exists fundamentally as a platform through which people and organizations can communicate through shared information. When information is made available, it is said to be "published" on the Web. Publishing on the Web simply requires that the "publish- er" has a computer connected to the Internet and that the computer is running Web server software. Various "search engines," or "browsers," such as "Yahoo," "Lycos" and "Magellan," have been developed to allow users of the Web to search for particular information among all of the public sites that are part of the Web. The browsers permit the user to access information by pointing to it with a computer "mouse" or keystroke. Service Providers. As noted above, in contrast to traditional telephone networks, no one entity or organization governs the Internet. Each facilities-based network provider that is interconnected with the global Internet controls operational aspects of its own network. It is still possible to differentiate "online service providers" from "Internet service providers" or "ISPs," although the distinctions have grown blurred in practice. Online service providers, such as America Online, Inc., CompuServe, Inc., Netcom, Earthlink and the Microsoft Network generally combine content origination, computer database services and proprietary interfaces with IP access (a computer connection) to the Internet. These services offer nationwide computer networks (so that subscribers can dial-in to a local telephone number) and the services provide extensive and well-organized content within their own proprietary computer networks and also allow subscribers to link to the much larger resources of the Internet. ISPs generally offer consumers and businesses purely access to the Internet, including at least an IP connection to an Internet host/router. More typically they offer a full point-to-point protocol IP connection, allowing the end user to connect to the Internet using communications software on his or her own computer. ISP offerings typically include dial-up analog, ISDN, dedicated and frame-relay based Internet connections. "Content providers make information available on 'servers' connected to the Internet, where it can be accessed by end users." By mid-1997, there were more than 3,700 ISPs in North America alone. More recent estimates indicate that the number of local and regional ISPs has grown to over 4,800. At one point, collectively, the "Big Four" online service companies -- America Online, Inc., ("AOL") CompuServe (CompuServe was later acquired by AOL), Microsoft Corp., and Prodigy, Inc. -- served 84% of the total audience. Including AT&T Corp.'s "WorldNet" (the largest so-called "pure" Internet access provider) into a "Big Five" takes the collective total market share of these entities up to 88%, and underscores the increasing contribution of Internet access services to the overall online services sector. At the time of the lower court cases challenging the Commu- nications Decency Act, these commercial online services had almost 12 million individual subscribers. Both ISPs and online service providers transport TCP/IP packets to the next IP router up the line, typically a mid-level or backbone Internet gateway. Metcalfe divides ISPs into the following categories: "Backbone" ISPs specialize in high-speed long haul circuits, and they employ large, fast routers and switches to provide their service. "Dial-Up" ISPs specialize in many points of presence, or "POPs," which accept local dial-in calls from clients using modems. "Backend" ISPs specialize in Web hosting and carrying frequently accessed information to server caches near to large populations of users. "Frontend" ISPs specialize in high-performance access and data caching for local user populations. In addition, the large telephone companies are beginning to integrate into Internet markets, in part through vertical and horizontal mergers. Infonetics Research, Inc. has also recognized segmentation among ISPs, and has classified providers into five distinct groups: "local and regional ISPs, competitive local exchange carriers, cable operator ISPs, major Internet backbone providers, and telco ISPs." "Backbone providers" "route traffic between Internet access providers, and interconnect with other backbone providers." Reports in mid-1997 indicated that five Internet "backbone" suppliers in the United States, MCI Communications, Sprint, UUNet Technologies Co. (subsequently acquired first by MFS Communications, Co., and later by WorldCom), BBN (later a unit of the GTE Corporation), and ANS, handled approximately 80 percent of the nation's Internet traffic. Worldcom Inc., a Jackson Miss. telephone company, announced in early September, 1997 that is would acquire Compuserve and then sell its consumer subscription service to AOL, the largest on-line provider in the U.S. In return, AOL was to sell its Internet telecommunications unit, ANS, to WorldCom. WorldCom also became owner of UUNet through its purchase of MFS Communications. In early October, 1997, WorldCom announced a bid to acquire MCI Communications Corp., another significant provider of Internet infrastructure. Subsequently, MCI and WorldCom announced an agreement to sell MCI's Internet holdings to address concerns by U.S. and European regulators that the combined company would unfairly control traffic on the Internet. Network Interconnection Arrangements. The sharing of traffic over the interconnected networks forming the Internet on a statistical and un-metered "settlements" (or "bill & keep") basis was a hallmark of early federal agency involvement in the development of the Internet. This system of traffic carriage free of charge became known as "peering." Another arrangement for traffic carriage was for one network to purchase the ability to have its traffic transit another network to other points on the Internet. Accessing the Internet. There are multiple options for individuals to access the Internet, in addition to the commercial on-line services, including access through their schools and employ- ers. Many educational institutions, businesses, libraries, and individual communities maintain a computer network linked directly to the Internet and issue account numbers and passwords enabling users to access the network directly or by modem. Many communities across the country have established "free-nets" of community networks to provide their citizens with a local link to the Internet, and to provide local-oriented content and discussion groups. In addition, individuals can also access the Internet using some (but not all) of the thousands of local dial-in computer services, often called "bulletin board systems" or "BBSs." Communicating Over the Internet. "Once one has access to the Internet, there are a variety of different methods of communication and information exchange over the network, which are themselves constantly evolving." Although constantly evolving, "the most common methods of communications on the Internet (as well as the major online services) can be roughly grouped into six categories: (1) one-to-one messaging (such as "e-mail"); (2) one-to-many messaging (such as "listserv"); (3) distributed message databases (such as "USENET newsgroups"); (4) real time communication (such as "Internet Relay Chat"); (5) real time remote computer utilization (such as "telnet"), and (6) remote information retrieval (such as "ftp," "gopher," and the "World Wide Web")." Various types of information, including text, data, computer programs, sound, visual images (i.e., pictures), and moving video images can be transmitted by most of these methods. Each of these six categories involves one of two basic uses of the Internet. "First, an individual who obtains access to the Internet can correspond or exchange views with one or many other Internet users. Second, a user can locate and retrieve information available on other computers." "For any communication to take place over the Internet, two pieces of software, adhering to the same communication protocol, are required. A user must have access to certain kinds of 'client' software, which enables his computer to communicate with and make requests of remote computers where information is stored; these remote computers must be running 'server' software, which provides information in response to requests by client software." B. Statutory Definitions and Policies The 1996 Act defines the term "Internet" as, "the international computer network of both Federal and non-Federal interoperable packet switched data networks." It defines the term "interactive computer service" to mean, "any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such systems operated or services offered by libraries or educational institutions." The 1996 Act added many definitions to those contained in the Communications Act of 1934, both in the general definitions of Title I, section 3, and in specific provisions under Title VI. Definitions relevant to the classification and regulatory treatment of Internet-based services that will be examined in this paper are found throughout Title I, governing wire communications ("telecommunications," "telecommunications carrier," "telecommunications service," "information service," "wire communication"); Title VI, governing cable communications ("cable service," "video programming," "other programming service," "cable system,""cable operator," "interactive on-demand services,"); and Section 706 of the 1996 Act ("advanced telecommunications capability"). The operative provisions of the 1996 Act deal with the Internet itself in fairly limited ways. The general approach to the Internet in the 1996 Act appears to have been that computer networks, web pages and on-line services comprised a market that was sufficiently competitive so that federal regulatory intervention was both unnecessary and undesirable. The major area where the Congress did attempt to regulate interactive computer services involved the presentation of indecent material which could be accessed by minors. In addition to several noncontroversial provisions, section 223 made the use of interactive computer services to display "patently offensive" sexually explicit material so that it was "available" to minors a criminal offense. Section 223(e)(6), which lists defenses to claims of violations of the operative provisions in subsection (a) and (d), specifically states that "[n]othing in this section shall be construed to treat interactive computer services as common carriers or telecommunications carriers." On the other hand, the Act protects what it terms "good samaritan" blocking of certain programming. The 1996 Act also protects those who provide connections to the Internet or networks they do not control, and who are not responsible for on-line content. This protection is reserved for "entities that simply offer general access to the Internet and other online content." Thus, a possible distinction appears to be imbedded in these provision of 1996 Act between the regulatory treatment of entities that provide only access to the Internet, but no content of their own origination, and Internet-based service providers who originate and provide their own online content together with access to the Internet. Several provisions of the CDA were held unconstitutional by two different three-judge courts in ACLU v. Reno and Shea v. Reno. These judgments were affirmed by the Supreme Court in Reno v. ACLU, 117 S.Ct. 2329 (1997). The Supreme Court held, inter alia, that the "indecent transmission" provision, section 223(a), and the "patently offensive display" provision, section 223(d), were content-based blanket restrictions on speech, and, as such, could not be properly analyzed on First Amendment challenge as a form of time, place, and manner regulation, and that the challenged provisions to be facially overly broad, in violation of the First Amendment. Significantly, the Supreme Court rejected attempts to find a proper analogy for the Internet to other previously recognized media of communications, and instead focussed on the unique nature of the Internet and Internet communications. "As the District Court found, 'the content on the Internet is as diverse as human thought.' 929 F.Supp., at 842 (finding 74). We agree with its conclusion that our cases provide no basis for qualifying the level of First Amendment scrutiny that should be applied to this medium." The Court found that the "vast democratic fora of the Internet has [not] been subject to the type of government supervision and regulation that has attended the broadcast industry,"and that the Internet is not as invasive as radio or television. Nor is the Internet supervised by any federal agency, and cannot be considered a "scarce" expressive commodity like broadcast spectrum at the outset of governmental regulation. "This dynamic, multifaceted category of communication includes not only traditional print and news services, but also audio, video, and still images, as well as interactive, real-time dialogue." The remainder of the CDA, apart from the "indecent transmission" and "patently offensive display" provisions, was left intact by the Court's decision in Reno v. ACLU. One of the remaining portions of the CDA is the "On-line Family Empowerment," provision. Section 509 of the 1996 Act, "Online Family Empowerment," amended Title II of the Communications Act of 1934 by adding at the end new section 230, "Protection for Private Blocking and Screening of Offensive Material." Section 230(a) contains five significant congressional findings with respect to the Internet: (1) The rapidly developing array of Internet and other interactive computer services available to individual Americans represent an extraordinary advance in the availability of educational and informational resources to our citizens. (2) These services offer users a great degree of control over the information that they receive, as well as the potential for even greater control in the future as technology develops. (3) The Internet and other interactive computer services offer a forum for a true diversity of political discourse, unique opportu- nities for cultural development, and myriad avenues for intellectual activity. (4) The Internet and other interactive computer services have flourished, to the benefit of all Americans, with a minimum of government regulation. (5) Increasingly, Americans are relying on interactive media for a variety of political, educational, cultural, and entertainment services. Section 230(b), in relevant part, states that, it is the policy of the United States, "to promote the continued development of the Internet and other interactive computer services and other interactive media [and] to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation." III. VOICE AND DATA COMMUNICATIONS UNDER COMMISSION'S RULES The Communications Act of 1934, as amended ("the Act") gave the Commission extensive authority over all "common carriers," which the Act defined to include all persons "engaged as a common carrier for hire, in interstate and foreign communication." Title II of the Act requires, inter alia, "that common carriers provide service at just and reasonable prices, and subject to just and reasonable practices, classifications and regulations; that they make no unjust or unreasonable discrimination; that they file tariffs, subject to Commission scrutiny; and that they obtain Commission approval before acquiring or constructing new lines." How to reconcile the "convergence and interdependence of communication and data processing technologies" with the strictures of Title II common carrier regulation has been the subject of one of the Commission's longest running, and most complicated, set of proceedings. In the mid-1960s, the Commission determined that communications over telephone lines increas- ingly involved computers, with respect to both the means of communication -- how a message is transmitted and switched -- and the content of the communication -- providing data processing services to users. The Commission initiated a series of proceedings in 1966, known as the "Computer Inquiry" proceedings, which, at the outset attempted to separate the regulatory treatment of computers that were involved in the means of communication from the treatment of computers which perform data processing services. From the outset, the central regulatory and policy questions in the Computer Inquiry proceedings were: "(a) the nature and extent of the regulatory jurisdiction to be applied to data processing services; and (b) whether, and under what circumstances, and subject to what conditions or safeguards, common carriers should be permitted to engage in data processing." The primary focus of the Commission's effort was the establishment of regulatory safeguards that would permit efficient telephone company participation in competitive computer and data processing service markets, while at the same time protecting their customers and competitive service providers against unlawful cross-subsidization and interconnection discrimination through the establishment of competitive safeguards. The regulatory categories that emerged reflect these goals, and still form the basis for regulation of certain Internet access services provided by Title II common carriers. A. Computer I Computer I delineated the circumstances in which computer use constituted common carrier communication subject to regulation under Title II of the Act versus unregulated data processing. Under Computer I, the Commission looked at the manner in which computeriza- tion was employed to determine how a service would be regulated. To facilitate this functional approach, the Commission established a three-part classification of computer and communications services, based on their technological and functional characteristics, with a different regulatory treatment for each classification. "Data processing" was defined as the use of a computer for the processing of information as distinguished from the use of computers for circuit or message- switching. "Processing" was defined as involving the use of the computer for operations which include, inter alia, the functions of storing, retrieving, sorting, merging and calculating data, according to programmed instructions. Title II empowers the Commission to regulate only common carriers engaged in interstate or foreign communication by wire or radio. The Commission determined not to regulate "data processing" services, which it found were being offered on a highly competitive basis. The Commission chose to regulate what it described as "communications services" as common carrier offerings under Title II of the Act. Thus, computer processing involved in the means of communications, such as message-switching, would be regulated under Title II of the Communi- cations Act, whereas computer services providing data processing to end users over the telephone network would not be regulated under Title II. "Hybrid" services, which the Commission defined as offerings that combine remote access data processing and message-switching to form a single integrated service, were to be treated as either data processing or communications services, based on case-by-case determinations as to which of the two functions were predominant in the particular hybrid service. The Commission specifically declined to regulate hybrid services that are primarily data processing services under Title II, despite their incorporation of a communications component, and regardless of whether that hybrid service was offered by a common carrier or non-common carrier. Although data processing services were not regulated under Title II, the Commission found that it had jurisdiction over these services under the ancillary jurisdiction of Title I. Under Computer I, the Commission permitted common carriers over a certain size to provide data processing services subject to a "maximum separation" requirement. The maximum separation requirement meant that common carriers could offer data processing services only through a separate corporate entity having separate accounting records, personnel, equipment and facilities. This requirement was designed to protect telephone ratepayers and competitive data processing service providers by preventing the common carriers from engaging in anticompetitive behavior, such as interconnection discrimination and from unfairly burdening their regulated communications services with costs properly attributable to unregulated data processing services. The Commission did not establish requirements for AT&T and its affiliated Bell System companies in Computer I, based upon the assumption that they were precluded from offering any type of data processing services by the terms of an antitrust consent decree then in effect. B. Computer II and Computer III Although the Computer I rules were upheld on appeal, case-by-case determination of which hybrid services were to be treated as unregulated data processing, as opposed to Title II common carrier services, ultimately proved unsatisfactory in light of the increasing convergence of these services. In response, the Commission initiated the Computer II, and later, Computer III proceedings. Computer II. In its 1980 Computer II Final Decision, the Commission adopted a regulatory scheme that distinguished between the common carrier offering of basic transmission services and the offering of enhanced services. This decision introduced the concepts of "basic" and "enhanced" services, and divided these services into two non-overlapping categories. These categories rest upon the nature of the processing performed. Basic service was limited to "the common carrier offering of transmission capacity for the movement of information," or "a pure transmission capability over a communications path that is virtually transparent in terms of its interaction with customer supplied information." Data processing, computer memory or storage, and switching techniques can be components of a basic service if they are used solely to facilitate the movement of information. Enhanced services were defined as "any offering over the telecommunications network which is more than a basic transmission service," and as "combin[ing] basic service with computer processing applications that act on the format, content, code, protocol or similar aspects of the subscriber's transmitted information, or provide the subscriber with additional, different, or restructured information, or involve subscriber interaction with stored information. The Commission's rules were revised to define enhanced services in terms of the functions that were considered to be different from basic telephone service: "the term 'enhanced services' shall refer to services, offered over common carrier transmission facilities used in interstate communications, which employ computer processing applications that act on the format, content, protocol or similar aspects of the subscriber's transmitted information; or involve subscriber interaction with stored information." The Commission acknowledged that with respect to the line it drew between basic and enhanced services, "[p]lausible arguments can be tendered for drawing it elsewhere. At the margin, some enhanced services are not dramatically dissimilar from basic services or dramatically different from communications as defined in the Computer Inquiry I." Nonetheless, the Commission refused to re-draw the line at this margin because such action potentially would subject the issue to constant adjudication over the status of individual services offerings. In addition, the Commission stated that it had tried to draw the line "in a manner which distinguishes wholly traditional common carrier activities, regulable under Title II of the Act, from historically and functionally competitive activities not congruent with the Act's traditional forms," in recognition of the policy "that substance not form govern the treatment of services within the Act's reach." "We have acted upon that belief by applying traditional Title II regulatory mechanisms to basic services and applying no direct regulatory mechanism for enhanced services." Continuing, the Commission stated that although it recognized "the existence of a communications component" and that "some enhanced services may do some of the same things that regulated communications services did in the past," there was also a substantial data processing component in all of these enhanced services, over which the agency had never imposed a scheme of regulation. Any agency regulatory decision in this area must assess the merits - - as we do in this order -- of extending regulation to an activity simply because a part of it is subject to the agency's jurisdiction where such regulation would not be necessary to protect or promote some overall statutory purpose. The Commission observed that because enhanced service was not explicitly contemplated in the Act, there is no more a requirement to confront it with a specific traditional regulatory mechanism than there was for, for example, with cable television (then unregulated under the Act), which has formal elements of common carriage and broadcast television. "Precedent teaches that the Act is not so intractable as to require us to routinely bring new services within the provision of our Title II and III jurisdiction even though they may involve a component that is within our subject matter jurisdiction." Because the Commission determined that the enhanced services market was competitive, and that consumers were deriving benefits from this competition, the Commission declined to regulate enhanced services as common carriage under Title II of the Act. Such comprehensive regulation of competitive services would not be "directed at protecting or promoting a statutory purpose." Nonetheless, the Commission again noted that it had jurisdiction over enhanced services under the ancillary jurisdiction of Title I, on the grounds that the enhanced services under consideration "constitute the electronic transmission of writing, signs, signals, pictures, etc., over the interstate telecommunications network ." It further found that it could reasonably exercise these ancillary powers by imposing certain separate subsidiary requirements where required, to assure wire communications services at reasonable rates. Regulation of enhanced services provided by common carriers was deemed necessary to prevent the dominant carrier from burdening its basic transmission service customers with part of the cost of providing competitive enhanced services. In addition, the Commission stated that it could rely on the direct regulation it retains with respect to the independent provision of basic services, which remain a component of the charges for enhanced services. It is clear from the foregoing discussion that the Commission created its distinction between basic and enhanced services with the jurisdictional consequences of regulation versus no regulation (i.e., Title II versus Title I) very much in mind. Again, as in Computer Inquiry I, the Commission's primary concern was in setting up definitional categories and regulatory consequences that would curtail the potential for anticompetitive conduct that could result from telephone carrier participation in competitive markets by means of integrated operations and service offerings. Of particular concern was that carriers with local telephone distribution networks could use their control over basic services to discriminate against other enhanced service providers' (ESPs) services and products, as well as with the potential for anticompetitive cross-subsidization from unregulated to regulated activities. To guard against such abuses, the Commission required the major carriers with local distribution networks, the AT&T companies and GTE, to provide enhanced services and CPE only through corporate affiliates fully separated from their basic services operations. Section 202 of the Act prohibits common carriers from discriminating unreasonably in their provision of communications services. Pursuant to section 203, common carriers are required to tariff their interstate communications services. Although the separate subsidiary requirements of Computer II applied only to AT&T (and later to the divested Bell Operating Companies, "BOCs"), the other requirements of Computer II applied to all facilities-based common carriers, regardless of whether their revenues exceeded the Computer I threshold. Carriers owning common carrier transmission facilities and providing enhanced services must unbundle the basic from the enhanced components of their services. They must offer the unbundled transmission capacity to other enhanced service providers pursuant to the same tariffed terms and conditions under which they provide such services to their own enhanced service opera- tions. On August 11, 1982, the District Court for the District of Columbia entered a consent decree, known as the "Modification of Final Judgment" or "MFJ," settling the antitrust lawsuit against the AT&T's Bell System. The MFJ required AT&T to divest itself of the BOCs. The MFJ distinguished between "telecommunications" and "information" services. The BOCs were to provide local exchange telecommunications services, but because of their control of the local exchange bottleneck, were prohibited from providing information services, interLATA services, manufacturing and selling telecommunications equipment, and manufacturing CPE. The interLATA information services restriction was modified in 1987 to allow BOCs to provide voice messaging services and to transmit information services generated by others. The MFJ's category of "information services" was very similar, although not identical, to the Commission's "enhanced services" category. The MFJ's definition of information services was the basis for the 1996 Act's use of that term. Computer III. In the Computer III proceeding, the Commission reviewed its customer premises and enhanced service safeguards, and replaced the structural separation requirement for the provision of enhanced computerized data services with a set of phased-in non-structural safeguards. Thus, BOCs and AT&T would be permitted to provide enhanced services on an "integrated" basis (i.e., through the regulated telephone company), subject to certain "non- structural" safeguards. In general, these safeguards were developed to (1) prevent cross-subsidi- zation through cost accounting measures, (2) prevent discriminatory network access or interconnection practices; and (3) to regulate joint marketing practices through protection of customer proprietary network information (CPNI). The Commission also preempted nearly all state regulation of the sale of enhanced services by communications common carriers. The nonstructural safeguards featured implementation of a concept known as "open network architecture" or "ONA," designed to ensure non-discriminatory access to network facilities and functions for all ESPs. ONA as originally envisioned in Computer III was to provide all ESPs equal access to the components of the BOCs' telephone network, as well as the ability to select network service elements not used by the BOCs in providing their own enhanced services. "As a first step in implementing Computer III, the Commission permitted the BOCs, pending full structural relief, to offer individual enhanced services on an integrated basis ("i.e., directly by the operating company, rather than through a separate affiliate) following approval of service-specific comparably efficient interconnection (CEI) plans." The other non-structural safeguards include: "accounting safeguards; timely disclosure to competing ESPs of network information, including technical interfaces; access to and use of CPNI; and quarterly reporting to help ensure that BOC provision of basic services to competing ESPs was non-discriminatory in terms of quality, installation, and maintenance." The CEI requirement for BOCs was based upon a finding that the BOCs possessed local network facilities that, although increasingly subject to by-pass by alternative local access providers, still possessed substantial market power in providing network access for most end users and other large companies. Similarly, the Commission found that although AT&T was increasingly subject to competition in the markets for its regulated offerings, AT&T's position in interexchange basic service markets remained sufficiently strong, and therefore warranted the imposition of CEI requirements on its enhanced service offerings. The Commission further concluded that it would limit the CEI and ONA requirements to AT&T and the BOCs even though other "dominant" carriers with market power in the provision of basic services, including the independent telephone companies, could engage in the discriminatory practices against enhanced service providers that CEI is designed to prevent. Later, these requirements were extended to the GTE local exchange companies. In addition, the Computer III decisions subject certain carriers to further unbundling requirements in offering an enhanced service. Under the ONA model, ESPs may obtain access to various unbundled ONA services, termed "Basic Service Elements," through access links described as "Basic Serving Arrangements." Non-carrier ESPs are not subject to Title II regulation, even if their enhanced service offering contains enhanced protocol processing service in conjunction with basic transmission service under the Commission's "contamination" theory. In Computer III, the Commission reaffirmed earlier decisions concluding that three types of protocol processing are not enhanced services within the meaning of its rules. First, the enhanced services definition applies only to end-to-end communications between or among subscribers. Thus, communications between a subscriber and the network itself (e.g., for call setup, call routing and call cessation) are not considered enhanced services. Second, protocol conversions necessitated by the introduction of new technology (requiring protocol conversion to maintain compatibility with existing customer premises equipment) are also outside the ambit of the enhanced services definition. Third, inter-networking protocol conversions -- those taking place solely within the network that result in no net conversion between users -- are treated as basic services. In early 1998, the Commission issued a Further Notice of Proposed Rulemaking in the Computer III docket, that is also part of its 1998 Biennial Regulatory Review. The Commission believed it necessary to not only respond to the issues remanded by the Ninth Circuit Court of Appeals regarding Computer III unbundling requirements for BOC intraLATA enhanced services, but also to re-examine its non-structural safeguards regime governing the provision of information services by the BOCs in light of the 1996 Act. Comment was sought, inter alia, on whether the Commission's "definition of basic service and the 1996 Act's definition of 'telecommunications service' should be interpreted to extend to the same functions, even though the two definitions differ." Comment was also sought on the impact of the Act's unbundling and structural separations requirements on the Commission's current non-structural safeguards framework; on the question of whether certain ISPs should have the same type of access to unbundled elements of BOC networks as is granted to telecommunications carriers under section 251 of the 1996 Act; and on certain specific proposals to streamline requirements for BOC provision of enhanced services. C. BOC Provision of Internet Access Under Computer III Consistent with Computer III, BOCs wishing to provide intraLATA Internet access service to connect end users to the Internet currently must file, and receive approval of, CEI plans that demonstrate that the underlying basic services are available on an equivalent, unbundled basis to unaffiliated ESPs. For example, Bell Atlantic received such approval from the Common Carrier Bureau in June 1996, for its "Internet Access Service" ("IAS"). Bell Atlantic's service description indicated that, in addition to access to the Internet, the carrier would offer users supporting services, including access to the World Wide Web and Usenet, electronic mail, and "chat" services. As described in the Bell Atlantic Internet Access CEI Plan Order, Bell Atlantic's IAS uses several tariffed services, including Switched Multi-Megabit Data Service ("SMDS"), Frame Relay Service, and Integrated Services Digital Network ("ISDN"). It also utilizes a new service, "Internet Protocol Routing Service" ("IPRS"), which consists of network routers located at LATA hub sites that collect the customer's end user traffic and concentrate it for connection and transport over a Bell Atlantic SMDS interface. The Bell Atlantic Internet Access CEI Plan Order recites the following service characteristics: "end user customers will be able to dial into IAS using a standard seven or ten- digit telephone number, or may obtain direct connection through special access service;" "in either case, the end user customer will subscribe to the telecommunications service connecting the end user to IAS;" "end users using switched access are connected to a digital modem or ISDN port at Bell Atlantic's premises;" "modems and ports provide the customer with connection to a terminal router;" "[a]fter the customer enters a valid identifying password, Bell Atlantic's processor will connect the call to the Internet." Once connected, switched access customers are able to navigate the Internet through "browser" software and an Internet "gateway" service to be provided by Bell Atlantic on an unregulated, unbundled basis. Dedicated access subscribers, in contrast, are continuously connected to the IAS and are not required to enter a password to access the Internet. Dedicated access subscribers also have the option of obtaining from Bell Atlantic browser software and Internet gateway functionality. Finally, the service includes design and hosting services for database providers. The Bell Atlantic Internet Access CEI Plan Order recites that the "design services will aid information providers in developing home pages and databases . . . the hosting services will provide ESPs with the ability to store Internet information, such as home pages, databases, bulletin boards, and other data on Bell Atlantic's processor, from which connection is provided to the Internet." D. Frame Relay Order The Common Carrier Bureau's Frame Relay Order applied to common carrier frame relay services the Computer II requirement that all carriers that own common carrier transmission facilities and also provide enhanced services, must unbundle basic from enhanced services and offer transmission capacity to other enhanced service providers under the same tariffed terms and conditions under which they provide such services to their own enhanced operations. This ruling came in response to a petition for declaratory ruling that AT&T's InterSpan Frame Relay Service is a basic transmission service, subject to tariffing and other requirements of Title II. The petitioner argued that AT&T possessed sufficient market power in the provision of frame relay service to warrant regulation. AT&T, in turn, sought a ruling that the decision regarding InterSpan should apply to all other interexchange carriers (IXCs). AT&T maintained that its InterSpan frame relay service was enhanced service because protocol conversion was an integral part its service; other parties commenting, including several BOCs, countered that they provide basic frame relay service under tariff. The 1995 Frame Relay Order described frame relay technology "as a relatively new, high- speed packet-switching technology used to communicate digital data between, among other things, geographically dispersed local area networks (LANs). In addition, frame relay technology often serves as the intermediary format for data traveling between different computer systems employing different communications protocols." The Frame Relay Order also recited that, in contrast to voice communications, data communications between computers is generally considered "bursty" traffic. "Packet-switched networks were developed to take advantage of the "bursty" nature of data communications. With packet switched data transmission, many users can share a single digital transmission channel. Each user's packet contains a header with address information that enable the network to route the packet to the proper destination." Packets may be sent separately and reassembled at their destination; packets from several users may be interspersed during transmission, allowing more efficient channel usage. The Frame Relay Order explained that "protocol conversion" is employed to permit existing customer terminal equipment to originate and terminate data sent by packet networks. Frame relay networks communicate "frames" containing digital data; frame relay switches are faster than packet switches because they do not store frames until positive acknowledgement is received from the destination switch. Rather, the destination switch, if it receives frames with errors, simply discards the frame, relying on higher-layer protocols of intelligent customers premises equipment to note omissions and take corrective action. The Frame Relay Order stated: Protocol refers to the ensemble of operating disciplines and technical parameters that must be observed and agreed upon by subscribers and carriers in order to permit the exchange of information among terminals connected to a particular telecom- munications network. A subscriber's digital transmission neces- sarily consists of two components: information-bearing symbols and protocol-related symbols. The information-bearing symbols constitute a subscriber's message. The protocol-related symbols initiate various transmission control functions and also define the format in which the information-bearing symbols appear within the composite data stream. "Protocol processing" was identified as "a generic term, which subsumes 'protocol conversion' and refers to the use of computers to interpret and react to the protocol symbols as the information contained in a subscriber's message is routed to its destination. 'Protocol conversion' is the specific form of protocol processing that is necessary to permit communications between disparate terminals or networks." The Frame Relay Order noted that, prior to its divestiture, AT&T offered neither packet switching services nor protocol conversion. Independent vendors of packet switched commu- nications services known as "value-added-network" service providers ("VANs") purchased common carrier transmission facilities (lines linking switches together) from AT&T and added "value" by reselling the underlying transport services in conjunction with their own packet switched information services. By 1995, AT&T, the BOCs and many other service providers (both facilities-based carriers and VANs) offered packet switched and protocol conversion services, such as asynchronous-to-X.25 conversion. The Frame Relay Order found that, despite some interim changes to the information transported over AT&T's packet switched data network, AT&T's frame relay service offered a transmission capability that is virtually transparent in terms of its interaction with customer- supplied data, and thus constitutes a basic service under the Commission's rules. InterSpan provided protocol conversion for CPE that did not have a frame relay interface. The "core" of InterSpan service was the provision of frame transmission in the frame relay format between the point where a customer's data enters the public switched network and the point where it leaves the network. Treating frame relay, and basic digital services in general, as basic common carrier services was in the public interest because such a classification provides competitors with access to the underlying basic service of facilities-based carriers that are better able to implement new communications technologies. This treatment, in turn, permits competitive ESPs to enter and compete in the market for such technologies, thus promoting the public interest by accelerat- ing the development of emerging digital technologies. AT&T was directed to unbundle its basic frame relay service from any enhancements, and offer it pursuant to tariff. AT&T retained the ability to package CPE and enhanced protocol processing with the basic frame relay service, so long as the underlying basic service is also separately offered under tariff. Significantly, the Frame Relay Order concluded that, pursuant to Computer II, all facilities-based common carriers providing enhanced services in conjunction with basic frame relay service must file tariffs for the underlying frame relay service and acquire that tariffed service in the same manner as resale carriers. This requirement was found to apply independently of any additional requirements under the Computer III proceedings. The Bureau's order did not distinguish dominant from non-dominant common carriers for purposes of this unbundling requirement. V. TELECOMMUNICATIONS AND INFORMATION SERVICES UNDER THE 1996 ACT Following enactment of the 1996 Act, the Commission initiated what it termed a "trilogy" of actions focussed on achieving Congress' goal of establishing a "pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans by opening up all telecommunications markets to competition." The trilogy consists of the Local Competition Order, the Universal Service Order, and the Access Charge Reform Order. In addition to the local competition trilogy, the Commission launched several proceedings to implement various provisions of the Act (sections 271, 272, and 274) governing BOC entry and/or continued provision of specific services in competitive markets, such as interstate interexchange and information services, telemessaging, electronic publishing and alarm monitoring. While not initiated expressly to determine the appropriate regulatory treatment of Internet- based services, each proceeding addressed issues that inevitably arise where Internet-based communications services are provided by Title II telecommunications common carriers. The key underlying questions raised in the "trilogy" are whether Internet-based communications are "telecommunications" or "information services" under the 1996 Act, and the related question of whether ISPs are telecommunications carriers, entitled to interconnection rights under section 251 and subject to universal service fund contribution obligations, or are access service end users, exempt from paying access charges for their local exchange connections, and exempt from contributing to the universal service fund. The BOC entry proceedings necessitated decisions on whether BOC-provided enhanced services fell into the category of "information services" under the 1996 Act, and if so, the consequences for their existing and future intra- and interLATA information service offerings, including Internet access services. A. Interconnection Rights and Obligations Under Section 251; Who is a "Telecommunications Carrier"? Section 251 requires all telecommunications carriers to interconnect directly or indirectly with other telecommunications carriers to facilitate the creation of a "network of networks." Section 251(a) specifically requires all telecommunications carriers: (1) "to interconnect directly or indirectly with the facilities and equipment of other telecommunications carriers;" and (2) "not to install network features, functions, or capabilities that do not comply with the guidelines and standards established pursuant to sections 255 or 256." The issue presented vis-a-vis the Internet was whether enhanced and information service providers would be subject to the reciprocal interconnection rights and obligations imposed on telecommunications carriers under section 251. The 1996 Act defines a "telecommunications carrier" as "any provider of telecommuni- cations services, except that such term does not include aggregators of telecommunications services (as defined in section 226)." A telecommunications carrier shall be treated as a common carrier under the Act "only to the extent that it is engaged in providing telecommuni- cations services, except that the Commission shall determine whether the provision of fixed and mobile satellite service shall be treated as common carriage." A "telecommunications service" is defined as 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." "Telecommunications" is defined in the Act 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." The Local Competition Order concluded that, to the extent a carrier is engaged in provid- ing for a fee domestic or international telecommunications, directly to the public or to such classes of users as to be effectively available directly to the public, the carrier falls within the definition of "telecommunications carrier." In addition, all telecommunications carriers that compete with each other would be treated alike regardless of the technology used, unless there is a compelling reason to do otherwise. Companies that provide both telecommunications and information or enhanced services, will be classified as telecommunications carriers for section 251 purposes. They will subject to the obligations under section 251(a), to the extent that such companies are acting as telecommunications carriers. Information and enhanced service providers that do not also provide domestic or international telecommunications, and are thus not telecommunications carriers within the meaning of the Act, do not obtain interconnection rights under section 251. B. Universal Service; Status of Internet Services and Service Providers Under Section 254 The Report to Congress states that the "universal service system is designed to ensure that low-income consumers can have access to local phone service at reasonable rates," and also ensures that consumers in all parts of the country, particularly those in sparsely populated rural areas, "are not forced to pay prohibitively high rates for their phone service." The Report further explains that before passage of the 1996 Act, "universal service was promoted through a patchwork quilt of implicit and explicit subsidies at both the state and federal levels." The 1996 Act directed the restructuring of universal support mechanisms so that support would be explicit, "and that 'every telecommunications carrier that provides interstate telecommunications service shall contribute, on an equitable and non-discriminatory basis, to the specific, predictable, and sufficient mechanisms established by the Commission to preserve and advance universal service.'" 1. Requirements of Section 254 Section 254 directs the States and the Commission to establish support mechanisms to ensure the delivery of affordable telecommunications service to all Americans, including low- income consumers, eligible schools and libraries, and rural health care providers. Section 254(c)(1) defines universal service as "an evolving level of telecommunications services that the Commission shall establish periodically under this section, taking into account advances in telecommunications and information technologies and services." In making this determination, the definition of the services that are supported by Federal universal service support mechanisms, are to take in account specific statutory characteristics, including whether the services "have, through the operation of market choices by customers, been subscribed to by a substantial majority of residential customers." Section 254 explicitly designates elementary and secondary schools and libraries among the entities eligible to receive the benefits of universal service support. Section 254 describes the services that are to be supported for schools and libraries in terms of "telecommunications services," "special" or "additional" services, and access to "advanced telecommunications and information services." Section 254(c)(3), "special services," provides that, in addition to the telecommunications services designate for support under section 254(c)(1), the Commission may designate "additional services" for universal support for schools, libraries and health care providers for purposes of subsection (h). Section 254(d) mandates that universal service support should be explicit, and that, with respect to federal universal support, "every telecommunications carrier that provides interstate telecommunications services shall contribute, on an equitable and non-discriminatory basis, to the specific, predictable, and sufficient mechanisms established by the Commission to preserve and advance universal service." Implementation of section 254 required: (1) examination of whether the telecommunica- tions services supportable by universal service funds could be defined to cover information and enhanced services, including Internet access services; (2) examination of whether the access to "advanced telecommunications and information services," and the "additional" services supportable for schools, libraries and health care providers includes Internet access services; and (3) determination of the status of Internet service providers with respect to the statutory obligation to contribute to universal support mechanisms, and the statutory right to benefit from such support. 2. Section 254(c)(1) "Core" Telecommunications Services Do Not Include Internet Access The Universal Service Order defines the "core" or "designated" telecommunications services that will be supported by universal service support mechanisms as: single party service, voice grade access to the PSTN, dial tone multi-frequency ("DTMF") signaling or its functional equivalent, access to emergency services, access to operator services; access to interexchange service, access to directory assistance, and toll limitation services for qualifying low-income consumers. The Universal Service Order addressed the question of whether Internet access should be included in the category of core telecommunications services supported by universal service mechanisms. It recognized that Internet access consists of more than one element. The Universal Service Order stated that Internet access includes a network transmission component, which is the connection over a LEC network from a subscriber to an ISP, and an information service component. Voice-grade access to the public switched network usually enables customers to secure access to an ISP, and thus to the Internet. Thus, it concluded that "the information service component of Internet access cannot be supported under section 254(c)(1), which describes universal service as an 'evolving level of telecommunications services.'" 3. Supportable Services for Schools and Libraries Include "Basic Conduit Access to the Internet" The Universal Service Order adopted the Joint Board's recommendation that all eligible schools and libraries should receive discounts of between 20 and 90 percent on all telecom- munications services, Internet access, and internal connections provided by telecommunications carriers, subject to an annual cap. However, the Commission took this action pursuant to section 254(c)(3) and section 254(h)(1)(B) rather than section 254(h)(2), on which the Joint Board relied. The Commission concluded that sections 254(c)(3) and 254(h)(1), in the context of the broad policies set forth in section 254(h)(2), authorized it to permit schools and libraries to receive, the telecommunications and information services needed to use the Internet at discounted rates provided by telecommunications carriers. The Commission reasoned that section 254(c)(3) grants it authority to "designate additional services for support" and section 254(h)(1)(B) authorizes it to fund any section 254(c)(3) services. In addition, the Commission noted that section 254(a)(1) and (a)(2) mandate that the Commission define the "services that are supported by Federal universal support mechanism," but does not limit support to telecommunications services. The Commission concluded that use of the broader term "services" in section 254(a) provides further validation for the inclusion of services in addition to telecommunications services in sections 254(c)(3) and 254(h)(1)(B). Accordingly, schools and libraries may receive rate discounts from telecommunications carriers for the basic "conduit" access to the Internet, and that it could include the "information services," e.g., protocol conversion and information storage, that are needed to access the Internet, as well as internal connections, as "additional services" that section 254(h)(1)(B) , through section 254(c)(3), authorizes the Commission to support. The Commission clarified that there are two types of "information" services at issue, and that it is not granting discounts on the cost of purchasing information content. Rather, it is authorizing the provision of discounts on the data links and associated services necessary to provide classrooms with access to those educational materials, even though these functions meet the statutory definition of "information services" because of their inclusion of protocol conversion and information storage. Without the use of these "information service" data links, schools and libraries would not be able to obtain access to the "research information, [and] statistics" available free of charge on the Internet. It noted that these information services are essential for effective transmission service, i.e., "conduit" service; they are not elements of the content services provided by information publishers. The Commission also offered a more precise definition of what "information services" will be eligible for discounts under this program by cross-referencing the category of services excluded from the definition of "electronic publishing" in section 274 of the Act. The Commission specified that eligible schools and libraries will be permitted to use support to obtain discounted informa- tion services consisting of: (i) the transmission of information as a common carrier; (ii) the transmission of information as part of a gateway to an information service, where that transmission does not involve the generation or alteration of the content of information but may include data transmission, address translation, protocol conversion, billing management, introductory information content, and navigational systems that enable users to access information services that do not affect the presentation of such information services to users; and (iii) electronic mail services [e-mail]. 4. Non-Telecommunications Carriers May Receive Support for . .Internet Access Services Provided to Schools and Libraries The Commission determined that sections 254(c)((3) and 254(h)(1)(B) authorized support for telecommunications, Internet access and internal connections provided by telecommunications carriers, and relied upon sections 254(h)(2)(A) and 4(i) to authorize support for discounts for Internet access and internal connections provided by non-telecommunications carriers. Thus, the same non-telecommunications services eligible for discounts if provided by telecommunications carriers under section 254(h)(1)(B) are eligible for discounts if provided by non-telecommunications carriers, such as cable operators, under section 254(h)(2)(A). 5. Telecommunications Carriers Alone Must Contribute to Universal . Service Support Section 254(d) directs that all telecommunications carriers that provide interstate telecom- munications services must contribute to the support mechanisms. It also states that the Commission may require "[a]ny other provider of interstate telecommunications" to contribute to universal service, "if the public interest so requires." To be considered a mandatory contributor to universal service under section 254(d): (1) a telecommunications carrier must offer "interstate" "telecommunications;" (2) those interstate telecommunications must be offered "for a fee;" and (3) those interstate telecommunications must be offered "directly to the public, or to such classes of users as to be effectively available to the public." The Commission concluded that only common carriers should be considered mandatory contributors to the support mechanisms, but that any entity that provides interstate telecommunications to users other than significantly restricted classes should be required to contribute under the Commission's "permissive" authority. Entities in this latter category may include private network operators that lease excess capacity on a non-common carrier basis, as "other providers of interstate telecommunications." Conversely, information and enhanced service providers are not required to contribute to support mechanisms to the extent they provide such services. The Commission rejected the argument that information services are "inherently" telecommunications services because information services are provided "via telecommunications." The Commission stated that information services are not inherently telecommunications services under section 254(h), because that section directs the Commission to enhance access to advanced telecommunications and information services. The Commission reasoned that if they were the same thing, the language "and information services" would be repetitive. The Commission observed that ISPs alter the format of information through computer processing applications such as protocol conversion and interaction with stored data, while the statutory definition of telecommunications only includes transmissions that do not alter the form or content of the information sent. Telecommunications services, by definition, do not involve a change in the form or content of the user's information as sent or received, whereas information services, although provided via telecommunications, by definition involve "generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information." Finally, the Commission recognized that the classification of information services, and especially Internet-based services, raises many complicated and overlapping issues, with implications far beyond section 254, and indicated that it would review the status of ISPs under the 1996 Act in a comprehensive manner in the Internet Usage Notice of Inquiry. As discussed infra, the Commission addressed many of these classification issues in its April 10, 1998 Report to Congress. C. BOC Safeguards Under Sections 271 and 272 for InterLATA Information . Services The 1996 Act ended the prohibition against provision of interLATA services by BOCs that was imposed by the MFJ. The 1996 Act conditions the BOCs' entry into certain in- region interLATA services on their compliance with the requirements of section 271. Under section 271, the Commission must determine, among other things, whether the BOC has complied with the safeguards imposed by section 272. Section 272 established certain structural safeguards for BOC entry into interLATA telecommunications services originating in states in which they provide local exchange and exchange access services, interLATA information services, and BOC manufacturing activities. With enumerated exceptions, section 272 generally requires that such services be provided through one or more structurally separate affiliates. The Commission's proceeding to implement what it termed the "non-accounting" (i.e., structural safeguards) in section 272, addressed the relationship between its category of "enhanced services," and the statutory definition of "information service," for purposes of determining which services must be provided through separate affiliates. 1. Enhanced Services are Information Services The Non-Accounting Safeguards Order concluded that all of the services that the Commission has previously considered to be "enhanced services" are "information services." The Commission stated that "interpreting 'information services' to include all 'enhanced services' provides a measure of regulatory stability for telecommunications carriers and ISPs alike, by preserving the definitional scheme under which the Commission exempted certain services from Title II regulation." It found "no basis to conclude that by using the MFJ term 'information services,' Congress intended a significant departure from the Commission's usage of 'enhanced services.'" However, the Commission also found that "information services" category includes services that are not classified as enhanced services under the Commission's rules. That is, "while all enhanced services are information services, not all information services are enhanced services." Under Commission precedent, "enhanced services" are limited to services offered over common carrier transmission facilities used in interstate communications. In contrast, "information services" under the 1996 Act may be provided, more broadly, "via telecommunica- tions." Further, live operator telemessaging services that do not involve computer processing applications are information services, even though they do not fall within the definition of "enhanced services." 2. Protocol Processing Services are Information Services The Commission concluded that, subject to certain exceptions, "protocol processing services constitute information services under the 1996 Act." It rejected arguments that the "information services" category only includes services that transform or process the content of information transmitted by an end-user. Rather, the statutory definition makes no reference to the term "content," but requires only that an information service transform or process "informa- tion." The Commission also agreed 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 di