The FCC’s inquiry involves Google’s call-blocking policy.  In June, Google began noticing extremely high-cost calls to a concentrated number of rural destinations which generated vastly disproportionate costs.  Its internal investigations, using data filters to sort out call patterns, revealed that the top 10 telephone prefixes (the area code plus the first three digits of a seven digit number) to US destinations generated more than 160 times the expected amount and accounted for 26.2 percent of its monthly U.S. costs.  By August, Google began restricting calls to certain high-cost destinations.  Google’s response letter to the FCC describes the Google Voice service and explains Google’s investigation into and rationale behind its call blocking policy.  It claims that its engineers developed a “tailored solution” so that Google Voice currently restricts calls to fewer than 100 specific phone numbers, a practice which Google’s counsel believes is necessary to “prevent these schemes from exploiting the free nature of Google Voice.” 

While Google has only recently began blocking costly calls, the practice whereby rural telecoms charge long distance carriers exorbitant rates to connect and terminate calls from their networks is not new.  In may cases these telecoms partner and share revenue with adult chat service, conference calling centers and others to attract traffic to their networks.  AT&T, and other long-distance carriers, have long complained and sued over these so-called traffic pumping schemes.  However, as common carriers subject to FCC regulations, they were banned in 2007 from blocking calls and are required to deliver phone calls without discrimination to all numbers dialed.  AT&T’s complaint to the FCC is rooted in its contention that Google’s call blocking policy is enabling it to dance around this ban that applies to other carriers.

However, this recent skirmish over Google Voice is really part of a larger debate currently playing out in the regulatory stage over “network neutrality” rules being reexamined by the FCC and AT&T has framed Google’s actions as part of the debate. 

In its Statement on Google Voice and Net Neutrality, AT&T stated that “By openly flaunting the call blocking prohibition that applies to its competitors, Google is acting in a manner inconsistent with the spirit, if not the letter, of the FCC’s fourth principle contained in its Internet Policy Statement.“   The FCC’s fourth principle on net neutrality states that “consumers are entitled to competition among network providers, applications, and service providers, and content providers.“  

Some members of Congress are also concerned about the adverse impact on the market and support for universal service if Google is allowed to operate its telephone services outside of the rules that govern carriers.  As they stated in their letter to the FCC “[I]t is our opinion that a company should not be able to evade compliance with important principles of access and competition set forth by the FCC by simply self-declaring it is not subject to them without further investigation.”

Google responded to these charges by stating that “The FCC’s open Internet principles apply only to the behavior of broadband carriers – not the creators of Web-based software applications.” Google claims that AT&T is attempting to blur the distinction between Google Voice and traditional phone service but maintains that web applications like Google Voice and Skype shouldn’t be treated like traditional phone service.

Google distinguishes Google Voice from traditional phone carriers by explaining that unlike traditional carriers which charge users for their services, Google Voice is a free, web-based software application similar to e-mail rather than a telecom service designed to “supplement and enhance existing phone lines, not replace them” and should therefore be exempt from common carrier rules.   The service is currently available to a limited number of users on an invitation-only basis.  Users are still required to have an existing land or wireless line in order to use Google Voice and are still able to make outbound calls on any other phone device.  Therefore, because Google Voice is a software application, not a telephone company, Google believes that its service is not and should not be subject to common carrier laws or the FCC’s jurisdiction.

Distinctions aside, with nearly 1.5 million users, the increasingly popular service is viewed by some as running a rival service to traditional phone companies.  The heart of the FCC’s inquiry is whether Google Voice is a telecom service or an online software application and whether this distinction really matters.  How different is a call traveling directly over carrier lines from one that goes through software applications?  As of now, the difference appears to be the ability to block less than 100 calls, an option not available to AT&T and other carriers.

Whether the FCC agrees with Google’s characterization of its service and its interpretation of the current open Internet principles may have a dramatic impact on both the telecom and internet marketplaces.  And the FCC’s newly proposed rules on network neutrality may also play a prominent role in this debate.  We will continue to monitor the proceedings and keep you posted.

A testament to the significance of this concern is last week’s victory of the Office of the Privacy Commissioner of Canada.  Facebook was charged with violating Canada’s privacy laws, both with respect to the disclosure of personally identifiable information of Facebook users to over one million third party Facebook application developers, as well as keeping a user’s personal information indefinitely (including after deactivation of a user’s account).  Along with the attention of other social network providers, Canada’s investigation certainly elicited global attention, as it became the first country to legally examine Facebook’s privacy policies and procedures.  This investigation has also led the Canadian privacy commission to examine the privacy policies and practices of six other social networking sites.  The Privacy Commissioner’s chief complaint was that the way in which Facebook provides information about its privacy policies to its users is often confusing or incomplete.

As a result of the investigation, Facebook announced that it will implement new privacy safeguards and modify its privacy policy accordingly.  Among other things, Facebook has agreed to compel third-party developers to disclose to Facebook users the precise types of information they plan to access and use.  Under the current policy, users who want to utilize the third-party applications via their Facebook account are required to agree to share all of their data with such third party developers. 

The new procedures are intended to ensure that users are given the opportunity to consent to use of each type of personal information (such as date of birth, hometown, etc.), but more importantly have the ability to refrain from approving the use/disclosure of certain types of information while still being able to utilize the third party applications.  Facebook will also provide users clearer explanations and information in terms of deactivating their user accounts, specifically to make it clearer to users the difference between deactivation and deleting their information permanently.  Although Facebook plans to begin updating their privacy policy within the next month or so, implementing the technical changes will be performed over the course of the next year. 

While Facebook was the primary target of the investigation, we believe that the Canadian government’s actions, and Facebook’s response, will have a substantial ripple effect, with businesses carefully reconsidering their terms of use and privacy policies to ensure compliance with both the letter and spirit of privacy laws and regulations throughout the world. 

The technology platform promises that the incoming administration “will work to ensure the full and free exchange of information through an open Internet and use technology to create a more transparent and connected democracy” and “will encourage the deployment of modern communications infrastructure to improve America’s competitiveness and employ technology to solve our nation’s most pressing problems — including improving clean energy, healthcare costs, and public safety.”  These are pretty lofty goals.  But there are a few specific issues in the platform that are worth mentioning.

First, in unequivocal terms, the incoming administration states its support for net neutrality.  This is a topic we’ve written about before (here and here).  The net neutrality issue may also become a higher profile issue on Capitol Hill when the next Congress convenes.  Senator Byron Dorgan, who introduced the Internet Freedom Preservation Act in 2007 (a bill which went nowhere), has indicated that he will introduce the legislation again, in the hopes that support from the White House may give the bill needed momentum.

The second issue worth noting in the platform is a pledge to appoint the nation’s first CTO.  This position appears to be different from the position of IP enforcement “czar” that was created by the IP-PRO Act (discussed here).  While there has been speculation as to who will be appointed (some familiar names have been tossed out and at least one (Eric Schmidt, CEO of Google) has already said he’s not interested), the more critical issue is what the CTO will be able to accomplish.  According to the technology agenda, the CTO’s role will be “to ensure the safety of our networks and lead an interagency effort, working with chief technology and chief information officers of each of the federal agencies, to ensure that they use best-in-class technologies and share best practices.”  Again, lofty goals and perhaps the makings of a major bureaucratic turf war.  But it appears that the incoming administration wants its CTO’s primary focus to be on transparency to ensure that the government operates in an open and accessible environment.

Lastly, even though the long presidential campaign is over, the Obama administration will continue to use the Web as a primary means for communicating to and involving people in its policy decision-making and implementation process. The centerpiece of that effort will be www.change.gov, the website established the day after the election, which, along with news, videos, information on the transition and detailed policy papers, enables visitors to register on-line to receive e-mail updates directly from the administration.  Whether or not this will make for more effective governance is a judgment that will have to wait.  But we appear to be on the verge of the first Web 2.0 presidency.