Pursuant to several rulings, providers of VoIP services fitting the Federal Communications Commission's (FCC's) definition of "interconnected VoIP service" are now required to register with the FCC; contribute to the FCC's Universal Service Fund (USF), as well as FCC programs covering TRS, NANPA, LNP and Regulatory Fees; comply with E911 and Communications Assistance for Law Enforcement Act (CALEA) obligations; comply with the FCC's Customer Proprietary Network Information (CPNI) obligations; and comply with a diverse array of state tax and assessment obligations. In short, offering an interconnected VoIP service (whether "nomadic" or "fixed") is no longer an unregulated undertaking.
FCC Classification of Interconnected VoIP Service
The FCC has defined "interconnected VoIP service" as those VoIP services that: 1) enable real-time, two-way voice communications; 2) require a broadband connection; 3) require IP-compatible customer equipment; and 4) permit subscribers to receive calls from and place calls to the Public Switched Telephone Network. Such VoIP providers are subject to the regulatory requirements summarized below. Providers that do not fall within the definition will be subject to different regulatory treatment.
FCC Registration (Form 499-A)
Interconnected VoIP providers must file an FCC Form 499-A registration with the Universal Service Administrative Company (USAC). The FCC Form 499-A serves to register the company with the FCC and USAC as a provider of U.S. domestic, interstate services. This registration also automatically ties the company into the FCC's USF contribution system, identifying the company as a potential contributor under the program. Among other things, the form requires the company to list an agent for service of process in the District of Columbia and identify the states in which the company is likely to provide service. For more information, see http://www.tkcrowe.com/fcc-forms-499/.
Without determining whether VoIP services are "telecommunications services" or "information services," the FCC has concluded that interconnected VoIP providers are "providers of interstate telecommunications" for purposes of USF, and thus must contribute to USF. USF fees subsidize or underwrite telecommunications services for a number of different groups including residents of rural areas, low-income consumers, rural health care providers, schools and libraries. USF contributions are calculated based on quarterly submissions of FCC Form 499-Q and annual submissions of FCC Form 499-A (due each April 1st). Providers are then billed monthly and payment is required on a monthly basis. The contribution rate, which changes quarterly, has in recent years run at approximately 12-15 percent of combined interstate/international revenues, and presently stands at 15.3%.
USF Revenue Reporting
Interconnected VoIP providers must file an annual FCC Form 499-A (due on April 1st), and may be required to file quarterly FCC Forms 499-Q (due on February 1st, May 1st, August 1st, and November 1st of each year). For more information, see http://www.tkcrowe.com/fcc-forms-499.
Like wireless providers, interconnected VoIP providers can report revenues by using 1) a "safe harbor" (set at 64.9%); 2) actual revenues; or 3) a traffic study to estimate interstate revenues. The FCC set the VoIP "safe harbor" at 64.9% because it determined that interconnected VoIP service is predominantly used for interstate and international service, like wireline toll service. The percentage of interstate revenues reported to the FCC by wireline toll providers is 64.9%, so the FCC established the same percentage as a "safe harbor" for interconnected VoIP providers.
Other Federal Assessments
In addition to the payment of USF contributions, interconnected VoIP providers are also subject to other federal regulatory assessments. Specifically, such providers are required to contribute to the following programs: TRS, NANPA, and LNP. These factors all vary annually, and LNP additionally varies by region. They were most recently assessed as follows: TRS at 1.137%, NANPA at .00107%, and LNP at up to .0036% of intrastate (LNP and NANPA only), interstate, and international end-user revenues. In addition, interconnected VoIP providers are required to pay FCC Regulatory Fee assessments which are assessed annually, usually in September. They were last assessed at .342% of interstate and international end-user revenues in September 2009.
VoIP Legal Planning (Part 2)
Please check back soon for the next installment of this legal guide series which will discuss both VoIP E911 and Communications Assistance for Law Enforcement Act (CALEA) requirements.
* Update: As of 4/19, Part 2 has been published. Please see link below.
The foregoing is intended to provide a general overview only and should not be viewed as a substitute for conferring with qualified legal counsel. Each business will have unique requirements that should be analyzed by counsel.
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