Written by attorney Jonathan Soukias Marashlian

VoIP Regulatory Issues: What’s Past May Be Prologue for Non-Interconnected VoIP

Just when VoIP providers started getting their arms around the decade-long march of regulation and taxation that now captures “PSTN Interconnected" VoIP services, Congress and the FCC recently threw down another gauntlet. In October 2011, the FCC implemented the 21st Century Communications and Video Accessibility Act of 2010 (CVAA). Within the CVAA, Congress codified a brand new category of advanced communications service defined as “Non-Interconnected VoIP service." Non-Interconnected VoIP service is defined as a service that “enables real-time voice communications that originate from or terminate to the user’s location using Internet protocol or any successor protocol; and requires Internet protocol compatible customer premises equipment; and does not include any service that is an interconnected VoIP service." The FCC’s newly implemented regulations extend Telecommunications Relay Services (TRS) Fund contribution duties to Non-Interconnected providers. These regulations are rather narrow and appear directed at capturing one-way VoIP services, such as Skype. The rules and corresponding Form 499-A Instructions direct that the TRS Fund contributions of Non-Interconnected providers be assessed against interstate end-user revenues. For providers whose interstate end-user revenues are generated from Non-Interconnected VoIP services offered with other (non-VoIP) services, contributions are not to be assessed against such revenues unless providers (1) offer Non-Interconnected VoIP service on a stand-alone basis for a fee; or (2) offer non-VoIP services without the Non-Interconnected VoIP services at a different (discounted) price. Although the additional conditions for determining TRS registration and contribution eligibility appear to limit the impact of the new rules, the Devil is in the details, many of which could have unintended consequences for various other services, both regulated and unregulated. The big news, however, is that Congress’ decision to statutorily define “Non-Interconnected VoIP" as a “communications service" (advanced or otherwise) is akin to rolling up a ball of snow and pushing it down a hill. While the CVAA’s immediate impact appears to be minimal, it is premature for the industry to exhale. Instead, it might be more appropriate to hold your breath waiting for the next shoe to drop because, in this industry, regulatory creep has a way of repeating itself. The regulation and taxation of Interconnected VoIP services was first solely confined to E911 obligations, but within a span of just four years, interconnected providers found themselves strapped with a bevy of FCC regulatory duties. Today, interconnected providers must comply with nearly the identical slate of responsibilities as their traditional circuit-switched brethren, including everything from Universal Service Fund (USF) and disability access obligations to CALEA, local number portability and numbering plan support, regulatory fees and, even Section 214 discontinuance rules. Following the FCC’s lead, states are now imposing greater regulatory obligations on Interconnected VoIP in addition to existing state and local communications taxation. With powerful lobbies currently urging the FCC to extend USF obligations to Non-Interconnected VoIP, is it only a matter of time before state and local tax authorities demand tribute from Non-Interconnected providers? If the history of VoIP regulation is any indication, the question of broader Non-Interconnected VoIP regulation may not be one of if, but when. Our conclusion? The regulatory and tax environment for advanced communications services is imperfect and in a state of flux. There are no ideal answers. Exercise caution, however; ignorance of one’s legal responsibilities to the FCC and to state tax authorities is never excused no matter how uncertain or complex compliance seems. Jonathan S. Marashlian is Managing Partner of Marashlian & Donahue, LLC, The CommLaw Group, a Washington, D.C.-area law firm specializing in VoIP and advanced communications services. Jonathan can be reached at [email protected] . Disclaimer: This article is provided for informational use only and is in no way intended to constitute legal advice or the opinions of the firm or any of its attorneys.

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