FCC’s Intercarrier Compensation Proceeding Could Affect Regulation of VoIP

On November 5, 2008, the FCC (News - Alert) released an Order and Notice of Proposed Rulemaking that, among other things, requested comment on three alternative proposals for reform of the Universal Service Fund and the Commission’s intercarrier compensation rules, including access charges. While primarily aimed at unifying the intercarrier compensation and universal service systems, the proposals contain proposed language that, if adopted, will classify all services that involve transmission of calls between IP and PSTN networks as an “information service” under the Communications Act on the basis that such traffic involves a “net protocol conversion.” The Commission further proposed, consistent with the Vonage (News - Alert) Order, to preempt any state imposition of traditional “telephone company” regulations on IP/PSTN services. But, the proposal also provides in a footnote that states are “free to require contributions to state universal service or telecommunications relay service funds through methodologies that are consistent with federal policy,” which implies that states may require VoIP providers to contribute to state universal service and telecommunications relay programs so long as they do not conflict with federal policies. This distinction is also consistent with the positions that the FCC General Counsel has taken in recent litigation concerning the application of state universal service contribution requirements on VoIP providers.

A number of VoIP providers have opposed this proposal because it lacks any discussion on how to determine consistency with federal law, as well as the logistical problem of implementing potentially conflicting state regulations. For example, some state contributions are based on the billing address, while others assesses contributions based on intrastate revenues, which can lead to double assessments against certain customers.

Of course, it remains unclear when, and if, the Commission will ultimately adopt rules to reform the intercarrier compensation and universal service systems, and if the proposed VoIP-specific language will be included in any forthcoming decision. However, VoIP providers should realize that the Commission has, at least internally, started to differentiate between state universal service requirements and other “traditional telephone company” regulations with respect to VoIP services. IT

William B (News - Alert). Wilhelm is a partner and Jeffrey R. Strenkowski is an associate at the global law firm of Bingham McCutchen LLP. For more information, please visit them online at www.bingham.com. The preceding represents the views of the authors only and does not necessarily represent the views of Bingham McCutchen LLP or its clients. Bingham McCutchen represented the Petitioners in the case described above.

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