FCC Considers Intercarrier Compensation Reform for VoIP Providers

Regulation Watch

FCC Considers Intercarrier Compensation Reform for VoIP Providers

This article originally appeared in the April 2011 issue of INTERNET TELEPHONY.

On Feb. 9, the FCC (News - Alert) released a Notice of Proposed Rulemaking requesting comment on a proposed thorough overhaul of the Universal Service Fund distribution mechanism and intercarrier compensation at the federal, state, and local level. Under the FCC’s proposal, USF distribution would be shifted from voice to broadband, a move that will indirectly affect the VoIP industry in years to come. More immediately, the FCC also proposes to rework the intercarrier compensation system with a particular immediate focus on setting compensation rates for VoIP traffic. 

In raising this issue, the FCC states that it “has never addressed whether interconnected VoIP is subject to intercarrier compensation rules, and if so, the applicable rate for such traffic,” and acknowledges that this indecision has resulted in billing disputes and uncertainty in the industry. 

The FCC initially proposes to only address “interconnected” VoIP traffic, but asks for comment on whether other types of VoIP traffic should be included. The NPRM then asks for comment on compensation structure and timing for imposing such obligations on VoIP providers, “administrability” (such as how would carriers identify VoIP traffic subject to a VoIP-specific rate), legal authority to adopt a specific rate, the impact this decision may have on existing agreements between service providers, and a number of other issues. The commission is considering adopting either a “bill and keep” mechanism or a separate VoIP-specific rate such as $0.0007 per minute of traffic. The commission will also consider whether to classify VoIP as either a telecommunications or information service.

This far-reaching proceeding will be significant to VoIP providers and the industry at large. Through this proceeding the FCC may significantly alter the regulatory and financial obligations of VoIP providers for years to come.

 William B. Wilhelm (News - Alert) is a partner and Jeffrey R. Strenkowski is counsel at the global law firm of Bingham McCutchen LLP (www.bingham.com).

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Edited by Stefania Viscusi