Telecom Alert: D.C. Circuit Court Upholds
FCC’s
VoIP USF & Safe Harbor Rulings
June 1, 2007
The U.S. Court of Appeals for the D.C. Circuit ruled today that
the FCC has statutory authority under Section 254(d) of the Telecommunications
Act of 1996 to require voice over-internet protocol (VoIP) providers
to make Universal Service Fund (USF) contributions and that it
acted reasonably in analogizing VoIP to wireline toll service for
the purposes of setting the presumptive percentage of VoIP revenues
generated interstate and internationally.
In 2006, the FCC issued an Order requiring providers of “interconnected” VoIP
services to contribute to the USF. In re Universal Service
Contribution Methodology, 21 F.C.C.R. 7518 (2006). Interconnected
VoIP services “(1) enable real-time, two-way voice communications;
(2) require a broadband connection from the user’s location;
(3) require IP-compatible customer premises equipment; and (4)
permit users to receive calls from and terminate calls to the PSTN
[public switched telephone network].” Id. at 7526 ¶ 15.
Vonage
filed a petition for review from that Order and challenged the
USF contribution requirement. It argued that the FCC had acted
arbitrarily and capriciously by (1) analogizing VoIP to wireline
toll service for the purposes of setting the presumptive percentage
of VoIP revenues generated interstate or internationally, (2) requiring
pre-approval for traffic studies submitted by VoIP providers but
not for those submitted by wireless providers, and (3) suspending
the “carrier’s carrier rule” with respect to
VoIP (a rule that prevents double payment at the wholesale and
retail level by basing USF contributions only on “end-user
telecommunications revenues.”).
In its decision in Vonage Holdings Corporation v. FCC,
No. 06-1276, the federal appeals court determined that the FCC
was within its bounds when it issued an order last June requiring
interconnected VoIP service providers to contribute to the USF
and in the “safe harbor” levels it adopted for them
as part of its decision. The court, however, found the FCC’s
explanation “wanting” as to the pre-approval of traffic
studies and the suspension of the carrier’s carrier rule
and, therefore, vacated those portions of the Order.
A copy of the full opinion is available by clicking here.
