On May 1, 2009, the Eighth Circuit Court of Appeals (“8th Circuit”) upheld a ruling by the Nebraska District Court enjoining the Nebraska Public Service Commission (“NPSC”) from imposing intrastate Universal Service Fund (“USF”) contribution obligations on Vonage. Based on its interpretation of previous Federal Communications Commission (“FCC” or “Commission”) decisions, the District Court concluded that the FCC had preempted all state regulation of nomadic interconnected VoIP (“I-VoIP”) service providers.
However, in its ruling, the 8th Circuit noted that while state USF could be imposed on intrastate nomadic VoIP services, the decision as to whether such regulations will apply is solely within the FCC‘s discretion. Seizing on that portion of the 8th Circuit‘s decision, the Kansas Corporation Commission (“KCC”) and NPSC (collectively “Petitioners” or “states”), jointly filed a petition with the FCC on July 16, 2009 seeking a declaratory ruling that the FCC has not preempted states from assessing USF fees on the intrastate revenues of nomadic I-VoIP service providers.
Petitioners suggest that state USF assessments on intrastate revenues complement rather than conflict with federal objectives. Petitioners further argue that policy concerns support their request. Specifically, Petitioners contend that such assessments are necessary to ensure sustainable state USFs. Petitioners further maintain that imposing fees only upon fixed services artificially inflates fixed service rates giving nomadic providers a competitive advantage. They also suggest that nomadic I-VoIP service providers should share equally in the maintenance of the Public Switched Telephone Network (“PSTN”) to which their services connect.
Petitioners request “clarification” that the FCC never preempted these assessments. In the alternative, Petitioners ask the FCC to approve such assessments going forward. Petitioners liken nomadic I-VoIP to traditional wireless services, reminding the Commission that it previously adopted safe harbors similar to those Petitioners propose to address difficulties in segregating interstate and intrastate traffic. In their petition, the states rebuff the court‘s concern that nomadic services are particularly vulnerable to duplicative state assessments.
Petitioners argue that the FCC‘s interpretation of its own orders is entitled to deference. They maintain that, because the FCC never adopted a policy against state assessment of USF fees on intrastate nomadic I-VoIP revenues, such assessments are authorized. Petitioners also note that no procedural hurdle prevents states from assessing these fees without first seeking FCC approval. Petitioners contend that their position is consistent with the views expressed by the FCC in its Amicus Curiae brief filed with the 8th Circuit and that they are merely requesting that the FCC reaffirm its already expressed views in response to the petition.
Petitioners ask that the FCC‘s declaratory ruling have both prospective and retrospective effect, reasoning that since the FCC‘s ruling construes existing law and will impose no “manifest injustice,” the ruling should be both prospective and retrospective in application.
The states also request a second declaratory ruling granting states discretion to adopt “any mechanisms that do not assess interstate revenues and that contain procedures designed to ensure that no provider pays assessments to more than one state on the same intrastate revenues.” In other words, Petitioners seek freedom to adopt safe harbors for assessing intrastate fees. In their second petition, the states suggest allocating revenues on the basis of the customer‘s (1) billing address (currently adopted by the NPSC); (2) address of registration for purposes of 911 calling (currently used by the KCC); and (3) revenue breakdowns as reported on its Form 499-A.
Clients are encouraged to monitor this proceeding and submit relevant comments and reply comments. On August 10, 2009, the FCC placed the states‘ petition on Public Notice. In the Public Notice, the Commission will seek comments on the matters asserted by Petitioners, with initial comments due on September 9, 2009 and reply comments due on September 24, 2009.
Clients who have any further questions or concerns about the information contained in the Advisory or interest in filing comments in this matter should contact Jonathan Marashlian at: email@example.com or 703-714-1313.