As anticipated, on November 5, 2010, the Federal Communications Commission (“Commission”) released a Declaratory Ruling granting the petition of the Nebraska Public Service Commission and the Kansas Corporation Commission seeking a declaratory ruling that states are not preempted by federal law from imposing state universal service contribution obligations on the intrastate revenues of nomadic interconnected VoIP providers. The Declaratory Ruling became effective upon its release and was limited to prospective-only relief, which effectively precludes states from imposing retroactive contributions. States are now free to assess USF contributions on revenue derived from nomadic Interconnected VoIP services, subject to the conditions outlined in the Ruling.
In accordance with the Ruling, state Universal Service Fund (“USF”) contribution rules must be consistent with the Commission‘s USF rules for allocating interstate and intrastate revenues. As such, states must allow nomadic interconnected VoIP providers to treat as intrastate 35.1 percent of all end user revenues (the inverse of the 64.9 percent interstate safe harbor for Interconnected VoIP providers). States must also allow nomadic interconnected VoIP providers to use traffic studies to allocate intrastate revenues, and to develop other methods of accurately classifying revenue between federal and state jurisdictions. Importantly, the Commission concluded that individual state contribution rules must be established in ways that avoid resulting in duplicate assessments on identical revenue. Other than referencing the manner in which state commissions were able to resolve a similar concern in the wireless context several years ago, the Commission offered no specific instructions for solving the potential duplicate contribution dilemma now confronting providers of nomadic VoIP services.
Our Firm anticipates the Ruling will spawn a rash of rulemakings and other proceedings at the state commission level. We will continue to monitor and report on developments for impacted clients.
Clients with specific questions about this Advisory should contact the Attorney assigned to their account.
A copy of the Declaratory Ruling is available here: Declaratory Ruling