FCC Nomadic VoIP Order Opens Door for More State Regulation

The order could potentially apply to things other than USF, said Wayne Jortner, senior counsel with Maine Public Utilities Commission’s Public Advocate Office. If states can collect USF contributions, they should also be allowed to impose consumer protection rules and licensing requirements, he said. The order would naturally lead to revisiting the Vonage order, which is very specific and only has to do with states’ ability to regulate nomadic VoIP services when they couldn’t distinguish between interstate and intrastate traffic, Jortner said. The latest order reveals that “this FCC is more open to state regulation of VoIP, provided it is not inconsistent with the federal regulatory scheme,” said telecom lawyer John Heitmann of Kelley Drye. Regulators in states like Maine and Vermont have recently concluded that fixed VoIP services are telecom services under state law, while the Wisconsin Public Service Commission is looking into the appropriate level of regulation on retail VoIP. Wisconsin hasn’t decided if it will now assess nomadic VoIP, said Gary Evenson, head of the telecom division.

"The FCC order does nothing to change the state of the law concerning preemption of state regulation of nomadic VoIP services,” said lawyer Glenn Richards of Pillsbury Winthrop, who has represented VoIP companies. “What Maine, Vermont and Wisconsin have done is to take advantage of what these states believe is the ambiguity in the 2004 Vonage order as to whether it applies to non-nomadic or fixed VoIP services.” The FCC has several open dockets that give it the opportunity to address this ambiguity and could broadly preempt state regulation of all forms of VoIP, he said.

The FCC ruling stated that “as long as states have a policy against collecting universal service assessments with respect to interconnected VoIP revenue that an interconnected VoIP provider has properly allocated to another state under that state’s rules, we do not preempt,” said Brad Ramsey, general counsel of the National Association of Regulatory Utility Commissioners. For states that can claim such a policy, the order at least opens the door for them to seek assessments retroactive to the June 2006 FCC order that constructively severed intra- and interstate traffic, he said. It would be an opportunity, with reasonable odds, for states like Kansas, he said. Service providers had said the Vonage order sets a jurisdictional precedent that should be adhered to by state commissions. In Vonage, the FCC said that Minnesota regulators couldn’t require that VoIP provider or other “IP-enabled services having the same capabilities” to pay state USF contributions.

The FCC’s declaratory ruling answered the bigger question of whether in prior rulings it had preempted the states, and “we know it has not,” said Ward Loyd, commissioner with the Kansas Corporation Commission (KCC). “Now we can go about our daily work without question that all that play must pay.” KCC is mindful that “the FCC decision had a narrow scope; however, there is no question that the FCC has never preempted the states on this issue, or that the commission has properly been assessing interconnected VoIP service providers since early 2009,” he said. The commission is gratified that the FCC recognized the merits of the petition for relief filed jointly by the KCC and the Nebraska Public Service Commission, Loyd said.

While the FCC said Friday’s order doesn’t address the question of retroactivity, retroactivity is potentially OK, Maine’s Jortner said. There never was a federal conflict, he said. “Unless there’s a specific reason for preemption, you have to presume there’s no preemption.” Providers seeking to fend off retroactive state USF assessments can continue to rely on the broad preemptive language contained in the Vonage order and a ruling by a federal appeals court, said Heitmann. The FCC ruling essentially overturns a 2009 8th U.S. Circuit Court of Appeals decision finding that the FCC had preempted the states’ ability to impose such contribution requirements, he said. While states can attempt to enforce the new order retroactively, they might not want to fight that fight, said Richards.