Universal Service Order Requires VoIP Provider Contributions and Reporting, Raises Wireless Safe Harbor
In Order and Notice of Proposed Rulemaking ("NPRM") FCC 06-94, the Commission adopted two modifications to its approach for assessing contributions to the federal universal service fund ("USF"). The Commission required providers of interconnected voice over Internet Protocol ("VoIP") service to contribute to the USF. For interconnected VoIP providers, the "safe harbor" percentage used to estimate interstate revenue will be 64.9 percent of total VoIP service revenue. Interconnected VoIP providers also may calculate their interstate revenues based on their actual revenues or by using traffic studies.
The Commission has defined "interconnected VoIP services" as those VoIP services that: (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 Public Switched Telephone Network ("PSTN"). The Commission emphasized that interconnected VoIP service offers the capability for users to receive calls from and terminate calls to the PSTN; the new requirements apply to all VoIP communications made using an interconnected VoIP service, even those that do not involve the PSTN. Those requirements apply regardless of how the interconnected VoIP provider facilitates access to and from the PSTN, whether directly or by making arrangements with a third party. The Commission stated that the definition of interconnected VoIP services may need to expand as new VoIP services increasingly substitute for traditional phone service.
Interconnected VoIP providers must report and contribute to the USF on all their interstate and international end-user telecommunications revenues. To fulfill this obligation, interconnected VoIP providers have three options: (1) they may use the interim safe harbor established in the Order; (2) they may report based on their actual interstate telecommunications revenues; or (3) they may rely on traffic studies, subject to the conditions set forth in the Order.
The Commission recognized that some interconnected VoIP providers may hold themselves out as telecommunications carriers, but others do not, considering themselves instead to be end users. Carriers that provide telecommunications service inputs to the latter group of interconnected VoIP providers have been reporting the resulting revenues as end-user revenues and including them in their contribution bases. Carriers supplying telecommunications services to interconnected VoIP providers who are not themselves carriers should continue to include those revenues in their own contribution bases for two full quarters after the effective date of the Order. Wholesale carriers may not exclude these revenues by invoking the "carrier's carrier" rule during the interim period.
Providers of interconnected VoIP services must follow the same basic USF reporting procedures as other providers of interstate and international telecommunications. Contributors to USF report historical gross-billed, projected gross-billed, and projected collected end-user interstate and international revenues quarterly on FCC Form 499-Q. Interconnected VoIP service providers must file FCC Form 499-Q beginning on August 1, 2006. Contributors report gross-billed and actual collected end-user interstate and international revenues on FCC Form 499-A on April 1 of each year. Interconnected VoIP service providers must file a completed FCC Form 499-A beginning on April 1, 2007.
Under the rules, a provider of interstate and international telecommunications whose annual universal service contribution is expected to be less than $10,000 is not required to contribute to the USF, or to file a Telecommunications Reporting Worksheet unless it is required to contribute to other support and cost recovery mechanisms. Interconnected VoIP providers that satisfy the de minimis exemption need not contribute to the Fund. However, the Commission required all providers of interconnected VoIP services - including those that satisfy the de minimis exemption - to register with the Commission. Every interconnected VoIP provider that has not already registered with the Commission (and designated an agent for service of process) must complete and file an FCC Form 499-A with blocks 1, 2, and 6 completed.
The Commission raised the existing wireless safe harbor percentage from 28.5 percent to 37.1 percent of total end-user telecommunications revenue to better reflect growing demand for wireless services. The new figure is the highest percentage of interstate and international usage by a wireless company supported in the record. The interim wireless safe harbor was last updated in 2002. Wireless carriers will retain the option to base contributions on their actual revenues or on traffic studies that estimate their actual interstate revenues. require any mobile wireless provider that uses a traffic study to determine its interstate end-user revenues for universal service contribution purposes to submit the study to the Commission and to USAC for review.
The Commission stated that its "measured interim steps" will stabilize the contribution base for the USF in the near-term while the Commission considers more fundamental reform of the contribution methodology. Noting that a change to a non-revenue-based contribution methodology would require significant time to implement, the Commission retained a revenues-based approach on an interim basis so it can implement the revisions, including reporting requirements, for the fourth quarter 2006 universal service contribution requirements. Although it retained the revenue-based approach, the Commission stated it is committed to examining more fundamental reform.
The NPRM requested comment on whether modifications to the interim safe harbors established in the Order may be appropriate. Comments are due 30 days from Federal Register publication, and replies 60 days from Federal Register publication.
