VoIP Industry Newsletter: Understanding the Impact of Cloud Computing for VoIP

Oct 2009

VOIP AND TAXATION
ANDREW ISAR, PRESIDENT OF MILLER ISAR, INC.

In the US, few interconnected Voice over Internet Protocol (iVoIP) regulatory compliance issues carry as much risk as failure to contribute to the federal Universal Service Fund (USF). Federal and state USFs, in the states which have adopted them, were created to subsidize telecommunications service costs for eligible low income subscribers, educational and health care facilities, and those living in “high-cost” rural service areas. Section 254(d) of the federal 1996 Telecommunications Act established an obligation on all telecommunications service providers to contribute to the USF.

In response to growing concern over dramatic increases in the use of VoIP services and Internet Protocol (IP) networks that were not contributing to the USF and resultant implications for maintaining universal service support, on June 21, 2006, the FCC released “Interim Modifications” to its universal service fund contribution process and a Notice of Proposed Rulemaking that expanded the universal service contributor base to iVoIP providers. The FCC determined that 64.9 percent of a VoIP provider’s revenue would be considered jurisdictionally interstate/international for purposes of imposing assessments. All iVoIP providers must now:

• Register as an FCC Form 499A filer. FCC Form 499A is the annual form used to report jurisdictional revenue;
• Assess USF surcharges on end users in accordance with the FCC’s established quarterly USF “contribution factor” – 12.3% for 4Q09 – multiplied by the combined interstate/international portion (64.9%) of iVoIP service charges;
• Report total interstate/international iVoIP revenue annually on or before April 1 of each year and quarterly on the FCC Form 499Q by the first day of the second month following the end of each quarter if estimated annual contributions exceed $10,000; and
• Remit USF contributions as billed by the USF administrator, the Universal Service Administrative Company (USAC).

Failure to comply will result in substantial non-compliance penalties and compounding interest. iVoIP providers have been spared from state USF contributions, though pending action by the Nebraska Public Service and Kansas Corporation Commissions before the FCC may broaden state USF requirements. USF compliance is imperative, but can be accomplished in a virtually revenue-neutral manner. It is critical that iVoIP providers ensure that they are meeting their reporting and contribution obligations to keep their operations running smoothly and profitably.

Andrew Isar is President of Miller Isar, Inc.
www.millerisar.com
253.851.6700
aisar@millerisar.com

Founded in 1991, Miller Isar, Inc. concentrates on the telecommunications industry. Headquarted near Seattle, WA, with offices in Philadelphia, PA, Miller Isar focuses its practice on Regulatory Compliance, Public Policy, and Business Practices, as they relate to Regulatory obligations.
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