VoIP Industry Newsletter: Hosted PBX - Why it Finally Makes Sense for Small and Medium Businesses

Feb 2010


VoIP Regulatory Issues: What is “Interconnected VoIP”? From a regulatory perspective, the answer is critical toward establishing how, or if, VoIP is regulated. VoIP characteristics are amply described in the United States through a host of FCC documents including the Commission’s 2004 VoIP Notice of Proposed Rulemaking and the seminal Vonage Memorandum Opinion and [State regulatory preemption] Order. Yet only one federal regulatory definition currently exists. In its 2005 First Report and Order and Notice of Proposed Rulemaking establishing emergency 911 access requirements for VoIP providers, the FCC promulgated the current definition of “interconnected (to Public Switched Telephone Network ) VoIP,” This definition relied in part on discussion contained in the Vonage preemption order. Codified in Section 9.3 of the FCC’s rules, 47 C.F.R. §9.3., the service definition rests four criteria:

1) Enables real-time, two-way voice communications;
2) Requires a broadband connection from the user's location;
3) Requires Internet protocol-compatible customer premises equipment; and
4) Permits users generally to receive calls that originate on the public switched telephone.

Through this definition, if a service meets all four criteria, it is subject to specific FCC-imposed obligations. More recently an increasing number of state regulatory utility commissions have differentiated between “nomadic” VoIP--the Vonage-esque type VoIP service that is not location-dependent, and “static” VoIP--the cable company digital voice services that require dedicated, location-dependent service access equipment. Static VoIP is not deemed subject to federal preemption from state regulation. State legislators and municipalities are now establishing their own VoIP definitions to allow collection of state regulatory program assessments and taxes from VoIP providers. Seattle and Baltimore recently prevailed in legal appeals of telecommunications tax assessments on VoIP providers, despite significant differences in city and FCC definitions. Regulatory definitions are in flux. The closer a service approximates a regulatory jurisdiction’s definition, the more likely it will be interpreted to apply. Ultimately, VoIP providers should verify regulatory applicability with the jurisdiction.

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

Founded in 1991, Miller Isar, Inc. is one of the nation’s oldest regulatory consulting firms, whose practice concentrates on the communications industry. Headquarted near Seattle, WA, with offices in Portland, OR, Miller Isar focuses its practice on Regulatory Compliance, Public Policy, and Business Practices, as they relate to Regulatory obligations.
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