Telecom Law Monitor : Washington D.C. Telecom Lawyer & Attorney : Kelley Drye & Warren Law Firm : New York, Chicago, Connecticut, New Jersey, Brussels

Here's another VoIP item from our backlog.  On December 16, the FCC's Enforcement Bureau issued an "Enforcement Advisory" reminding providers of their obligation to submit an FCC Form 477 every six months.  The Form 477 collects information about broadband deployment on a Census Tract level.  All facilities-based broadband providers and all interconnected VoIP providers are required to submit the form.

The Advisory lists several "problems" the Enforcement Bureau has noticed with the filings, including:

1. failing to file the form in a timely fashion, if at all;
2. failing to properly certify the form (and provide contact information); and
3. filing incomplete or inaccurate data (including failing to update data from previous submissions

The FCC has not issued any forfeitures for failure to submit a Form 477, nor, to our knowledge, are any investigations into Form 477 compliance pending.  Nevertheless, as a reminder, below is a summary of the Form 477 filing obligations for broadband providers and VoIP service providers.

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A long time ago, we posted about a decision of the US District Court in DC declaring that VoIP traffic was not subject to access charges and the strange coalition that asked the Court of Appeals to review the case.  Now, after a nearly two year delay caused by one of the litigants' bankruptcy, the appeal is moving forward.  Since the FCC refuses to rule whether access charges applied to VoIP (even as it has recently applied interstate access rates to VoIP prospectively), this case could have an important impact on many current access charge disputes.

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With new access charge obligations for interconnected VoIP, new contribution obligations for non-interconnected VoIP, and possible outage reporting requirements, 2012 is shaping up as a year of changes for VoIP providers.  Another possible change may be in store for how VoIP providers obtain access to telephone numbers.

Since 2005, various petitions have been pending seeking a waiver of FCC rules to allow interconnected VoIP providers to obtain direct access to numbering resources through the North American Numbering Plan Administrator and the Pooling Administrator.  In March 2011, Vonage renewed its request for waiver and submitted supplemental information in support of its request.  Shortly after Christmas, the FCC released a Public Notice seeking comment on Vonage's filing and its supplemental materials.  With a brief extension granted, the comments are due on January 25. 

VoIP providers and CLECs serving VoIP providers should monitor this docket closely.

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We took a holiday break, and now we have a large backlog of entries for you.  To begin, we have an unusual item to cover.  This blog, of course, deals with telecom enforcement.  Usually, that means fines for failure to comply with various regulatory requirements and filing obligations.  This item is a reminder that some violations result in criminal penalties also.

The basis for this post is a recent report that a payphone service provider was sentenced to three months in jail for fraudulently collecting FCC-mandated per-call compensation for dial around calls.  The background, and the story are discussed below.

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Back in October, the FCC released an order implementing the Twenty-First Century Communications and Video Accessibility Act of 2010 (CVAA).  Among other things, the order expanded the pool of contributors to the Telecommunications Relay Service Fund to include virtually all VoIP providers, including those that did not fit the FCC's definition of "interconnected" VoIP.

To implement this contribution requirement, non-interconnected VoIP providers are required to register with the FCC by filing FCC Form 499-A, which is better known as the form used for universal service fund contributions.  (The Form 499-A is used for other revenue-based support funds as well.)  Providers must file this form no later than December 31, 2011.  At this time, it appears that fewer than a dozen new providers have registered to date.  

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One of the trends in 2011 has been the rise in amicus filings by the FCC in litigation matters.  This trend is fueled, no doubt, by the Supreme Court's determination in Talk America v. Michigan Bell earlier this year that such interpretations by the agency are entitled to deference by the courts.

The latest example of this once again involves interpretation of the FCC's rules for the provision of unbundled network elements ("UNEs").  In the latest amicus brief, the FCC agrees with CLECs that a BOC is required to permit the commingling of section 271 elements with UNEs obtained via section 251(c)(3). 

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 As we warned over a week ago, the USF contribution factor is rising to a new record high of 17.9%.  The Commission made it official late today, releasing this Public Notice announcing the new contribution factor for the first quarter of 2012.  The nearly 18 percent factor is by far the highest contribution factor in the history of the universal service fund.

One aspect of the new factor deserves special mention.  For years, the FCC has employed a Limited Interstate Revenue Exemption (LIRE) for calculation of the contribution obligations of carriers with significant international revenues.  This rule, also known as the "88/12" rule, provides that if a carrier's interstate revenue is less than 12% of its total interstate + international revenue, then the carrier pays USF only on its interstate revenue (and no USF on its international revenue).  The rule was put in place in response to a court decision that found that USF assessments which exceed a carrier's gross domestic revenue are unlawful.  

The current LIRE threshold is set at 12% of total revenues.  Every quarter in which the USF contribution factor exceeded this 12% threshold, the FCC has included an invitation to carriers to petition for waiver of the LIRE threshold if their contributions would exceed their gross domestic revenues.   No carrier has yet taken the Commission up on this invitation.  However, with the spread between the LIRE and the USF contribution factor now nearly 6%, we expect that there may be a few carriers whose percentage of interstate revenue falls between the LIRE threshold and the USF contribution factor.  If so, we invite those carriers to contact us to discuss filing a petition for waiver with the FCC.

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On Friday, the FCC proposed a $25,000 fine against a carrier that failed to respond to a Commission investigation.  In the NAL, the Enforcement Bureau stated that Net One International had failed to respond to a letter of inquiry launching an investigation into its practices.  According to the NAL, the Bureau sent the letter of inquiry via certified mail, and the letter was signed for at the company's headquarters.  In addition, the Bureau attorney handling the investigation sent an email after the response date had passed, providing a second deadline for the company to respond.  Thus, the company was given two chances to respond before the Bureau issued the NAL. 

The Bureau proposed a fine of $25,000 for the failure to respond, and ordered the company to respond to the letter of inquiry within 10 days. 

The NAL is significant in two respects.  First, the proposed fine is $25,000, which is an upward adjustment from the $4,000 standard fine contained in the Forfeiture Guidelines.  In addition, the fine is greater than the $20,000 failure to respond fines the Bureau had used a few years ago.  The Bureau justified the increase amount as appropriate due to Net One's "apparent disregard for the Commission's authority and investigatory process."

Second, the subject matter of the investigation was described as "[Net One's] billing practices and its offering of prepaid calling card services."  This investigation was initiated in July 2011, well after its earlier prepaid card marketing investigations, and roughly at the time that the Bureau was presenting to the full Commission proposed $5 million fines for prepaid card marketing practices.  The timing suggests that the Enforcement Bureau is not finished with its examination of prepaid card providers.  Presumably, more investigations of prepaid card providers are pending at this time. 

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 On December 7, the FCC adopted a consent decree with an international carrier resolving several alleged transfers of FCC authorizations without prior approval.  This marks the latest in a series of enforcement actions in the area of ownership violations.  Many of these involve carriers providing foreign terminations.   The consent decree underscores the importance for all regulated carriers to monitor changes in ownership, even pro forma changes, and to seek prior FCC approval for the changes. 

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This is starting to sound like a broken record.  Once again, the USF contribution factor is poised to make a big jump upward to a new record high.  Once again, we wonder here whether this will finally be the time that the FCC moves forward to reform the contribution side of the USF.  With the volatility and high rates, one must wonder whether the current mechanism can satisfy the requirement that the USF fund be "specific, predictable and sufficient."

Here's the bad news:  according to a prominent USF analyst, the FCC will soon announce a first quarter 2012 contribution factor of 17.9%.  This is an increase of over 2.5% from the current factor and by far is the highest that the USF rate has ever been. 

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In response to yesterday's announcement that BART, the San Francisco area transit authority, modified its cell phone blocking policy, FCC Chairman Julius Genachowski announced that the FCC would soon be taking action as well.  Genachowski pledged an "open, public process" to provide guidance on lawful wireless service blocking.

If opened, this will be the first formal proceeding the FCC has undertaken to address lawful blocking of wireless signals.  In the past, the FCC staunchly denied any requests to sanction wireless call blocking. 

UPDATE:  This SF Chronicle report states that the FCC commented on BART's policy before it was adopted.  According to the report, the FCC suggested language recognizing that an interruption poses risks to public safety and that the benefits of a shut down should outweigh the risks to public safety.  While a BART official correctly notes that this is not an endorsement of the policy, it signals an openness (in limited circumstances) to a shut down that the FCC has not shown before.

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Yesterday, the FCC proposed another $5 million fine for insufficient disclosures on prepaid calling cards.  This action is best understood as an echo to the FCC's action in September, when it proposed four similar $5 million fines against other prepaid calling card providers.  In fact, I believe that this NAL has been circulating at the FCC since shortly before the other four NALs were released.

2011 has been highlighted by an active FCC using Section 201(b) of the Act to engage in consumer-focused enforcement.  Although the FCC's authority to use 201(b) in this way is in doubt, the lesson for carriers is clear, especially in the prepaid market.  Carriers should clearly and conspicuously disclose all material terms and conditions of their services.  Failure to do so risks claims of deceptive marketing or cramming. 

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This morning, the FCC's November 18, 2011 High-Cost USF and Intercarrier Reform Compensation Order was published in the Federal Register triggering an effective date of December 29, 2011 for all parts of the Order and rule changes adopted therein, except for the information collection requirements contained in some of the rules adopted.   Those information collection requirements will not become effective until approved by the Office of Management and Budget.  A subsequent Federal Publication will be made announcing the effective dates of those sections.  A copy of today's Federal Register publication is available here.

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