With the continued uncertainty regarding the classification of VoIP service and the application of intercarrier compensation to VoIP, litigation over VoIP charges is extensive.  In the latest case to reach a decision, the FCC ruled that a CLEC serving an affiliated VoIP provider may not collect tariffed access charges for terminating calls to the VoIP customers or for 8YY calls originated by the VoIP customers.

The FCC order was issued in a formal complaint case brought by AT&T against YMax Communications Corp., whose affiliated entity provides the MagicJack VoIP device.  The Commission agreed with AT&T that it did not have to pay YMax’s access charges for the traffic in question.

The FCC’s decision is a narrow one, however.  It ruled only that the CLEC’s tariff language did not apply to the traffic, not that VoIP may not be subject to access charges.  The primary lesson of the case is that a VoIP provider must carefully consider the description of its services, and not necessarily use "cookie cutter" tariffs designed for traditional PSTN traffic. 

MagicJack markets and sells a device that provides users the ability to place and receive VoIP calls throughout North America.  MagicJack is sold for $39.95 and offers unlimited calling for the first year, with an annual renewal fee of $19.95.  MagicJack relies upon its affiliate, YMax Communications Corp., to provide telephone numbers and the necessary interconnection with the PSTN to originate and terminate calls.  However, MagicJack customers do not purchase services from YMax, and YMax does not connect directly with the MagicJack customers.  The precise manner in which YMax’s network is configured was a key to the decision and is described in detail in the Order.

AT&T refused to pay access charges for two types of calls:  (1) calls terminating to MagicJack users and (2) 8YY traffic originating from MagicJack users.

The FCC granted two of AT&T’s counts, concluding that YMax violated Sections 201(b) and 203 by billing for access services not described in its tariffs.  The Commission dismissed without prejudice broader AT&T claims, including claims that YMax does not provide certain services billed or is prohibited from tariffing the services it performs.

The Commission concluded that YMax did not provide the services described in its tariffs.  Specifically, it held that MagicJack customers were not "End Users" under the tariff because MagicJack customers do not "use" a service they obtain under the terms and conditions of the tariff.  Further, the Commission concluded that YMax does not provide "End Office Switching" or "Transport" services because YMax does not provide connections to the MagicJack customers via "station loops" or "end user lines."  At bottom, the FCC narrowly found that the tariff at issue here did not describe the services performed.  As it summarized:

The fundamental problem appears to be that YMax chose to model its Tariff on common language in LEC access tariffs, even though the functions YMax performs are very different from the access services typically provided by LECs.  As a result, YMax’s Tariff fails to unambiguously describe the kinds of services and functions that YMax performs with regard to the traffic at issue.

The order therefore likely will not have application to VoIP traffic beyond its specific facts.  VoIP providers that provide connections to end users in different ways may still be able to collect their tariffed charges.  And the FCC still has not tackled the classification of VoIP and intercarrier compensation obligations.  As it stated:

We also note that we need not, and do not, address issues regarding the intercarrier compensation obligations, if any, associated with Voice over Internet Protocol ("VoIP") traffic in this Order. … We emphasize that this Order addresses only the particular language in YMax’s Tariff and the specific configuration of YMax’s network architecture, as described in the record.

Thus, the decision continues the FCC’s practice of avoiding the central issues raised by VoIP traffic until another day.   The broad VoIP issue is pending in the intercarrier compensation/USF proceeding.