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Jun 15, 2007

Regulatory Rundown: USF, FCC & CALEA, VoIP & E-911

Ed Maldonado

1. May 2007 USF Enforcement Update: Lessons Learned from Others2. FCC & CALEA Enforcement: The Quiet Before the Storm?3. DC Federal Court of Appeals Sides with FCC: VoIP to Contribute USF4. FCC Proposes New Rulemaking over E-911: Seeks Comment1. May 2007 USF Enforcement Update:Lessons Learned from OthersMay 31st 2007 – This past month the FCC’s Enforcement Bureau ( has sent a clear message to non-complaint carriers: obtain 214 Authority, register for the 499 Filer ID, file the 499 and pay your regulatory contributions, or be fined. The case on point is In the Matter of InPhonic, Inc., File No. EB-05-IH-0158 a wireless MVNO provider in operation since 2002. Between 2002 and 2005, InPhonic failed to submit Telecommunications Reporting Worksheets and pay USF, TRS and regulatory fee obligations. As a result, the Enforcement Bureau began investigation in 2005 and issued an initial Order Of Forfeiture in the amount of US$819,905.00. This past month the Enforcement Bureau proposed a further forfeiture in the amount of $100,000 for failure of the company to obtain Section 214 Authority until early 2005, although its operations began in 2002. While a truly unfortunate series of events for InPhonic, this enforcement action is illustrative of how important federal compliance is for carriers (be they wireless, prepaid, VoIP or otherwise) and how costly non-compliance can be. Keep this in mind as the May 499-Q is now past due and CPN certifications are now due.2. FCC & CALEA Enforcement: The Quiet Before the Storm?May 31st 2007- As interconnected VoIP providers (and the equipment manufacturers who serve them) continue to scramble to meet a CALEA safe harbor technical solution by month’s end, one uniform response is echoed from the FCC regarding the compliance deadline – nothing, at least for now. The 1994 Communications Assistance Law Enforcement Act (CALEA) was given “bite” last year by the FCC declaration and Order that all providers, including interconnected VoIP providers, needed to be compliant with Section 107 requirements by May 15th of this year. That deadline has come and gone, without clear indication of the consequences. Though the law itself establishes statutory fines for up to $10,000.00 USD per day, the FCC has stood silent as to how non-compliance will be dealt with by its Enforcement Bureau. Several questions seem to hang heavy in the minds of carriers regarding this uncertainty: is the FCC giving the market more time to bring their networks and policies into compliance with CALEA; is the FCC simply preparing for an aggressive enforcement of CALEA to begin by third quarter 2007; or are they just as unprepared as the industry? The FCC’s silence has made many non-compliant telecom and VoIP providers very uneasy.The interim result – a lot of effort toward compliance with no uniform direction. Since the beginning of 2007, carriers have rushed to file their FCC Form 445 compliance reports and set in motion policies and procedures aimed at safe harbor standards focusing more on documentation and less on compliance guidelines. The industry is indeed attempting to cover its bases with the paper trail of CALEA compliance. However, it is questionable if the true test of CALEA compliance begins with the filing of the Form 445, or if it begins when a subpoena reaches the provider, who must then meet its access, mediation and collection obligations in short stead. Many carriers are now questioning if this is the trigger event that the FCC is waiting for before weighing in on how reasonably carriers have met their CALEA obligations, be it through equipment, policies, training of personnel, or use of Trusted Third Parties. Until the FCC’s silence is broken on CALEA non-compliance, the industry can only wait and watch.3. DC Federal Court of Appeals Sides with FCC: VoIP to Contribute USFJune 1st 2007 - The U.S. Court of Appeals DC Circuit ruled that the FCC did not exceed its statutory authority by requiring interconnected VoIP providers to contribute to the Universal Service Fund under its VoIP-in-the-Middle Order. The appeal, advanced by Vonage shortly after the June 2006 Order, challenged the FCC’s application of USF to interconnected VoIP providers as well as the contribution formula (and safe harbor standard) promulgated by the FCC. At odds, the funding methodology used by the FCC for VoIP and the FCC’s policy of “competitive neutrality” regarding who qualifies as contributing USF carriers. In the end, the DC Court of Appeals sided with the FCC ruling that such determinations are within the authorized and statutory scope of the agency. The decision yields mixed results for the prepaid industry. Although the decision was limited to VoIP providers interconnected to the PSTN (public switched telephone network), the majority of prepaid calling carriers using VoIP fall into this category. Recent years have also seen many small to mid-sized prepaid providers migrate into residential and business VoIP or IP phone services under a “Vonage” business model, placing them squarely within the scope of the FCC definition of an interconnected VoIP provider. Both groups within the prepaid industry have traditionally shied away from registering from the 499 Filer ID and reporting on the 499-A until recently. While further appeals are possible, the question is to what end? 2007 Reporting and 499 registration requirements are now in effect for interconnected VoIP providers placing USF compliance, and not appeals, in the forefront of their regulatory concerns. Likewise Vonage did not factually challenge the concept or purpose of USF or the FCC’s power to regulate its collection in traditional forms of telephony. This leaves only a narrow array of issues that may be further appealed.Within this narrow array of issues, the amorphous FCC definition of “Interconnected VoIP Provider” stands out. Its regulatory genesis is first found in the E-911 Order which defines which IP telephony providers must offer their consumers access to 911 first responder services. This definition was later adopted by the FCC, without much clarification, in its May 15th 2006 Order mandating all such providers to meet CALEA compliance by May 14th 2007. And finally, culminating in the FCC’s VoIP-in-the Middle Order of June 2006, establishing VoIP USF contributors. The question remains whether further appeals will rally around the “Interconnected VoIP Provider” or if its time to call in all appeals and focus on compliance. Only time will tell.4. FCC Proposes New Rulemaking over E-911: Seeks CommentJune 4th 2007 - The Federal Communications Commission has issued an updated Notice of Proposed Rulemaking (NPRM) seeking industry comment on issues related to E-911 location accuracy and reliability requirements for wireless carriers and providers of interconnected VoIP services. Under the NPRM and comment period, the FCC seeks industry information and feedback on a number of regulatory issues and preliminary conclusions related to E-911 requirements. This includes: 1.The use of a single, technology-neutral location accuracy requirement for wireless E-911 service, rather than the separate accuracy requirements for network-based and handset-based technologies currently in place; 2.A mandatory schedule for accuracy testing and provision of accuracy data to PSAPs; and 3.That Providers of interconnected VoIP services that can be used at more than one location must employ an automatic location technology that meets the same accuracy standards which apply to providers of commercial mobile radio services (CMRS). In a public release, the FCC stated that its purpose in this NPRM is to establish policy and procedures to “support the efficient and reliable transmission of meaningful automatic location information” for cell phone users and residential VoIP users that call Public Safety Answering Points, the location where 911 operators answer emergency calls, in emergency situations. All affected wireless and Interconnected VoIP providers are encouraged to file comments, which can be done online at, the FCC’s Electronic Comment Filing System.Attorney Edward A. Maldonado is President of the Regnum Group, Inc. and the Maldonado Group. He can be reached

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