What are the ramifications of the FCC’s refusal to classify interconnected VoIP? For one, it complicates the job of the FCC’s Enforcement Bureau. As a recent Citation to Vantage Communications shows, the failure to classify interconnected VoIP as either telecom or non-telecom has allowed interconnected VoIP providers to get one "free violation" before the FCC imposes fines for violations of the Act or FCC rules.
In Vantage Communications, the Enforcement Bureau found that Vantage failed to provide 911 calling capability to at least three customers. This is a clear violation of Section 9.5(b) of the FCC rules, which requires interconnected VoIP providers, "as a condition to providing service to a consumer," to provide E911 calling capability. The FCC issued a Citation to Vantage — a warning — and stated that future violations could subject it to fines or other enforcement action. So why does Vantage get a warning when other telecommunications carriers would get fined? Keep reading to learn why.
The issue arises from Section 503 of the Communications Act. Section 503 gives the FCC power to impose fines (forfeitures) for violations of the Act or its rules. If the subject of a forfeiture proceeding is not a license or permit holder, such as a broadcast station or a carrier, however, Section 503 requires the FCC to issue a citation for the violation first, and then permits the FCC to impose fines only for a subsequent violation of the type described in the citation. Further, the potential penalties are different for license holders and non license holders; whereas the FCC can fine carriers up to $150,000 per violation, it may fine non-licensees only $16,000 per violation.
As Vantage Communications illustrates, these provisions are benefiting interconnected VoIP providers greatly. Because the FCC has refused to determine whether interconnected VoIP is telecommunications service, the Enforcement Bureau has proceeded cautiously with entities that only provide interconnected VoIP service. Without an FCC classification, the Enforcement Bureau cannot conclude that interconnected VoIP providers are license or permit holders. Consequently, the Bureau has issued Citations to interconnected VoIP providers, before issuing any proposed fines.
In Vantage Communications, for example, the Enforcement Bureau found that Vantage had failed in at least three instances to provide customers with 911 service. It warned Vantage that "any failure to provide fully compliant E911 service to your VoIP customers in the future would constitute a further violation of Section 9.5(b) of the Rules that may result in enforcement action, including monetary forfeitures" (emphasis added). In addition, the Bureau warned Vantage that fines could be issued for failure to comply with other obligations of interconnected VoIP providers, such as CALEA, CPNI, USF contributions and others. But, even in future violations, the maximum forfeiture Vantage faces for each violation is $16,000, not the $150,000 that applies to telecommunications carriers.
UPDATE: See our latest VoIP-related post, with a chart comparing the regulatory obligations of traditional telecom, interconnected VoIP and non-interconnected VoIP here.