Communications Law Bulletin -- May 2007.

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Communications Law Bulletin -- May 2007.

The Month in Brief

This issue of our bulletin, which discusses developments affecting the communications industry in May, 2007, comes somewhat later than usual in our publication cycle. We elected to delay publication this month so that we could include articles on items announced at the open meeting of the Federal Communications Commission ("FCC" or "Commission") held on May 30, 2007.

For obvious reasons, we hope that the FCC will not make a habit of holding open meetings at the end of the month. Unfortunately, as this issue was going to press, we learned that the June meeting will be held on the 28th. If we decide that the open meeting agenda justifies a slight delay in publication of our June issue to take some of those items into account, we certainly will strive to make that delay as short as possible.

We trust you will find that this bulletin was worth waiting for. As always, along with regulatory and legislative developments affecting all segments of our industry, we include a list of deadlines for your calendar.

Court Upholds Expansion of USF Obligations to Interconnected VoIP Providers

On June 1, 2007, the D.C. Circuit, acting on appeals by Vonage Holdings Corp. and the Computer and Communications Industry Association, partly upheld and partly vacated the FCC's 2006 Contribution Methodology Order imposing universal service fund ("USF") contribution obligations on Voice over Internet Protocol ("VoIP") providers. In an opinion by Judge Tatel, the court held that the FCC has the statutory authority to require VoIP providers to make USF contributions and that it acted reasonably in analogizing VoIP to wireline toll service in setting the "safe harbor" percentage of VoIP traffic presumed to be interstate and thus subject to USF contribution obligations. The court, however, found the FCC's explanation inadequate for its requirement that VoIP providers obtain FCC pre-approval for traffic studies used to demonstrate a lower percentage of interstate traffic and its suspension for two calendar quarters of the "carrier's carrier rule" preventing duplicative wholesale and retail USF contributions by VoIP providers.

Applying a "Chevron step two" analysis, the court found that it was reasonable for the FCC to find that its permissive contribution authority in Section 254(d) of the Communications Act, which covers "providers of telecommunications," extends to VoIP providers, whether it ultimately determines that VoIP is a "telecommunications service" or an "information service." Citing the U.S. Supreme Court's decision in the Brand X Internet Services case, the court found that it was reasonable for the FCC to determine that VoIP providers "provide" "telecommunications" as a component of VoIP service, irrespective of the ultimate regulatory classification of VoIP services.

The court rejected Vonage's challenge to the FCC's comparison of VoIP to wireline, rather than wirele...

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