The Federal Communications Commission (“FCC”) plans to adopt an order preempting State and Local laws and regulations that discriminate against providers of Voice over Internet Protocol (“VoIP”) services in the imposition of 911/E911 fees & surcharges (“911 fees”). The FCC’s preemption order will create parity between providers of VoIP services and carriers offering traditional telephone service when it comes to 911 fees.
911 fees are typically a “fixed value,” ranging from under $1.00 to over $3.00 “per access line” in some jurisdictions. How much ($) and how many (total per customer) 911 fees are required to be collected and remitted differs greatly throughout the U.S., often times based on diverse and conflicting interpretations of terms such as “access lines” or “users.” In some jurisdictions, for example, unique rules were adopted to lower the total number of 911 fees a provider of traditional, on-premise or CENTREX-based PBX services was required to bill, collect and remit from its customers (e.g., “PBX equivalencies”), but providers of VoIP or cloud-based PBX solutions often found themselves unable to take advantage of such 911 fee reduction rules because they did not, by definition, qualify. Thus, particularly in the business market, where many businesses are moving from on-premise/CENTREX-based PBX service to cloud-based PBX solutions, the disparity in state and local regulations governing 911 fees placed providers of cloud-based solutions at a disadvantage.
The pending FCC preemption order will prohibit state, local, and Tribal agencies from charging any individual VoIP service provider more in 911 fees than the total amount paid for the same volume of calling capacity delivered by providers of legacy telecommunications services.
The FCC took this action to remedy 911 fee disparities after an Alabama lawsuit by local 911 administrators seeking back charges from BellSouth. Under the 911 fee regime at issue in the case, a BellSouth VoIP customer could pay as much as four times more in 911 fees for the same amount of capacity when compared to a customer of traditional voice services, using the same capacity.
Another example of discriminatory fee structure is one in which total 911 fees are capped for traditional providers, but not for VoIP services. The order provides this example:
If a business subscriber orders 75 outbound telecommunications service access lines for each of its 75 employees, with each line having the ability to place a 911 call at the same time, but the jurisdiction’s 911 fee regulation caps the total monthly 911 fee any single business subscriber must pay at 50 access lines, then this business subscriber would be subject to the applicable 911 rate per line times 50. If this same business subscriber decides to convert her phone system to VoIP and she purchases a VoIP service that also provides outbound calling capability for 75 lines that can reach 911 for each of her employees, but the applicable 911 fee regulation does not cap the monthly 911 fees for VoIP service lines like it does for telecommunications service lines, this same business subscriber would be subject to the applicable 911 rate per VoIP line times 75. In this scenario, even if the nominal 911 rate per line for the telecommunications service was identical to the rate per line for the VoIP service, the business subscriber would owe, and the jurisdiction would collect, a 50% greater 911 fee for the 75 VoIP service lines than the 75 telecommunications service lines.
Not only does this policy hinder the transition of traditional telecommunications networks to IP services, the FCC also found that such fee discrimination violates the VoIP 911 fee parity provisions incorporated into the Communications Act by the NET 911 Act.
The preemption order will be considered at the FCC’s Open Meeting on October 26, 2019. It should be adopted and will go into effect immediately.
Firm clients are advised to evaluate the implications of the FCC order on their current 911 fee billing and collection activities. While many VoIP providers may find themselves paying less in 911 fees than previously, some may be surprised to learn that the clarity offered by the FCC order might actually result in increased impositions (because current policies may be based on outdated interpretations of state and local regulations). Service providers are advised to be pro-active in evaluating the impact 911 fee parity could have on their billing practices; for example, service providers relying on a third party Billing Service Solutions vendors and/or tax calculation software may wish to consult with their provider to ensure appropriate changes are being made to their underlying programming logic and/or content in a timely manner.
If you have any questions regarding the information contained in this Advisory and how it may impact your company, please contact the attorney assigned to your account or Allison D. Rule at email@example.com / 703-714-1312.