VoIP Provider, magicJack, Enters Into $5 Million Settlement with FCC to Resolve Decade-Long Investigation of Alleged Unlawful Avoidance of USF Contributions

On June 5th, the FCC Enforcement Bureau’s 11-year long investigation into magicJack’s (a provider of VoIP services) compliance with Commission rules requiring contributions to the Universal Service Fund (“USF”), ended with a settlement.  magicJack agreed to pay a five million dollar ($5 million) fine and accept the terms of an FCC Consent Decree, including onerous post-settlement compliance duties. The settlement concludes an investigation that began in 2009 and was re-opened in 2014, before finally settling last week.

The company had been accused by the FCC of dodging its legally-mandated USF contribution obligations. The sheer length of the investigation and the Commission’s tenacity in pursuing the company sends a strong signal to other service providers who may seek to avoid their USF contribution obligations.

MagicJack, which not only provides VoIP services but also traditional phone services such as caller ID, voicemail, and call forwarding, adopted a Compliance Plan which will bind its operations for three years. During this time magicJack commits to paying its USF contributions in full and agrees to provide reports on its compliance efforts at intervals of three, twelve, and twenty-four months from the date of implementation of the agreement.

“Today’s settlement sends a strong message that we take seriously the requirements on VoIP service providers to meet their legal obligations,” said Chairman Ajit Pai. “I am glad we can resolve this long-standing investigation.” 

USF contributions are collected quarterly. Proper compliance review and reporting is more important than ever for VOIP providers as the FCC continues to incorporate advanced telecommunications into the USF structure and pursues those who avoid their obligations with vigor. To make sure your communications company is up to date on all state and federal compliance obligations, please contact the attorney assigned to your account or Jonathan Marashlian at jsm@commlawgroup.com or 703-714-1313.

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