In a recent decision by a federal district court in Florida, Smartbiz Telecom, an intermediate voice service provider, was found liable on multiple counts in a lawsuit brought by the Florida Attorney General. The case alleged violations of several federal and state laws, including the Telephone Consumer Protection Act (TCPA), the Truth in Caller ID Act, the Telemarketing Sales Rule, and Florida’s Unfair Trade Practices Act.

In rejecting Smartbiz’s Motion for Summary Judgment, the court determined that Smartbiz was potentially responsible for making or initiating illegal calls, despite its status as an intermediate carrier. Citing a 1992 FCC Order, the court highlighted that liability under the TCPA could be established if an entity demonstrates “a high degree of involvement” or has actual notice of illegal activity and fails to take adequate steps to prevent it.

The court found that Smartbiz’s receipt of numerous traceback requests from the Industry Traceback Group satisfied the actual notice requirement. However, the court left open for a jury to determine whether Smartbiz’s Know Your Customer (KYC) program and robocall mitigation efforts were sufficient to prevent illegal transmissions. The court also ruled in favor of the AG regarding violations of the Truth in Caller ID Act and Telemarketing Sales Rule.

Implications for VoIP Providers

This decision underscores the increasing regulatory and legal risks facing VoIP providers, who, unlike traditional telecom carriers, often lack the regulatory protections provided by Title II of the Communications Act and FCC primary and exclusive jurisdiction. Traditional common carriers are subject to Title II regulations, which include clear federal oversight and liability limitations that VoIP providers do not necessarily enjoy.

Our managing partner’s recent Tele-Tech Talk article, “VoIP and Title II: Almost All of the Burdens, None of the Benefits”, explains how VoIP providers are increasingly exposed to a fragmented state-level regulatory framework, placing them at greater risk than their common carrier counterparts.

• Liability under multiple frameworks: VoIP providers may be subject to liability under federal statutes like the TCPA, Truth in Caller ID Act, and Telemarketing Sales Rule, but also state consumer protection laws. This leaves them vulnerable to actions like the one brought by the Florida AG against Smartbiz.
• Traceback notice as liability trigger: The Smartbiz decision highlights that even as an intermediate provider, VoIP services can be held accountable if they have actual notice of illegal calls passing through their systems, as evidenced by traceback requests. This broadens the scope of liability, especially if providers fail to implement sufficient robocall mitigation or KYC procedures.
• Lack of federal preemption: Unlike common carriers that benefit from FCC preemption under Title II, VoIP providers remain subject to a patchwork of state regulations. This creates a complex legal environment where providers may face litigation in multiple jurisdictions without the regulatory shield that traditional telecom carriers enjoy.

Key Takeaways

VoIP providers, especially intermediate carriers like Smartbiz, should be aware of the increased exposure to legal action from both federal and state regulators. The absence of Title II protections, combined with the growing importance of compliance with state and federal regulations, places these providers in a more vulnerable position than traditional telecom carriers.

To mitigate these risks, VoIP providers should:

• Ensure robust compliance programs are in place, including KYC and robocall mitigation plans.
• Stay vigilant about traceback requests and take immediate action to address illegal traffic.
• Consider the broader regulatory and legal landscape, particularly state-level consumer protection laws, which may impose additional obligations and risks.

By understanding and addressing these challenges proactively, VoIP providers can better position themselves to avoid significant legal and financial liabilities, such as those faced by Smartbiz.

For more information regarding the Smartbiz decision and its implications for your business, please contact the attorney assigned to your account or reach out to our firm’s Robocall Mitigation Response Team of attorneys.  If you would like to receive a copy of the Smartbiz decision, please contact Jonathan S. Marashlian at jsm@commlawgroup.com.

The CommLaw Group Can Help!

The CommLaw Group’s wealth of specialized telecommunications law expertise, particularly our ability to see strategic implications of robocall rules and advocacy experience will enable our clients’ voices to be heard! Please let us know if you have any questions on this new development or would like assistance filing comments on the NPRM.

CONTACT US NOW, WE ARE STANDING BY TO GUIDE YOUR COMPANY’S ADVOCACY EFFORTS.

Jonathan Marashlian – Tel: 703-714-1313 / E-mail: jsm@CommLawGroup.com

Michael Donahue — Tel: 703-714-1319 / E-mail: mpd@CommLawGroup.com

Rob Jackson – Tel: 703-714-1316 / E-mail: rhj@CommLawGroup.com  

Ronald E. Quirk – Tel: 703-714-1305 / E-mail: req@CommLawGroup.com

Diana James – Tel: 703-663-6757 / E-mail: daj@CommLawGroup.com