MYTHS vs. MISPERCEPTIONS: FCC Registration Requirements for Non-Facilities-Based Telecommunications & VoIP Providers

There is a common misperception that providers of non-facilities-based telecommunications and Voice over Internet Protocol (VoIP) services (i.e., resellers) are not required to register with the Federal Communications Commission (“FCC,” or the “Commission”). In reality, resold telecommunications and VoIP providers are required to register with the Commission and are subject to a wide variety of regulatory compliance and reporting obligations.

The purpose of this Educational Advisory is to dispel the Myth and Misperception that non-facilities-based telecommunications and VoIP providers are subject to the FCC’s regulatory jurisdiction, and to clarify their regulatory and reporting obligations.

FCC Jurisdiction

Resold telecommunications and VoIP providers remain subject to the Commission’s regulatory jurisdiction regardless of whether they provide services directly to an end-user customer, or to another reseller.  Accordingly, the Commission considers a provider to be subject to regulation regardless of whether a provider “own[s] and operate[s] their own facilities, services, or networks” or merely “outsource[s] some or all of those functions to others.”[1]  Therefore, barring certain exceptions, resold telecommunications and VoIP service providers are regulated the same as retail service providers (i.e., provide services directly to end-users), and are subject to similar registration, reporting, and compliance obligations.

Registration

Barring certain exceptions, all non-facilities-based telecommunications and VoIP providers must register with the Commission if they offer either domestic and/or international services.

The Commission directs all non-facilities-based telecommunications and VoIP providers offering domestic services (i.e., interstate services offered within the United States) to register with the FCC before providing interstate service to the public.[2]  Additionally, providers offering service to other entities that will resell those services have an affirmative duty to ensure those resellers are also registered.[3] 

A provider registers its domestic services by filing an FCC Form 499-A with the Commission’s designated agent for administration of the federal Universal Service Fund (“USF”) – the Universal Service Administrative Company (“USAC”). 

Thus, at the moment all non-facilities-based telecommunications and VoIP providers of interstate and/or international services are required to register with the Commission.

Compliance Obligations

Providers of resold telecommunications and VoIP services are subject to a broad array of direct regulatory responsibilities that cannot be delegated or contracted away.  More often than not, governmental regulations apply to the “retailer” of a service, not the underlying wholesaler.  Furthermore, underlying wholesalers are often powerless under the law to “comply on behalf of” their reseller customers, even if the wholesaler wants to assume compliance burdens for its reseller customers.

However, the scope of regulatory obligations for non-facilities-based telecommunications and VoIP providers may vary depending on whether their service offerings are considered common carriage or private carriage by the Commission.

1. Common Carriers

A common carrier “holds itself out or makes a public offering to provide facilities by wire or radio whereby all members of the public who choose to employ such facilities and to compensate the carrier there-for may communicate or transmit intelligence of their own design and choosing between points on the system of that carrier and other carriers connecting with it.”[4]

A common carrier is subject to the full range of Title II regulations (in addition to Form 499 registration and USF contribution) including:  disability access /TRS requirements, CPNI/privacy requirements, E911 mandates, CALEA requirements, LNP and NANP administration support and annual FCC regulatory fee payments.  In addition, as common carriers, telecommunications service providers may be subject to state regulatory obligations. 

Generally speaking, the FCC considers “telecommunications service” providers to be common carriers.  However, the Commission has yet to find that all VoIP services are classified as telecommunications services (and thus subject to the full range of Title II regulations).  Nevertheless, the FCC has determined that I-VoIP providers should be subject to many of the requirements applicable to traditional telephone services, while other forms of IP-based services (such as peer-to-peer services that do not make use of traditional telephone numbers) have been left largely unregulated.

2. Private Carriers

Private carriers, on the other hand, make individualized decisions in particular cases, whether and on what terms to deal.[5]  Providers that merely offer telecommunications (not telecommunications services) are considered private carriers. 

Private carriers must comply with CALEA, contribute to the USF, and make FCC regulatory fee payments, but are exempt from contributing to TRS, NANP and LNP (collectively the “other Title II Funds”).[6]  In addition, private carriers also face much less regulatory oversight than common carriers at the state level.

Generally speaking, telecommunications providers are considered to be private carriers.  Furthermore, although I-VoIP services are subject to extensive regulations as discussed above, it is unclear whether non-Interconnected VoIP services may be offered on a private carriage basis – and thus subject to a narrower scope or regulatory options – or are classified as information services – and not subject to FCC regulation altogether. 

Consequences of Failing to Register and/or Comply with FCC Regulations

Non-facilities-based telecommunications and VoIP providers can be subject to investigation by the FCC’s Enforcement Bureau, and fines and other penalties for failure to comply with the FCC’s rules and regulations. 

For example, in July 2023, the FCC’s Enforcement Bureau issued a Notice of Apparent Liability for Forfeiture (“NAL”) against Enhanced Communications Group, LLC (“Enhanced Communications”), a telecommunications reseller, for non-compliance with telecommunications reporting worksheets documentation requirements and for submitting inaccurate worksheets.[7] The NAL states that Enhanced Communications failed to cooperate with a USAC audit and repeatedly neglected directives from USAC to provide the necessary documentation supporting the information in the company’s annual worksheets for the years 2017 to 2022. Furthermore, Enhanced Communications consistently submitted inaccurate annual worksheets for the same period. As a result, the Bureau determined that Enhanced Communications is potentially liable for a forfeiture penalty of $1,000,000.

In September 2022, the FCC’s Enforcement Bureau issued an NAL proposing a $153,000 penalty against PayG, LLC d/b/a Skyswitch, an I-VoIP provider, for purportedly failing to: (a) cooperate in a USAC audit , (b) submit accurate FCC Form 499 worksheets, and (c) keep its information current in the FCC’s Commission Registration System (“CORES”).[8]  According to the NAL, PayGo, on multiple occasions, failed to provide the necessary documentation to USAC to support the company’s 2019 and 2020 Forms 499. Throughout this period, the company did not respond to any of USAC’s Issue Notices or communications until 2021 when the FCC’s Enforcement Bureau directly reached out to the company through a Letter of Inquiry. In response, PayGo attempted to shift blame onto its third-party “compliance vendor” and citing “communications issues” with the vendor as the reason for the non-compliance. However, the FCC reviewed and ultimately found each defense presented by the company to be “unpersuasive.”

Thus, non-facilities-based providers failing to comply with their FCC regulatory obligations may be subject to stiff fines and penalties as the result of an FCC Enforcement Bureau investigation into their lack of compliance. 

Summation

As this Educational Advisory illustrates, the notion that non-facilities-based service providers are not subject to the FCC’s regulatory jurisdiction is a Myth and Misperception held by many industry members.  In reality, providers of resold telecommunications and VoIP services must register with the Commission and are subject to a wide variety of regulatory and reporting obligations.

Thus, non-facilities-based service providers should not hesitate to consult with legal counsel regarding their regulatory and reporting obligations at the federal level.

Contact Us for Assistance

Failing to register and comply with the federal statutes, rules, and regulations governing the registration, compliance, and reporting obligations of providers of telecommunications and VoIP services can result in the imposition of hefty fines and penalties by the FCC’s Enforcement Bureau. 

Attorneys in The CommLaw Group’s Telecommunications, VoIP, and Advanced Communications Services Group can help you unpack and understand the issues, and how they may impact your business.  Moreover, our attorneys can assist in the development of practical and pragmatic strategies that will enable, and not inhibit, your company’s ability to take full advantage of marketplace opportunities while mitigating exposure to regulatory enforcement agencies.

DISCLAIMERS: This Educational Advisory has been prepared for informational purposes only.  It is not for the purpose of providing legal advice; and does not create an attorney-client relationship between Marashlian & Donahue, PLLC, and you.  You should not act upon the information set forth herein without seeking experienced counsel.  This Advisory may be considered Attorney Advertising in certain jurisdictions.  The determination of the need for legal services and the choice of lawyer are extremely important decisions and should not be based solely upon advertisements or self-proclaimed expertise.

[1] See In the Matter of Universal Service Contribution Methodology, Report and Order and Notice of Proposed Rulemaking, 21 FCC Rcd. 7518 (2006). 

[2] 47 C.F.R. § 64.1195.  Non-interconnected VoIP registration requirements were imposed by the FCC in In the Matter of Contributions to the Telecommunications Relay Services Fund, Report and Order, CG Docket No. 11-47, FCC 11-150 (rel. Oct. 7, 2011).

[3] 47 C.F.R. § 64.1195(h).

[4] Frontier Broad. Co. v. Collier, 24 F.C.C. 251 (1958); see Industrial Radiolocation Serv., 5 F.C.C. 2d 197 (1958).  

[5] NARUC v. FCC, 533 F.2d 601 (D.C. Cir. 1976).

[6] The Commission’s jurisdiction under Title II is limited solely to practices that are undertaken (1) by a carrier while “engaged as a common carrier” and (2) “for and in connection with” such common carrier services. 47 U.S.C. § 153(10).  The Commission’s jurisdiction under Title II does not extend to services provided on a private carriage basis, even if provided by a common carrier.  NARUC v. FCC, 533 F.2d 601 (D.C. Cir. 1976).  The Act does authorize the Commission to extend contribution obligations to “any other provider of interstate telecommunications.”  47 U.S.C. § 254(d).  The Commission has required both common carriers and private service providers to contribute to the USF, but private carriers are not required to contribute to certain other support mechanisms (i.e., LNP, NANP, and TRS).  See Federal-State Joint Board on Universal Service, 12 FCC Rcd. 8776 (1997); In the Matter of Federal-State Joint Board on Universal Service, Report to Congress, 13 FCC Rcd. 11501 (1998). 

[7] https://www.fcc.gov/document/fcc-proposes-1m-fine-against-enhanced-filing-violations

[8] https://www.fcc.gov/document/fcc-proposes-153k-fines-against-payg