The California Public Utilities Commission (CPUC) is actively engaged in a significant rulemaking proceeding that will shape the future regulation of interconnected Voice over Internet Protocol (VoIP) services in California (and which may, as previously reported, create a snowball effect at other State Utility Commissions throughout the U.S.). This includes determining the regulatory framework for nomadic VoIP services—those that can be used from multiple locations—compared to fixed or facilities-based VoIP services. The outcome of this proceeding is critical for companies operating in the VoIP space, especially those providing Over-the-Top (OTT) nomadic VoIP services.
Background:
This rulemaking was initiated on August 25, 2022, to address the licensing status of VoIP carriers and explore necessary regulatory reforms under the Public Utilities Code. The CPUC’s decisions will impact the ongoing obligations of these service providers, including how nomadic VoIP services are treated compared to other types of VoIP services.
Our firm is actively representing the Cloud Communications Alliance (CCA) in this proceeding. The CCA, a key industry association, has submitted comments and replies advocating against increased regulation on VoIP providers, particularly regulations that are better suited for different technologies and service models. The CCA argues that imposing such regulations would increase operating costs, reduce competition, and ultimately harm both consumers and small businesses.
Key Updates and Implications:
- Extension of Statutory Deadline:
- For the second time, the CPUC has extended the statutory deadline for this rulemaking proceeding, this time until December 31, 2024. According to the recent Order, the extension allows the Commission additional time to consider the complex issues at hand and develop a proposed decision, along with any alternative decisions that may be necessary.
- Ongoing Challenges for VoIP Providers:
- Regulatory Uncertainty: The CPUC has yet to establish clear rules for the registration, licensing, and compliance obligations of VoIP providers. This uncertainty poses significant challenges, particularly for OTT nomadic VoIP services that have entered the California market after the CPUC discontinued its streamlined registration process—a process that had been in place for over 15 years.
- Increased Compliance Burden: Without the streamlined registration option, new market entrants may be required to undergo the more burdensome Non-Dominant Interexchange Carrier (NDIEC) registration process, which includes a $25,000 surety bond requirement. Additionally, this process could subject nomadic VoIP providers to other regulatory obligations applicable to “Telephone Corporations” (as defined by the California Code), such as obtaining CPUC approval for any transfer of control or asset sale.
- Challenges in Remitting Regulatory Fees: The inability to register and obtain a Utility Number (U-Number) has prevented new nomadic VoIP providers from complying with regulatory fee obligations, such as remitting the California Combined Surcharge. Without a U-Number, these companies cannot access the CPUC’s Telecommunications & User Fees Filing System (TUFFS), leaving them at risk of non-compliance with state law.
The CPUC’s ongoing rulemaking and the extension of the statutory deadline underscore the continued regulatory uncertainty and potential challenges for VoIP providers in California. Companies operating in this space should closely monitor developments in this proceeding and consider proactive measures to address potential compliance obligations.
Our firm will continue to represent the interests of the CCA in this critical proceeding and keep our clients informed of any significant developments. If you have any questions or concerns about how this rulemaking process might impact your business, please do not hesitate to contact the attorney responsible for your account or, in the alternative, Jonathan Marashlian, who can be reached at: jsm@commlawgroup.com.
