In two recent Forfeiture Orders issued to Cardinal Broadband, LLC (“Cardinal”), the FCC clarified that a reseller of Voice over Internet Protocol (“VoIP”) service is subject to the FCC’s VoIP E911 requirements as a “provider of I-VoIP” services.  The FCC held that the fact Cardinal relied on its underlying VoIP supplier to provide certain services, including E911, does not preclude Cardinal from being deemed “a provider of interconnected VoIP services” because the FCC does not distinguish between whether a party “own[s] and operate[s] their own facilities, services, or networks” or “outsource[s] some or all of those functions to others.”  The FCC therefore found that, as an I-VoIP provider, Cardinal was required to provide E911 service to its customers and failed to do so.

The FCC also explained that “Cardinal’s status as an interconnected VoIP service provider is unaffected by the fact that it also offers conventional analog telephone service” because “conventional analog telephone service and interconnected VoIP service are distinct services.”  It therefore found that the critical issue was whether Cardinal’s VoIP offering met the definition of I-VoIP in the FCC’s rules, specifically whether a broadband connection and Internet Protocol-compatible CPE were required in order to utilize Cardinal’s VoIP service.  The fact that Cardinal offered a separate, conventional analog service was not relevant to this analysis.

Finally, the FCC noted that it is immaterial that the violation occurred because the VoIP supplier whose services Cardinal resold failed to provide E911 because the FCC has consistently “refused to excuse licensees from forfeiture penalties where the actions of employees, independent contractors, or agents have resulted in violations.”

The implications of this decision are significant, particularly for VoIP resellers.  In short, the FCC has decided that an entity that provides retail VoIP service and is considered by the customer to be the service provider, will be considered to be an I-VoIP provider subject to the FCC’s rules, regardless of whether the entity outsources all or some portion of its service to third parties.  In addition, while the Forfeiture Orders addressed E911 compliance, the FCC’s determination that a VoIP reseller cannot rely on its supplier to satisfy its own compliance obligations, could apply to other requirements imposed on I-VoIP providers, including USF contribution obligations.

The Forfeiture Orders are available here:

https://transition.fcc.gov/Daily_Releases/Daily_Business/2012/db0713/DA-12-1123A1.pdf

https://transition.fcc.gov/Daily_Releases/Daily_Business/2012/db0713/DA-12-1124A1.pdf

Please contact the attorney assigned to your account if you have questions about the issues addressed in this Advisory.