States Continue Drive to Extend State Universal Service Contribution Obligations to Nomadic Interconnected VoIP Providers

February 24, 2011

Efforts to include nomadic Interconnected VoIP providers in the contribution base of state Universal Service Funds (“USF”) are well underway, as Arizona becomes the latest state to extend state USF contribution obligations to nomadic providers. Recently, Arizona’s state USF administrator, Solix, Inc. released the 2011 Arizona USF Remittance Worksheet Instructions, which includes a change in the directions to require nomadic Interconnected VoIP providers to file the remittance form and contribute to the Arizona USF. The Instructions reference as the basis for the change the FCC’s recent Declaratory Ruling confirming that states are not preempted from assessing state USF contribution obligations on nomadic Interconnected VoIP providers. To our knowledge, the change in the Instructions was not channeled through the Arizona Corporation Commission and does not appear to have occurred through the rulemaking process. Nebraska, California, and Kansas have also taken steps to require nomadic Interconnected VoIP providers to contribute to their respective state USF programs. Unlike California and Nebraska, however, the Arizona Instructions provide no guidance to nomadic providers on what contribution methodology they should follow to report Arizona intrastate revenues. The instructions also do not address how nomadic Interconnected VoIP providers can avoid potential duplicative assessment by states on the same intrastate revenues.

Furthermore, through conversations with Solix, our firm has learned that other states, including Puerto Rico, New Mexico, and Nevada have also taken steps to extend their respective state USF contribution obligations to Interconnected VoIP providers. While Puerto Rico expressly includes nomadic Interconnected VoIP providers in the contribution base, New Mexico and Nevada do not tinguish between nomadic and fixed providers in requiring Interconnected VoIP providers to contribute to their respective state USF programs.

We firmly expect other states to follow the lead of Arizona, Nebraska, California, Kansas and Puerto Rico and extend their state universal service programs to nomadic interconnected VoIP providers.

Clients with comments or questions regarding this Advisory should contact the attorney responsible for their account.