Vonage, 8x8 in States USF Sights With New FCC Ruling

Nomadic VoIP providers such as Vonage Holdings Corp. and 8×8 Inc. now must pay into states Universal Service funds.

Late last week, the FCC ruled that states may require the likes of Vonage and 8×8 to contribute to their individual USF subsidies from here on out; the decision was expected.

VoIP operators will be allowed to pass on the additional costs to subscribers but, if they do that, they risk state regulators increasing the cost of their service.

The FCC was acting on a petition from Kansas and Nebraska, which wanted to add nomadic VoIP contributions to their coffers. Companies including Vonage disagreed with that stance and said the FCC should open a rulemaking. But the FCC said that wasnt necessary. As long as states dont force VoIP operators to contribute based on revenue allocated to other states, everything works out, the FCC found.

The National Association of Regulatory Utilities Commissioners (NARUC) concurred.

This decision is right on the law and right for consumers,” NARUC President David Coen of Vermont said in a prepared statement. It assures, as Congress intended, that nomadic [VoIP] providers join other carriers supporting critical state universal service programs.”

The new ruling comes after several years of back-and-forth between state and federal governments. In 2006, the FCC created a safe harbor” that allowed nomadic VoIP providers whose jurisdiction is almost impossible to pin down to contribute to the federal USF assuming that 64.9 percent of their traffic is interstate. That gave states the freedom to collect on 35.1 percent of nomadic VoIP carriers interstate revenue.

However, Vonage and others fought back and, last year, a federal court sided with them. The judge said nomadic VoIP didnt have to pay into state USF kitties. The FCCs Nov. 5 order, though, addresses future assessments, not past. Commissioners did not dive into past USF contributions at the state level, leaving that instead for the courts.

Shares of Vonage and 8×8 were trading 4.72 percent and 8.39 percent higher, respectively, by 3:25 p.m. Eastern.