Appeals Court Upholds FCC VoIP Policy

WASHINGTON — In a ruling issued late last week, a U.S. appeals court upheld a Federal Communications Commission ruling that requires VoIP providers to contribute a portion of their earnings into the Universal Service Fund.

The U.S. Court of Appeals for the District of Columbia held that the FCC acted within its authority last year when it issued an order requiring VoIP providers like Vonage to pay into the fund.

In its challenge of the FCC order, Vonage argued that the FCC had exceeded its authority under the Telecommunications Act of 1996 and “acted arbitrarily and capriciously” by analogizing VoIP to traditional phone services when calculating revenues generated through interstate and international service, requiring pre-approval for traffic studies submitted by VoIP providers but not those submitted by wireless providers and suspending the “carrier’s carrier rule” where VoIP is concerned.

On the first two points, the court disagreed with Vonage.

“We conclude that the Commission has statutory authority to require VoIP providers to make USF contributions and that it acted reasonably in analogizing VoIP to wireline toll service for purposes of setting the presumptive percentage of VoIP revenues generated interstate and internationally,” the court stated in its decision.

The ruling wasn’t a complete loss for Vonage, however.

In its decision, the appeals court stated that it found the FCC’s explanation “wanting as to the pre-approval of traffic studies and the suspension of the carrier’s carrier rule,” and vacated those portions of the FCC order accordingly.

Representatives of both the FCC and Vonage were quick to declare victory, albeit a partial triumph.

“I am pleased that the court has affirmed the commission’s action, which ensures that Universal Service Fund contribution obligations are administered in a competitively and technologically neutral manner on all phone providers, including interconnected VoIP providers,” FCC Chairman Kevin Martin said in a written statement issued by the FCC.

A spokesperson for Vonage said that the company got what it wanted all along, despite the court’s ruling that the FCC acted within its authority.

“We are pleased that the court vacated portions of the FCC’s USF order that treated VoIP providers in an inequitable manner, as that was our goal: fair and equitable treatment for all VoIP providers under this interim USF funding regime,” Vonage spokeswoman Brooke Schulz said.

Companies offering long-distance and/or international phone service, as well as companies that offer digital subscriber line (DSL) technology currently must contribute 10.9 percent of revenue generated from those services to the USF.

According to the Universal Service Administrative Company (USAC), estimated contributions to the USF in 2006 totaled $7.3 billion. Since the fund was established in 1997, more than $16.4 billion in funding commitments have been disbursed from the fund to schools and libraries nationwide.

Copyright © 2026 Adnet Media. All Rights Reserved. XBIZ is a trademark of Adnet Media.
Reproduction in whole or in part in any form or medium without express written permission is prohibited.

More News

Pineapple Support Partners with Better Life Science's 'STD Hero'

Pineapple Support has partnered with Better Life Science brand STD Hero.

Brazil Sets Enforcement Timeline for New AV Rules

Brazil’s National Data Protection Authority (ANPD) on Friday published a timeline outlining planned steps for monitoring and enforcing age verification under the country’s Digital Statute for Children and Adolescents (Digital ECA), which took effect Tuesday.

Utah Governor Signs 'Porn Tax' and VPN Rule Into Law

Governor Spencer Cox on Friday signed into law a bill to tax adult websites and make them liable if minors circumvent geolocation.

BranditScan Launches 'White Glove' Subscription Tier

BranditScan has launched its new White Glove subscription tier for creators.

German Court: Regulator Can't Block Creator's IG Account, Only Posts

A German court has ruled that while a regional media regulatory agency may block specific Instagram posts that include material deemed harmful to minors, it cannot ban an entire Instagram account due to such a post.

Brazil Lays Out Preliminary Guidelines for New AV Requirements

President Luiz Inácio Lula da Silva on Wednesday signed a decree establishing guidelines for new regulations requiring adult websites to age-verify users located in Brazil.

Senate Committee Debates Section 230 Reform

The U.S. Senate Committee on Commerce, Science, and Transportation held a hearing Wednesday on potential changes to Section 230 of the Communications Decency Act, which protects interactive computer services — including adult platforms — from liability for user-generated content.

Pearl Industry Network Offers Free Creator Memberships

Industry trade group Pearl Industry Network (PiN) has launched its free creator membership initiative.

Sam Bird Acquires Fanblast

Sam Bird, former co-director of global talent agency Surge, has acquired creator monetization tool Fanblast and named himself CEO.

'SheHerGirls' Launches Through Paysite.com

The braintrust behind PoleVixens has officially launched a new membership site, SheHerGirls, also through Paysite.com.

Show More