Do VOIP Services Have to Pay Into TRS? Yes and No!

Caption Action 2 was both right and wrong about Voice Over IP (VOIP) services not having to pay into the Telecommunications Relay Services (TRS) fund. Here is why, and what we learned after consulting with both the National Association of the Deaf (NAD) and the National Exchange Carrier Association, Inc. (NECA), as well as doing some additional research. The information in this post is very important because it affects the health of the TRS fund!

Two Kinds of VOIP

Interconnected VOIP

Turns out there are two different kinds of VOIP. The first kind is Interconnected VOIP. It is called Interconnected because it "touches" the regular telephone network (public switched telephone network). Someone who uses an Interconnected VOIP provider like Vonage can call any number. A more formal definition of Interconnected VOIP Service can be found in 47 CFR 9.3:

Interconnected VoIP service. An interconnected Voice over Internet protocol (VoIP) service is a service that:
(1) Enables real-time, two-way voice communications;
(2) Requires a broadband connection from the user's location;
(3) Requires Internet protocol-compatible customer premises equipment (CPE); and
(4) Permits users generally to receive calls that originate on the public switched telephone network and to terminate calls to the public switched telephone network.

Non-Interconnected VOIP Service

The other kind of VOIP, non-interconnected VOIP, is called that because it never "touches" the public switched telephone network. HR 3101 defines non-interconnected VOIP as:

‘(56) NON-INTERCONNECTED VOIP SERVICE- The term ‘non-interconnected VoIP service’--

‘(A) means a service that--

‘(i) enables real-time voice communications that originate from or terminate to the user’s location using Internet protocol or any successor protocol; and

‘(ii) requires Internet protocol compatible customer premises equipment; and

‘(B) does not include any service that is an interconnected VoIP service.

Why We Were Wrong

We thought that all VOIP services did not have to pay into the TRS fund. According to the NAD, that was true at the time HR 3101 was introduced. In fact, the Coalition of Organizations for Accessible Technology had produced a position statement that warned of the threat to the TRS fund if VOIP services did not have to pay into the TRS fund. However, according to the NAD, after HR 3101 was introduced, the FCC recognized the risks to the fund and used its authority to require Interconnected VOIP to pay into the TRS fund.

This was confirmed by Jill Cardoso of NECA, who pointed Caption Action 2 to a PDF file, a Telecommunications Reporting Worksheet. In that file, we found this language: "Section 64.604 requires that every common carrier and interconnected VoIP provider contribute to the Telecommunications Relay Services (TRS) Fund on the basis of its relative share of interstate end-user telecommunications revenues..."

Why We Were Right

Although Interconnected VOIP is indeed required to contribute to the TRS fund, Non-Interconnected VOIP like Skype, is NOT required to contribute. This was confirmed by the NAD.

Hey! That's Not Fair!

HR 3101 has language that would require BOTH interconnected AND non-interconnected VOIP to contribute to the TRS fund, as follows:

SEC. 715. INTERNET PROTOCOL-BASED RELAY SERVICES
Within one year after the date of enactment of the Twenty-first Century Communications and Video Accessibility Act of 2009, each interconnected VoIP service provider and each provider of non-interconnected VoIP service shall participate in and contribute to the Telecommunications Relay Services Fund established in section 64.404(c)(5)(iii) of the Commission’s regulations (47 C.F.R. 64.404(c)(5)(iii)), as in effect on the date of enactment of such Act, in a manner prescribed by the Commission by regulation to provide for obligations of such providers that are consistent with and comparable to the obligations of other contributors to such Fund.’’

However, S. 3304 does NOT require both interconnected and non-interconnected VOIP to contribute to the TRS fund - ONLY interconnected.

SEC. 715. INTERNET PROTOCOL-BASED RELAY SERVICES.

‘Within 1 year after the date of enactment of the Equal Access to 21st Century Communications Act, each interconnected VoIP service provider shall participate in and contribute to the Telecommunications Relay Services Fund established in section 64.404(c)(5)(iii) of the Commission’s regulations (47 C.F.R. 64.404(c)(5)(iii)) as in effect on the date of enactment of such Act, in a manner prescribed by the Commission by regulation to provide for obligations of such providers that are consistent with and comparable to the obligations of other contributors to the Fund.

Will This Impact the TRS Fund?

Will the fact non-interconnected VOIP does not have to pay into the TRS fund, hurt the TRS fund? Maybe! Caption Action 2 went back to Jill Cardoso to ask her if the TRS fund was seeing any reduction. Her answer was "We will have to wait and see once we start billing the new Fund year in July. " In the meantime, she suggested we compare the data in the April 30, 2010 NECA filing on NECA.org to the previous year's NECA filing.

The filing contains multiple Exhibits. The exhibits seem to present a variety of possible scenarios for the TRS fund's health. In each exhibit, the total collections for 2008 is 776,075,728. The total collections for 2009 is 850,161,288. This shows an increase, yes, but read on...

Exhibit 3-8a :

The projected total for 2010 is 765,445,973 - a DECREASE of about $85 million from 2009.

The projected collections for 2011 through June 2011 is only 287,904,061.

Exhibit 3-8b:

Projected 2010 total: 688,711,873 - a DECREASE of about $161 million.

Projected total through June 2011: 222,874,238

Exhibit 3-8c:

Projected 2010 total: 670,429,101 - a DECREASE of about $179 million.
Projected total through June 2011: 207,380,145

Exhibit 3-8d:

Projected 2010 total: 593,695,001 - DECREASE of about $257 million
Projected total through June 2011: 142,350,323

So What Does All this Mean?

Unless the law is updated, non-Interconnected VOIP will continue to be exempt from having to pay into the TRS fund. If both HR 3101 and S 3304 pass, Congress will have to work on reconciling the two bills, and hopefully the reconciled version would apply to both types of VOIP services.

But in the meantime, every time that someone chooses to use a non-interconnected VOIP service like Skype as their sole means of telephone communications, the TRS fund loses a source of funds.

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