California Opens Rulemaking to Consider Extensive New VoIP Regulations

Today, the California Public Utilities Commission (CPUC) unanimously voted to commence a rulemaking to consider new regulatory requirements for interconnected Voice over Internet Protocol (VoIP) providers in California, including facilities-based providers and resellers. The Order Instituting Rulemaking (OIR) and accompanying staff proposal contemplate significant changes to the type of license required to be a VoIP provider, the process for obtaining such a license, and ongoing compliance requirements for all new and existing VoIP providers in California.

As discussed below, if the proposed new rules are adopted:

• VoIP providers that previously registered using the CPUC's streamlined (but now discontinued) VoIP registration system will be required to apply for a new license;
• New entrants will be subject to an extensive VoIP application and licensing process; and
• All VoIP providers will be required to file tariffs, secure performance bonds, and submit annual financial and operational reports to the CPUC.

CPUC Jurisdiction Over VoIP Providers

The CPUC previously found that under California law, regardless of how voice service is provided – i.e., traditional landline, wireless, or IP-enabled – the service provider meets the statutory definition of a "telephone corporation" and therefore is subject to regulation by the CPUC. The OIR indicates that the CPUC intends to use this rulemaking to examine its authority to regulate interconnected providers of nomadic as well as fixed VoIP service.

The Proposed VoIP Licensing Regime

A VoIP provider historically has been able to obtain operating authority from the CPUC in one of three ways:

• By registering through a simplified process under Pub. Util. Code § 285 (Sec. 285 Carriers);
• By obtaining a Certificate of Public Convenience and Necessity (CPCN) if it provides facilities-based service; or
• By registering as a Non-Dominant Interexchange Carrier (NDIEC) if it is an interconnected VoIP reseller.

In 2021, following the sunset of Pub. Util. Code § 710, which limited the CPUC's authority to regulate VoIP, the CPUC stopped licensing VoIP providers as Sec. 285 Carriers. CPUC staff proposes allowing providers already operating with Sec. 285 authority to continue operating but would effectively rescind their registrations and create an "expedited" application process to license these carriers with either CPCN or NDIEC authority.

Similarly, any unregistered entity seeking to offer VoIP service in California would be required to either obtain a CPCN or register as an NDIEC prior to entering the market.

The OIR also asks whether the CPUC should grant its Communications Division staff ministerial authority to approve changes to the Wireless Identification Registration forms and instructions to expedite the registration process for wireless carriers.

Proposed Ongoing Compliance Requirements for VoIP Providers

In addition to changing the licensing requirements and process for offering any VoIP service in California, CPUC staff proposes significant new ongoing compliance obligations for all VoIP providers. If adopted by the CPUC, the staff proposal would require all VoIP providers to:

• Meet performance bond requirements, including submitting the original hard copy of the performance bond and filing Advice Letters;
• File annual financial and operational reports pursuant to General Order 104-A;
• File annual affiliate transaction reports pursuant to CPUC Decision 93-02-019;
• File tariffs consistent with the CPUC's basic service requirements set out in Decision 12-12-038; and
• Pay CPUC user fees.

Proposed Penalties

The staff proposal also includes a series of proposed penalties. These include: (1) fines for Sec. 285 Carriers that have not reported and remitted surcharges; (2) fines for providers that acquire a Sec. 285 Carrier without approval of the transfer and the necessary operating authority; (3) authorizing CPUC staff to rescind the utility identification number of providers that do not take steps to obtain appropriate operating authority within a specified time frame; and (4) fines for carriers that operate without that authority.

Upcoming Deadlines

Now that it has been adopted, we expect the CPUC to issue the OIR within 10 days. Once issued, the following schedule will apply:

• Parties will have 20 days to request to be on the service list.
• Opening comments on the OIR will be due within 46 days.
• Reply comments on the OIR will be due within 61 days.

Please contact DWT if you have questions about the OIR or if you would like to discuss options for participating in the rulemaking process.