A recent D.C. Circuit Court decision may significantly impact the access charges billed by over-the-top VoIP carriers.

In 2015 the Commission issued a declaratory ruling (In re Connect America Fund, 30 FCC Rcd. 1587 (2015) regarding the classification of end office local switching when internet service providers (“ISPs”) collaborate with over-the-top VoIP providers to complete interexchange calls. AT&T didn’t like what the FCC came up with and asked the D.C. Circuit to weigh in. The court has now vacated and remanded the declaratory order so the Commission might clear up its “muddled treatment” of the term “functional equivalence”.

The court decision reduces the revenue that over-the-top VoIP service providers receive from long distance carriers like AT&T when the VoIP carrier completes a long distance call for the long distance carrier. Instead of receiving payment of an end office switching rate, over-the-top VoIP service providers will receive payment of a tandem switching rate, which is generally much lower.  

After applying the FCC’s functionally equivalent test, the court held that the FCC had failed to identify functions performed by the VoIP carriers that were functionally different from tandem switching and unique to end office switching. In vacating the FCC decision allowing VoIP carriers to charge for end office switching, the court has limited over-the-top VoIP carriers to billing for tandem switching instead.