Eighth Circuit Rules that Federal Law does not Preempt State Authority to Regulate Intrastate VoIP Service
July 17, 2017
On June 23, 2017, the United States Court of Appeals for the 8th Circuit (“8th Circuit”) ruled that federal law does not preempt state regulation of long distance intrastate VoIP calls. In doing so, the Court ruled that Section 251(g) of the Telecommunications Act preserved the Iowa Utilities Board’s right to enforce intrastate access charges. However, notably, the Court did not determine whether the relevant VoIP calls were “information services” or “telecommunications services.”
The case was initiated in 2011 after the Iowa Utilities Board (“IUB”) ruled that VoIP calls are subject to intrastate regulation that required Sprint to pay access charges for intrastate VoIP communications. Sprint appealed the IUB decision to the District Court for the Southern District of Iowa, arguing that the intrastate VoIP calls were “information services” under the Telecommunications Act of 1996 (“Act”), and, consequently, that even intrastate VoIP traffic is subject to federal regulation and not the IUB’s authority. The District Court abstained from exercising jurisdiction and dismissed the case, a decision that was initially upheld by the 8th Circuit. However, the U.S. Supreme Court found the abstention to be inappropriate and remanded the case back to the District Court for further consideration. Ultimately, the District Court held that the Telecommunications Act preserved the IUB’s authority over VoIP and granted the IUB’s motion for summary judgment.
In response to Sprint’s appeal of the District Court’s second decision, the 8th Circuit held that regardless of whether VoIP calls are properly classified as an information service or a telecommunications service, the Telecommunications Act preserved the IUB’s authority to regulate long distance intrastate VoIP calls. Sprint had argued that Section 251(b)(5), which requires local exchange carriers to enter into reciprocal compensation arrangements, applied and superseded the Board’s requirement of access charges. The 8th Circuit disagreed and held that Section 251(g) of the Telecommunications Act preserves the “enforcement of exchange access and interconnection requirements that were in place before the passage of the Telecommunications Act.” Since the Iowa regulations had been in place prior to the passage of the Act, they remained in effect until they were “explicitly superseded,” which did not occur until the Federal Communications Commission’s Connect America Fund Order (“CAF Order”) was released in 2011. The Court also noted that the rule exempting enhanced service providers from access charges only applied to interstate communications, and declined to extend it to intrastate ones.
Although limited to state regulations issued prior to the 2011 CAF Order, the 8th Circuit’s confirmation that state regulation can apply to VoIP traffic potentially has some important ramifications. At a minimum, it will ensure that in many circumstances interexchange carriers will have difficulty avoiding the payment of intrastate access charges by simply claiming that traffic is VoIP traffic. If you have any questions regarding the above, please contact Rob Gastner at 202.659.6674 (rgastner@eckertseamans.com).
This Utilities and Telecommunications Alert is intended to keep readers current on matters affecting businesses and is not intended to be legal advice.
© Eckert Seamans Cherin & Mellott, LLC, 2017, all rights reserved.