New licensing regime in California for nomadic and fixed interconnected VoIP providers
On November 12, 2024, the California Public Utilities Commission (CPUC) issued Decision (D.) 24-11-003, "Establishing a Regulatory Framework for Telephone Corporations Providing Interconnected Voice over Internet Protocol Service" (the VoIP Licensing Decision or Decision), in its ongoing VoIP licensing proceeding, R.22-08-008. No party applied for rehearing of the Decision by the December 12, 2024, deadline.[1] The VoIP Licensing Decision was the culmination of the first phase of the CPUC's rulemaking proceeding to consider how California's VoIP providers should be licensed and what regulatory obligations should apply to VoIP services. The CPUC has now moved onto the second phase of the proceeding to consider certain implementation issues arising out of the new regulatory framework.
Impact on New Market Entrants
The VoIP Licensing Decision added a fourth category of voice services—interconnected VoIP services—to the three current telecommunications service categories: (i) local exchange service; (ii) interexchange service; (iii) wireless service; and now (iv) interconnected VoIP service. Interconnected VoIP service is split into two utility-type designations: a Digital Voice Nomadic (DVN) designation for providers that offer nomadic-only interconnected VoIP services and a Digital Voice Fixed (DVF) designation for providers offering fixed interconnected VoIP as part of their service offerings. The CPUC also established a new licensing framework for interconnected VoIP providers, as described below.
For providers that exclusively provide nomadic VoIP service, the VoIP Licensing Decision creates a streamlined registration form that must be ministerially approved by the CPUC's Communications Division Director prior to the provision of nomadic VoIP service. The nomadic VoIP registration process also requires the payment of a $250 registration fee and an attestation under penalty of perjury that the provider: (i) has the same characteristics of a nomadic-only VoIP provider as specified in the Decision and (ii) does not have the capability to track intrastate and interstate calls. An entity is considered to be a nomadic provider if the service being offered: (i) is portable and can be accessed from any broadband connection to the internet, regardless of the subscriber's location and internet access provider; (ii) operates on "specialized customer premise equipment," such as a personal computer with a microphone and speaker, and software to perform the conversion; (iii) has "integrated capabilities and features," such as voicemail, three-way calling, and geographically independent phone numbers; and (iv) provides the subscriber with an allocated telephone number that is not necessarily tied to a specific physical location and permits calls to be received anywhere in the world.
For providers that exclusively provide fixed VoIP service, with some or no ancillary nomadic capabilities and features, the VoIP Licensing Decision adopts a more formal licensing process—albeit with different approaches for facilities-based VoIP providers that offer fixed VoIP service over facilities that they own and non-facilities-based VoIP providers that lease capacity for the provision of fixed VoIP service. All facilities-based VoIP providers must obtain a certificate of public convenience and necessity (CPCN) pursuant to Public Utilities Code Section 1001. Non-facilities-based VoIP providers must register pursuant to Public Utilities Code Section 1013.
The VoIP Licensing Decision also adopts updated forms for each licensing pathway. The Section 1001 CPCN process is generally a more formal and lengthy process, with the provider's application being assigned to an administrative law judge and then approved through a formal CPUC decision. The Section 1013 registration process is a quicker staff-led process whereby the CPUC's Communications Division staff reviews, processes, and ultimately recommends the provider's registration application for an order of approval or denial by the Executive Director of the CPUC.
In the VoIP Licensing Decision, the CPUC also established a path for certain VoIP providers currently operating in the state to migrate to DVF or DVN status. That migration period has now concluded; and moving forward, unlicensed VoIP providers in the State must file a Section 1001 CPCN, a Section 1013 registration, or a nomadic registration no later than May 11, 2025. At this juncture, interconnected VoIP entities that wish to convert from a DVF to a DVN designation must file a Tier 2 advice letter, pursuant to Resolution T-17723, to surrender their DVF designation and apply for a DVN registration using the CPUC's designated form. Interconnected VoIP entities that wish to convert from a DVN designation to a DVF designation must apply for a DVF designation through the Section 1001 CPCN or Section 1013 registration process, as described above; it is not clear whether the process in Resolution T-17723 would need to be followed to relinquish a DVN.
New Regulatory Obligations for Interconnected VoIP Providers
Interconnected VoIP providers with DVN or DVF designations are required to "comply with all laws applicable to telephone corporations." While most of these regulations apply to both fixed and nomadic VoIP providers, because the CPUC's jurisdiction over nomadic VoIP service is more limited than its jurisdiction over fixed VoIP service, certain entry and transfer regulations are simplified for nomadic providers.
While the CPUC requires Interconnected VoIP providers to comply with all regulations currently applicable to telephone corporations, including public purpose program surcharges, network resiliency and outage reporting requirements, and consumer protection rules, the Decision explicitly calls out the following annual regulatory compliance obligations:
Additional regulatory obligations may be imposed on interconnected VoIP providers as the CPUC continues with subsequent phases of its VoIP Licensing rulemaking. If you have any questions regarding the VoIP Licensing Decision or the CPUC's new VoIP Licensing regime or need assistance with navigating the CPUC's new VoIP provider regulatory framework, please contact the authors.
[1] Pursuant to CPUC Rule 16.4, parties may still petition to modify the Decision based on new or changed circumstances. See, e.g., D.24-10-031 at 4. In February the Cloud Communications Alliance and the Cloud Voice Alliance petitioned the FCC for a declaratory ruling that the CPUC’s framework for regulating interconnected VoIP in the Decision is preempted by federal law. The petition has not been assigned a docket number or put on Public Notice.
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