Government Affairs

Zoom’s Direct Numbering Access Application with FCC May Accelerate the “Skype Loophole’s” Demise

March 17, 2021

Authored by:  Jonathan S. Marashlian

The fast-growing and wildly popular video conferencing company, Zoom, recently filed an application with the FCC to obtain direct telephone numbers from the North American Numbering Plan Administrator (“NANPA”). While the company’s application may well be a simple business Economics 101 decision — increase margins through lowered cost of number resource acquisition — or a targeted one, to tackle compliance with the FCC’s STIR/SHAKEN mandates on robocall mitigation, perhaps there’s more lurking beneath the surface? Maybe it’s a sign of acquiescence to the inevitable expansion of FCC regulation of one-way Voice over Internet Protocol (“VoIP”) services that have benefited under the so-called “Skype Loophole” for the better part of the past 15 years.

Again, while this may be reading too much into the filing, there is an argument to be made that Zoom’s application either sends a signal or will be viewed by the regulator as a sign, that a major market player is open to greater regulatory oversight and obligations.  Including, importantly, being open to the Skype Loophole’s elimination. In other words, opening the door to greater parity among One-Way and Two-Way VoIP services, particularly with respect to the way revenue is subjected to federal Universal Service Fund contributions and service providers up and down the supply chain are required to treat one another for USF contribution exemption purposes — which is a tricky and thorny wicket of complex rules, fraught with risks.

On the surface, Zoom’s application appears innocuous: it would like to be able to get telephone numbers for its users straight from the FCC’s numbering administrator, rather than through third-parties, as it expands its popular services across the nation. However, it contains both an overt gesture and a read-between-the-lines message that may add to the acceleration of bringing One-Way VoIP operators under regulations requiring direct contributions to the USF.

Zoom, seemingly, has done a head spinning U-Turn on its earlier objection to One-Way VoIP being required to contribute to the fund, now appearing fully committed to USF contributions in its latest application. Zoom’s application effectively ramps-up the conversation about whether One-Way VoIP services should be brought under the regulatory sphere of services that must pay directly into the USF.

Requesting direct access to telephone numbers, in effect, puts Zoom more in-line with regulated telephone companies or, more accurately in this case, a telecommunications company, which would automatically put it in conversation to be brought under further federal regulation.

Of course, Zoom may also be pursuing a “want cake and eat it too” business strategy, one that capitalizes on the best of the regulatory regimes applicable to One-Way and Two-Way services — after all, that’s what smart businesses tend to do! But smart businesses also know how to smooth out the pathway to achieving mission critical goals by signaling their openness to accepting something the government wishes to achieve, and with support from a major brand name in the marketplace to add caché. Indeed, Zoom could have very easily formed the entity pursuing numbering access (and, presumably, enhanced STIR/SHAKEN compliance) under a different name, one less obviously intertwined with the Zoom brand. It did not do so, and this –alone– is telling.

This may all play out in a game of public opinion shaping and softening by the FCC. While it’s impossible to say with certainty, the FCC’s actions regarding the regulation of One-Way VoIP over the last two years certainly indicate a certain “lean.” With Zoom now signaling its willingness to contribute directly to the USF, the FCC may feel it has cover to proceed with what will likely be an unpopular expansion of its regulatory authority over One-Way VoIP services.

The USF, which hasn’t witnessed material changes since it was created in the late 1990s, is suffering a dwindling money pot, reflected in the fact that the latest contribution percentage of voice revenues is at more than 33 percent, the highest ever recorded.

All of this is to say that Zoom’s application has come at the absolute opportune time for the possibility that greater regulation may be coming to One-Way VoIP services –and possibly other previously exempt revenue streams– more quickly than otherwise anticipated. A confluence of events is now converging to make an expansion of the USF contribution revenue base all but inevitable: namely, a progressive White House and FCC; the record-high USF contribution percentage; and the growing debate about whether to expand the USF contribution base to include other service providers, potentially even broadband.

According to a recent Law360 article, the prospect of adding broadband revenue to the existing revenue-based contribution system administered by the Universal Service Administrative Company (“USAC”) is “gaining steam.”

Reform ideas for these [USF] programs have been bandied about for years, including charging providers based on the number of connections or phone lines they provide. But one old standby option and one newer option are emerging as the clear favorites: make all broadband providers pay into the USF, alongside legacy companies like long-distance phone providers, or support the programs through congressionally appropriated line items.

“There’s been no clear consensus about which of those three options would be the best,” said John Windhausen, executive director of the Schools, Health & Libraries Broadband Coalition, a group that advocates for USF recipients, of the older go-to ideas.

However, he noted that the idea of skimming off of broadband revenue has been gaining steam.

Read more at: https://www.law360.com/articles/1354562/consumer-relief-focus-points-to-urgent-fcc-subsidy-reform?copied=1

Whatever the ultimate outcome of the decades long drama over the best way to fund lofty universal service goals, one thing seems certain in the short term. The FCC appears poised to take at least a shot at patching the bleeding program through its tried and true “piecemeal” approach, and with One-Way VoIP services being eye-balled as its sacrificial lamb.

About the Author

Mr. Marashlian is the Managing Partner of Marashlian & Donahue, PLLC, The CommLaw Group. He is also the founder and CEO of The Commpliance Group, d/b/a Compliance Square, a consulting services firm providing outsourced regulatory, tax and other compliance services to the communications industry for more than 15 years.

The views and opinions expressed in this article are those of its author and do not necessarily reflect the official policy or position of Marashlian & Donahue, PLLC, The CommLaw Group, or the firm’s clients. Assumptions made in the article are not reflective of the position of any entity other than the author – and, since the author is an admittedly biased author, albeit a critically-thinking human being — these views are always subject to change, revision, and rethinking at any time. Please do not hold the author to them either universally or in perpetuity.

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