Washington Post 2012 Annual Report Download - page 31

Voice Services
Voice Over Internet Protocol (VoIP). Cable companies, including Cable ONE and others, offer voice over Internet
Protocol service, which permits users to make voice calls over broadband communications networks, including the
Internet. U.S. Federal law preempts state and local regulatory barriers to the offering of voice service by cable companies
and others, and the FCC and U.S. Federal courts generally have preempted state laws that seek to regulate or classify
VoIP.
The FCC has held that VoIP services are IP-enabled services, which are interstate in nature and thus subject exclusively to
the FCC’s U.S. Federal jurisdiction. This decision was upheld on appeal, although the FCC has an ongoing proceeding
to consider whether VoIP services provided by cable companies and others are properly classified as an “information
service,” “telecommunications service” or some other new category of service. This determination, once made, could have
numerous regulatory implications for cable companies that provide VoIP services, including Cable ONE. Although the
FCC has yet to ascribe a regulatory definition to VoIP services, the FCC nevertheless has imposed a number of
obligations on some types of VoIP providers known as interconnected VoIP service providers, some of which are
discussed more fully below. In 2011, the FCC implemented a statutory provision that Congress adopted and imposed a
smaller subset of requirements, principally, registration and contribution obligations for contributions to the Interstate
Telecommunications Relay Services Fund, on non-interconnected VoIP providers. In the absence of a definitive FCC
decision regarding the regulatory classification of interconnected VoIP services, several states, including several in Cable
ONE’s service territory, also have attempted—and are expected to continue to attempt—to regulate VoIP services like
traditional telephony service and impose certain fees and taxes on the provision of VoIP services. While Cable ONE and
other VoIP service providers are actively challenging state attempts to regulate and classify VoIP services, these state
actions could have an adverse effect on Cable ONE’s business by increasing its costs to provide VoIP services.
Legislation from time to time has been introduced in Congress to address the classification and regulatory obligations of
VoIP providers. The prospects for passage of any such legislation are uncertain.
Emergency 911 Services. The FCC has ruled that an interconnected VoIP service provider that enables its customers to
make calls to and from persons who use the public switched telephone network must provide its customers with the same
enhanced 911 (E911) features that traditional telephone and wireless companies are obligated to provide. This
requirement was upheld on appeal. The FCC is currently assessing whether additional rules related to the provision of
E911 services by interconnected VoIP service providers should be adopted.
CALEA. FCC regulations require providers of interconnected VoIP service to comply with the requirements of CALEA,
which requires covered entities and their equipment suppliers to deploy equipment that law enforcement officials can
access readily for lawful wiretap purposes.
Universal Service. The FCC has determined that interconnected VoIP service providers must contribute to the U.S.
Federal Universal Service Fund (USF). The amount of a company’s USF contribution is based on a percentage of revenues
earned from end-user interstate and international interconnected VoIP services. Cable ONE is permitted to recover these
contributions from its customers. This percentage changes from time to time and generally has been increasing, prompting
Congress and the FCC to consider ways in which the USF and the payment obligations of fund contributors should be
reformed. In 2011, the FCC adopted an order and new rules intended to transition the USF so that it supports the build
out of broadband, rather than telecommunications facilities. The order principally addressed the manner in which
universal service funds will be distributed to network operators for broadband build out. In 2012, the FCC initiated a
proceeding that focused on reforming the nature and manner in which entities should contribute to the USF and at what
levels. Cable ONE cannot predict whether and how such reform will occur and the extent to which it may affect providers
of VoIP services, including Cable ONE and its competitors. The FCC’s 2011 universal service reform order is subject to
both reconsideration requests and appeals, and Cable ONE cannot predict the outcome of those actions. In November
2010, the FCC determined that states may impose state USF fees on interconnected VoIP service providers subject to
certain limitations and requirements. State USF contributions are based on a percentage of revenues earned from end-user
intrastate interconnected VoIP services, and Cable ONE is typically permitted to recover these contributions from its
customers. Cable ONE cannot predict whether or how the imposition of such state-based universal service fees will affect
its operations and business.
Intercarrier Compensation. The order and new rules adopted by the FCC in 2011 in connection with universal service
reform also addressed intercarrier compensation and specified that “VoIP-PSTN traffic,” that is, traffic exchanged over
public switched telephone network facilities that originates and/or terminates in IP format, which includes interconnected
VoIP traffic, is subject to intercarrier compensation obligations either on the basis of specified default charges or through
negotiated rates. The FCC’s order is the subject of both reconsideration requests and appeals, and Cable ONE cannot
predict the outcome of these actions. Future FCC determinations regarding the rates, terms and conditions for transporting
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