VoIP service provider magicJack VocalTec has agreed to a $5 million settlement with the FCC involving contributions to the Universal service Fund. According to an FCC press release, MagicJack also agreed to “an extensive compliance plan.”

The FCC had been investigating whether magicJack failed to report interstate revenues and contribute to the Universal Service Fund (USF). The USF covers some voice and broadband costs in high-cost rural areas, for schools and libraries, for low-income individuals and for healthcare providers. Funding for the program is collected from service providers as a percentage of interstate voice service revenues.

MagicJack offers a device that enables consumers to make calls using VoIP. Currently the device costs $49.99 and includes one year of free voice service.

MagicJack No Stranger to FCC
Over the years, magicJack has used a range of questionable tactics to avoid paying fees related to telecom services as a means of keeping its costs low enough to support its offering.

Tactics have included not completing calls to some rural areas, where per-minute access charges tend to be higher. One service provider is required to pay these fees to another for calls made to the other carrier’s customers. By simply failing to complete those calls, magicJack avoided those charges.

The company also has gotten into hot water for allegedly not paying fees that fund emergency 9-1-1 service.

The FCC magicJack settlement over USF contributions “sends a strong message that we take seriously the requirements on VoIP service providers to meet their legal obligations,” said FCC Chairman Ajit Pai in the press release about the settlement. “I am glad we can resolve this long-standing investigation.”

The compliance plan to which magicJack agreed requires the company to designate a senior corporate manager or officer to serve as compliance officer and to be responsible for developing, implementing and administering a compliance plan and overseeing compliance. Other requirements include creating a compliance manual, establishing a compliance training program, making certain federal filings, and reporting any instances of noncompliance and detailing how any instances of noncompliance will be addressed.

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