Schools and Libraries

Step 6: Interconnected Voice over Internet Protocol (VoIP)

In Funding Year 2007, the Eligible Services List announced the eligibility of Interconnected VoIP. VoIP is a technology that allows users to make phone calls using the same line as an Internet connection. VoIP service can replace your traditional phone service while providing the same calling features such as call waiting, three-way calling, caller ID, voicemail, etc.

The FCC defines Interconnected VoIP as a service that (1) enables real-time, two-way voice communication; (2) requires a broadband connection from the user's location; (3) requires Internet protocol-compatible customer premises equipment (CPE); and (4) permits users generally to receive calls that originate on the public switched telephone network and to terminate calls to the public switched telephone network.

Additional Information on VoIP

The following information is being provided to help applicants and services providers understand the eligibility of interconnected Voice over Internet Protocol (VoIP) services and configurations, and provide clarity regarding the eligibility of what are generally referred to as "managed interconnected VoIP services."

Below we discuss the following:

  • VoIP service can be eligible as Priority One Telecommunications Services or Internet Access.
  • VoIP equipment, if purchased, is eligible only as Priority Two Internal Connections.
  • The eligibility of leased equipment is based on the type of equipment, its function(s), and its configuration within a network.
  • A leased VoIP phone system located on the applicant's premise is only eligible as Priority Two Internal Connections.
  • A leased gateway located on the applicant's premise is eligible as Priority One if it is used as part of the VoIP service.
  • If there is more than one basic terminating component on the applicant's premise, then only one of the basic terminating components is eligible as Priority One.
  • A leased router may be eligible if the applicant own its own VoIP phone system and -  if the router is removed -  the applicant can still make internal calls.
  • End-user equipment, whether leased or purchased, is ineligible for discounts.
  • Beginning with Funding Year 2010, VoIP is treated as a basic telephone service.

Let's look at these concepts in more detail:

1. Voice over Internet Protocol as an eligible service

VoIP service can be eligible as Priority One Telecommunications Services or Internet Access. Eligible VoIP services include the costs for making phone calls and can also include features such as three-way calling, caller ID, and voicemail.

2. VoIP phone system equipment eligibility

The purchase of a VoIP phone system is eligible as Priority Two Internal Connections ONLY. Purchased VoIP equipment - as with all Internal Connections - is only eligible as Priority Two, not Priority One.

The lease of an on-premise VoIP phone system (the "brains" of this service) is NOT eligible as Priority One, but is eligible as Priority Two. A leased on-premise VoIP phone system is ineligible as Priority One because the internal communications network (in this case, the voice network) must remain functional without dependence on the leased equipment. If the on-premise VoIP phone system were removed, the school or library would lose its ability to route calls within the building or campus, but would still maintain its access to the public switched telephone network - which is why it is eligible as Priority Two (see below). For more information, refer to the Tennessee Order (FCC 99-216, released August 11, 1999).

3. VoIP gateway (single basic terminating component) eligibility

Only the lease of a single basic terminating component is eligible as Priority One. As established in the Third Report and Order (FCC 03-323, released December 23, 2003), "to the extent an applicant seeks to lease multiple terminating components, one would be deemed eligible for funding as a Priority One service and the remainder would be eligible for funding as Priority Two Internal Connections. Further, if an applicant seeks to purchase a single basic terminating component, it will be eligible for a discount only as Priority Two Internal Connections." Equipment such as channel service unit/data service units (CSU/DSUs), network interface devices, cable modems, and gateways are considered basic terminating components.

A gateway device located on the applicant premise may be included as part of an eligible Priority One service as a single basic terminating component. A gateway device is analogous to a CSU/DSU or a network interface device (NID) in that it functions as the termination point for a Priority One service. The internal communications network would fail if the gateway were removed and the gateway is necessary to access the public switched telephone network, so the gateway is considered a necessary component of end-to-end access to telecommunications service (see below).

Note the configuration below differs from the diagram in the previous example. In the diagram below, the "brains" of the service are located in the service provider's central office, while in the previous example, the VoIP phone system is located on the applicant's premise. In this example the gateway is eligible as Priority One.

4. Leased on-premise router eligibility

Hubs, routers, and switches are NOT considered basic terminating components and ARE subject to the on-premise Priority One equipment conditions set forth in the Tennessee Order. For more information and detailed descriptions and examples, refer to the On-Premise Priority 1 Equipment guidance on the USAC website. If these conditions are not met, the equipment would be considered Priority Two Internal Connections.

The following diagram is an example of a leased router that meets the on-premise Priority One condition that the voice network remains functional without dependence on the leased router. In this example, the VoIP phone system is owned by the applicant and NOT leased from the service provider. This configuration can be eligible as Priority One assuming the other conditions for on-premise Priority One equipment are satisfied.

5. Leased or purchased end-user equipment

End-user handsets (telephone sets) and soft phones, leased or purchased, are NOT eligible for discounts as either Priority One or Priority Two. A soft phone is a piece of end-user application software that allows phone calls to be made using a personal computer microphone and speakers in place of a physical end-user telephone.

6. Beginning with Funding Year 2010, VoIP is treated as a basic telephone service

Applicants requesting only VoIP services in the Telecommunications Services or Internet Access category are not required to prepare a technology plan, and the Children's Internet Protection Act (CIPA) does not apply to those services.

However, applicants requesting bundled services such as Internet Access with VoIP are still required to prepare a technology plan and to be compliant with CIPA.


Last modified on 3/23/2010