Chase Tower, Eighth Floor. PO. Box Charleston, WV November 30, : 29 p8 ~~~

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1 3Q STEPTOE & JOHNSON PLLC ATTORNEYS AT LAW Chase Tower, Eighth Floor PO. Box 1588 Charleston, WV (304) (304) Fax Writer's Contact Information (304) Telephone (304) Facsimile WVSB No November 30,20 10 J44 HAND DELIVERY Sandra Squire, Executive Secretary Public Service Commission of West Virginia 201 Brooks Street Charleston, West Virginia : 29 p8 ~~~ 2Q'EO PSC EXEC %Et an Re: CASE NO T-C EMERGENCY OPERATIONS OF KANAWHA COUNTY, V. YMAX COMMUNICATIONS CORPORATION and MAGICJACK, LP, Dear Mrs. Squire: For filing on behalf of YMax Communications Corporation and magicjack, LP in the above captioned proceeding, please find an original and twelve (12) copies of its Motion for Summary Judgment and Memorandum of Law in Support of Motion for Summary Judgment. I ask that you please file the enclosed documents and distribute the additional copies to the apprqpriate parties at the Commission. Also, please date stamp the file copy provided and return it with our messenger. Thank you in advance for your attention to the foregoing, and please contact me should you have any questions. TMS Encl o sues cc: Peter Russo, CFO (w/ enclosure) Marc Weintraub. Esq. (w/ enclosure) Richard M. Firestone, Esq. (wi enclosure) Service List (w/ enclosure) Sincerely, -rjj-j-- Todd M. Swanson a West Virginia * Ohie Kentucky

2 PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON CASE NO T-C EMERGENCY OPERATIONS OF KANAWHA COUNTY, Complain ant, V. YMAX COMMUNICATIONS CORPORATION and MAGICJACK, LP, Defendants. YMAX COMMUNlCATIONS CORPORATION S AND MAGICJACK, LP S MOTION FOR SUMMARY JUDGMENT COME NOW, YMax Communications Corporation and magicjack, LP (collectively, the Movants ), by counsel, and respectfully move the Commission award them summary judgment in the above captioned case. As explained more fully in Movants Memorandum of Law in Support, filed contemporaneously herewith and incorporated herein, neither Defendant YMax Communications Corporation nor Defendant magicjack, LP is a provider of VOIP service. Therefore, neither has the obligation under state law to collect and remit an E91 1 fee. WHEREFORE, YMax Communications Corporation and magicjack, LP respectfully request that the Commission grant summary judgment and order that the above captioned complaint be dismissed with prejudice. ~~ I

3 Respectfully submitted, YMAX COMMUNICATIONS CORPORATION and MAGICJACK, LP By Counsel Marc R. Weintraub (WVSB No. 8055) BAILEY & GLASSER, LLP 209 Capitol Street Charleston, WV (304) E. Dandridge McDonald (WVSB No. 2439) Todd M. Swanson (WVSB No ) STEPTOE & JOHNSON PLLC Chase Tower, Eighth Floor Post Office Box 1588 Charleston, West Virginia (304) Richard M. Firestone, Pro Hac Vice ARNOLD & PORTER LLP 555 Twelfth St., NW Washington, D.C (202) CH

4 PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON CASE NO T-C EMERGENCY OPERATIONS OF KANAWHA COUNTY, Complainant, V. YMAX COMMUNICATIONS CORPORATION and MAGICJACK, LP, Defendants. MEMORANDUM OF LAW IN SUPPORT OF YMAX COMMUNICATIONS CORPORATION S AND MAGICJACK, LP S MOTION FOR SUMMARY JUDGMENT As demonstrated herein and as supported by the affidavit attached hereto as Exhibit A, because neither Defendant YMax Communications Corporation ( YMax ) nor Defendant magicjack, LP ( magicjack ) is a provider of VOIP service, neither has the obligation under state law to collect and remit an E91 1 fee. Thus, the Commission should grant the Defendants Motion for Summary Judgment, filed contemporaneously herewith. A. Factual Background I. INTRODUCTION YMax and magicjack are affiliated companies, both subsidiaries of YMax Corporation. YMax is directly owned by YMax Corporation. magicjack is a limited partnership 1 The Commission has considered factual matters in pleadings and taken notice of judicially determined facts to treat a pleading as a motion for summary judgment. See, e.g., Mt. Nebo - Mt. Lookout Prop. Protection Ass n v. Summersville, Case No E-C (Feb. 7, 1997) ( The Commission may consider factual matters submitted with the parties pleadings and take notice of judicially determined facts, and thereby treat Defendants motion to dismiss as the equivalent of a motion for summary judgment ); Gunn v. Hope Gas, Znc., 402 S.E.2d 505 (W. Va. IP91); Jordan v. Allstate Ins. Co., 403 S.E.2d 421 (W. Va. 1991). CH

5 of which YMax Corporation is the limited partner. The general partner is YMax Holdings Corporation, which in turn is owned by YMax Corporation. magicjack sells a device known as the magicjack@. It weighs less than an ounce and is about the size of a cigarette lighter. It plugs into the USB port of any computer wherever located. It is a completely nomadic or portable device that customers can use wherever in the country, or the world for that matter, they have a broadband connection. When a customer purchases a magicjack@ device, the customer also receives a one year license of software commonly known as a softphone that allows the device to operate.2 This license gives the purchaser the capability and option to subscribe to magich, a service offered by YMax that gives the subscriber the option of obtaining a phone number and of receiving phone calls via their magicjack@ device. The softphone license also gives the purchaser the capability and option to subscribe to magicout@, a service offered by magicjack that gives the subscriber the option to make outgoing calls to the United States, Canada, Puerto Rico and the Virgin Islands through their magicjack@ device. Purchasers of the magicjack@ who subscribe to the magicout@ and/or magicin@ services are not charged a fee for either subscription, nor are they billed for these incoming or outgoing calls made or received through their magicjack@ device. The magicjack can be purchased through a variety of avenues, including over the Internet, by phone order, or through retail stores. By far, more magicjack@ devices are sold through retail outlets than through any other avenue. 2 Customers can later purchase a software license for an additional year or years. ch

6 B. Procedural Background On March 22, 2010, Emergency Operations of Kanawha County ( Kanawha County ) filed the above captioned complaint against YMax and magicjack. Kanawha County alleged in its complaint that YMax and magicjack are in the business of providing interconnected voice over internet protocol ( VoIP ) service: and as such are required to collect and remit the enhanced 911 fee allowed by W. VA. CODE Q 7-1-3cc. As a remedy for the foregoing allegation, Kanawha County requested an order from the Commission compelling YMax and magicjack to collect and remit enhanced 91 1 fees. YMax and magicjack, on April 1, 2010, answered Kanawha County s complaint. magicjack and YMax denied that they are required to collect and remit enhanced 911 fees because neither company provides interconnected VoIP service. Both companies also asserted that the service provided by each company does not meet the Federal Communications Commission s ( FCC ) definition of interconnected VoIP service, which definition is found in 47 C.F.R. Q 9.3. The FCC s definition of interconnected VoIP service is of paramount importance in this case, as a West Virginia county can impose the enhanced 911 fee only on instate subscribers of [VoIP] service, as VoIP is defined by the [FCC]. W. VA. CODE $ cc(b). Commission Staff issued its final memorandum on June 25, Staffs final memorandum did not contain a unified final recommendation, as Legal Staff argued that YMax and magicjack are providing interconnected VoIP service as defined by the FCC, while Technical Staff found that there is a question as to whether the Commission has jurisdiction to determine whether either company is providing interconnected VoIP service. In support of its position, Legal Staff asserted, in conclusory fashion, that Yhlax and magicjack undoubtedly CH

7 are providing interconnected VoIP service that meets the FCC s definition of such; therefore, both companies should be collecting and remitting enhanced 92 1 fees. Legal Staff also argued that from an equitable standpoint YMax and magicjack are required to collect enhanced 911 fees. Conversely, Technical Staff found that because the FCC has not determined whether YMax and magicjack are providing interconnected VoIP service, there is a threshold question of whether the Commission has jurisdiction to make such a determination. Neither YMAX Communication Corp. nor magicjack is registered with the FCC as a VOIP provider. Neither Defendant has paid any regulatory fees to the FCC based on being defined as a VOIP provider. Neither Defendant has sought nor received any waiver of such fees. Neither Defendant files any reports with the FCC as a VOIP provider such as Form 499-A or Form 159-W. In informal discussions with the FCC, Staff discovered that there are no current cases before the FCC to designate and consider Defendants as VOIP providers. Technical Staff finds that Defendants have not been determined to be VOIP providers by the FCC. (Technical Staff Memorandum, June 10,2010, p. 2.) On August 2, 2010, the Commission entered an order scheduling proceedings leading to a hearing to be held on March 1, ANALYSIS A. Interconnected VoIP Service and Enhanced 911 Fees VoIP service in West Virginia may be subject to an enhanced 911 fee. West Virginia counties are empowered to impose a fee upon consumers of local exchange service within th[eir] county for an enhanced emergency telephone system.... W. VA. CODE cc(b). Counties are authorized to impose an enhanced 911 fee on subscribers to interconnected VoIP service, but only as follows: the fee is imposed upon in-state subscribers to [VoIP] CH

8 service, as VoIP service is defined by the [FCC]. Id. (emphasis added). The Commission s regulations also provide that VoIP service has the same definition as Interconnected [VoIP] as set forth in the rules and regulations of the [FCC], 47 C.F.R W. VA. CODE R a. In sum, counties can impose an enhanced 91 1 fee on VoIP service subscribers primarily located in West Virginia, but only to the extent that the service meets the FCC s definition of interconnected VoIP service. Seizing on the foregoing authority, Kanawha County has authorized an enhanced 911 fee on VoIP service subscribers. Pursuant to an ordinance adopted August 21, 2008 by the Kanawha County Commission (Ordinance No l), Kanawha County imposed an enhanced 91 1 fee of (i) $5.34 per month on business VoIP subscribers, and (ii) $3.34 per month on residential VoIP subscribers. With respect to collecting enhanced 911 fees, the PSC s regulations provide that each provider of VoIP service may act as billing agent for the lawful county E91 1 fee on the bills rendered by the VoIP providers to its customers in each county in which the provider of VoIP service provides service. Id a. The Commission s regulations go on to provide that [a] provider of VoIP service shall begin acting as a billing agent for a county commission s fee when it begins providing VoIP service in that county.... Id b.l. CH

9 B. Neither Defendant in this Case is Providing Interconnected VoIP Service as Defined by the FCC and Therefore Neither is Required to Collect and Remit an Enhanced 911 Fee in West Virginia Neither Wax nor magicjack is an interconnected VoIP service provider as defined by the FCC and therefore applicable West Virginia statute and regulations. The FCC defines interconnected VoIP service as follows: 47 C.F.R An interconnected [VoIP] service is a service that: (1) Enables real-time, two-way voice communications; (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. In adopting its mandates for interconnected VoIP service providers, the FCC defined interconnected VoIP service for E91 1 and other purposes as one where, among other things, the service offering permits users generally to receive calls that originate on the PSTN and to terminate calls to the PSTN. In re E911 Requirements for IP-Enabled Service Providers, WC Dkt No , First Report and Order and Notice of Proposed Rulemaking, at 14 (released June 3, 2005) (emphasis in original). The FCC went on to explain, The rules we adopt in today s Order also apply only to providers that offer a single service that provides the functionality described above. Id. at 1 I n.78. (emphasis added). As described above, YMax Communications Corp. gives c,ustomers the option of getting a phone number and of receiving calls, by subscribing to its magicin@ service. magicjack, on the other hand, gives customers the option of making outgoing calls to the US, Canada, Puerto Rico and the Virgin Islands, by subscribing to its magicout@ service. Neither magicjack nor YMax Communications Corp. offers a single service that permits users generally CB

10 to receive calls that originate on the PSTN Ed to terminate calls to the PSTN. Neither therefore provides an interconnected VoIP service as defined by 47 C.F.R. tj 9.3-and consequently West Virginia. W. VA. CODE cc(b); W. Va. Code R a. Neither magicjack nor YMax Communications Corp. is therefore required by the FCC to provide 91 1 service to their customers. Nevertheless, magicjack has to date chosen to make this capability available. In its Notice of Proposed Rule Making, the FCC noted that the scope of its Order was limited to providers of interconnected VoIP services as defined. It did seek comment on whether to extend those 911 obligations to providers of other VoIP services not covered by the rules being adopted, and sought comment on its tentative conclusion that a provider of a VoIP service offering that permits users generally to receive calls that originate on the PSTN and separately makes available a different offering that permits users generally to terminate calls to the PSTN should be subject to the rules we adopt in today s Order if a user can combine those separate offerings or can use them simultaneously or in immediate succession. In re E911 Requirements for IP-Enabled Service Providers, at 33. The FCC has not, however, adopted that tentative conclusion it considered in Therefore, its rules and its definition of interconnected VoIP service-incorporated into West Virginia law--continue to apply only to providers that offer a single service that permits users generally to receive calls that originate on the PSTN pnd to terminate calls to the PSTN. Neither magicjack nor YMAX offer such a service. On September 23,2010, the FCC initiated a new Notice of Inquiry seeking public comment on whether it should consider proposing changes to its E91 1 rules in the future. In doing so, the FCC again specifically recognized the limited scope of its definition of interconnected VoIP services and therefore the limited reach of its 91 1 requirements: CH

11 Thus far, the Commission s VoIP 911 rules have been limited to providers of interconnected VoIP services. Since these rules were adopted, however, there has been a significant increase in the availability and use of portable VoIP services and applications that do not meet one or more prongs of the interconnected VoIP definition. In light of the increase in use of these services, we seek comment on whether we should extend 911 and E91 1 obligations to providers of VoIP services that are not currently covered by the rules. In re E91 I Requirements for IP-Enabled Service Providers, WC Dkt No , Further Notice of Proposed Rulemaking and Notice of Inquiry (FCC , at 7 31, released September 23, 2010 (emphasis added). covered by of its rules: The FCC went on to give as a specific example of a VoIP service that is not Should 911E911 obligations apply to VoIP services that enable users to receive calls from the PSTN and terminate calls to the PSTN but as separately elective services? Even though such VoIP services do not fully meet the definition of interconnected VoIP, should such service providers assume the same public safety responsibilities? Id. at (emphasis added). So while the FCC is contemplating, and seeking public comment on, the possibility of extending its E911 rules more broadly in the future, they left no doubt that the definition in those rules today-the definition incorporated into West Virginia law-does not cover magicjack or YMax services CONCLUSION As demonstrated above, neither YMax nor magicjack are providing interconnected VoIP service, as such is defined by the FCC. West Virginia s statute authorizing the collecting of enhanced 911 fees from VoIP subscribers clearly provides that said fee shall only be imposed upon in-state subscribers to [VoIP] service, as VoIP service is defined by the CH

12 Federal Communications Commission. Id. (emphasis added). Because neither YMax nor magicjack are providing interconnected VoIP service as defined by the FCC, neither company can be required pursuant to W. VA. CODE cc to collect and remit enhanced 911 fees. Consequently, Kanawha County s complaint must be dismissed as the Defendants are not providing a service to which 911 fees are applicable. YMax and magicjack respectfully request the Commission to grant their Motion for Summary Judgment and to order that the above captioned complaint be dismissed with prejudice. Respectfully submitted, YMAX COMMUNICATIONS CORPORATION and MAGICJACK, LP By Counsel Marc R. Weintraub (WVSB No. 8055) BAILEY & GLASSER, LLP 209 Capitol Street Charleston, WV (304) E. Dandridge McDonald (WVSB No. 2439) Todd M. Swanson (WVSB No ) STEPTOE & JOHNSON PLLC Chase Tower, Eighth Floor Post Office Box 1588 Charleston, West Virginia (304) Richard M. Firestone, Pro Hac Vice ARNOLD & PORTER LLP 555 Twelfth St., NW Washington, D.C (202) CB

13 PUBLIC SERVICE COMMISSION OF WEST VIRGINIA C LUIJCSTON CASE NO T-C EMERGENCY OPERATIONS OF KANAWHA COUNTY, Compluinant, V. YlMAX COMMUNICATIONS CORPORATION and MAGICJACK, LP, Defendants. AFFIDAVIT OF Daniel Borislow STATEKOMMONWEiALTH OF NEW JERSEY, COUNTY OF HUNTERDON, to wit: I, Daniel Borislow, being first duly sworn, deposes and says: 1. I am an employee of Ymax Communications Corp. ( YMax ) and am authorized to make this affidavit on behalf of YMax Communications Corporation ( y3max ) and magicjack, LP ( magicjack ). I make this affidavit based upon personal knowledge, interaction with client entities, general knowledge of the industry, and based upon the business records of YMax and magicjack which are created and maintained in the ordinary course of its business. I am over the age of eighteen, and I am competent to testify regarding the matters in this Affidavit. 2. YMax and magicjack, as subsidiaries of YMax Corporation, are affiliated companies. YMax Corporation directly owns Wax, while magicjack is a limited partnership of

14 which Wax Corporation is the limited partner, The general partner of magicjack is YMax Holdings, wfiich is owned by Wax Corporation. 3. magicjack sells a device known as the magicjack@, which weighs less than an ounce and is comparable in size to a cigarette lighter. 4. The magicjack* is a portable device that can be used by a customer anywhere in the world by plugging the device into a computer USB port, provided the computer has a broadband connection. 5. Upon purchasing a magicjack@ device, a customer receives a one year license, with the option to renew for an additional year or years, of software commonly known as a softphone. The software allows the magicjack* device to operate. 6. The softphone operating software license gives the customer the option to subscribe to magi&@, which is a service offered by Wax. magicin* permits a customer to obtain a phone number and to receive phone calls via his or her magicjack device. 7. The softphone license also permits a customer to subscriber to a service offered by magicjack known as magicout@. Subscription to the magicout* service allows a customer to make outgoing calls to the United States, Canada, Puerto Rico and the Virgin Islands through his or her magicjack@ device. 8. A magicjack purchaser who subscribes to magicout@ or magicin@ is not charged for either subscription, and the purchaser is also not billed for incoming or outgoing calls made or received through the magicjack* device. 9. A magicjack* can be purchased through various retail outlets, including by Internet, via phone order, and at retail stores. More magicjack* devices are sold through retail stores than any other avenue.

15 And further the afftant sayeth not. J.\ Taken, subscribed and sworn to before me this,% day of November, My commission expires: w%wh.- 2! 2615, NOTARY PUBLIC STATE OF NEW JERSEY...,

16 CERTIFICATE OF SERVICE I, Todd M. Swanson, one of counsel for YMax Communications Corporation and magicjack, LP, do hereby certify that a copy of YMax Communications Corporation s and magicjack, LP s Motion for Summary Judgment and accompanying Memorandum of Law in Support has been served upon the following by first class mail, postage prepaid this 30th day of November, 2010, addressed as follows: VL4 HAND DELIVERY Terry C. Owen, Staff Attorney Legal Division Public Service Commission of West Virginia 201 Brooks Street Charleston, West Virginia Jared M. Tulley FROST BROWN TODD LLC Laidley Tower, Suite Lee Street, East Charleston, West Virginia rj4- s- Todd M. Swanson (WVSB No ) CH