VoIP Bills Set to Increase

WASHINGTON — Note to Internet telephone users: Your monthly bill is about
to go up.

In a long anticipated move, the Federal Communications Commission (FCC)
ruled today Voice over IP services must contribute a portion
of their revenues to the Universal Service Fund (USF).

If VoIP providers follow the lead of local and long distance telephone
companies, wireless providers, paging firms and pay phone companies — who
already pay into the USF — the costs will be passed on to consumers.

The ruling only applies to VoIP services that interconnect with the public
switched telephone network (PSTN).

“Like public safety goals, universal service obligations transcend new
technologies and cannot be compromised,” FCC Chairman Kevin Martin said.

The USF subsidizes phone service in under-served and rural areas. Through
the E-rate fund, the USF also subsidizes Internet connections in schools and

According to Medley Global Advisors, the FCC order is likely to add
approximately $1.30 a month to each VoIP subscriber’s bill. An FCC spokesman
said VoIP consumers are likely to begin seeing the increase on their bills
as early as September.

“By requiring interconnected VoIP providers to contribute to the fund, the
[FCC] is furthering the principle of competitive neutrality,” Martin said.

“It requires us to ensure that our universal service rules do not unfairly
favor nor disfavor one technology over another, or unfairly advantage or
disadvantage one provider over another.”

Fairness issues aside, the FCC action was also prompted by the fact the USF
is facing an anticipated August shortfall in revenues.

Last year, the FCC exempted DSL
broadband services from common carrier rules and classified it as an
information service.

As an information service, DSL service is exempt from USF contributions. At
the end of July, DSL providers will no longer pay into the USF. Medley
predicts the loss of DSL revenue is likely to shrink the fund by as much as
$500 million.

FCC Commissioner Michael Copps, while voting in favor of Wednesday’s action,
said he favors keeping broadband services in the USF contribution base since
the Telecommunications Act “charges the FCC to encourage the deployment of
advanced telecommunications capability to all Americans.”

Copps said the original concept of the USF worked well.

“Those who were serving the more affluent and profitable markets were
charged with the responsibility to contribute towards the provision of
reasonably comparable service in more difficult telecom markets,” he said.

Copps added that Wednesday’s ruling reverses that course.

“DSL and cable broadband — which are surely going to be the backbone of our
nation’s telecom infrastructure for years to come — can build where they
choose and profit where they can without contributing towards
making these services available to harder-to-reach people.”

He added, “It’s like taking the broadband out of a broadband strategy,
except that the country lacks such a strategy.”

Congress is also considering rewriting the USF rules.

As a part of a massive telecom reform bill
currently set for a Thursday afternoon vote, the Senate Commerce Committee
is considering extending USF obligations to both VoIP and broadband

In the House, legislation to extend USF contributions to VoIP and broadband services has yet to
receive a vote. USF reform was not a part of the telecom reform bill passed
in early June by the House Commerce Committee.

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