TELECOM Digest OnLine - Sorted: Internet VOIP Must Pay Into Subsidy Fund, Says FCC

Internet VOIP Must Pay Into Subsidy Fund, Says FCC

Jeremy Pelofsky, Reuters (reuters@telecom-digest.org)
Wed, 21 Jun 2006 13:59:39 -0500

By Jeremy Pelofsky

Consumers who use wireless or Internet-based telephones could see
their bills rise, as the U.S. Federal Communications Commission
approved on Wednesday a new plan for funding phone service subsidies.

The FCC ordered Internet telephone services like Vonage Holdings
Corp. to contribute part of their revenue into the Universal Service
Fund, which subsidizes phone service to rural and low-income areas as
well as communications services and Internet access for schools,
hospitals and libraries.

The agency also increased the amount wireless telephone providers
would have to pay into the fund. The move may lead to higher bills for
wireless and Internet telephone customers because the companies
typically pass the fees on to customers.

Companies offering long-distance and international telephone services
as well as high-speed Internet service via digital subscriber lines
(DSL) must currently contribute 10.9 percent of that revenue into the
$7.3 billion fund.

However, DSL providers will no longer have to contribute to the
program after August, so the FCC had to act to avoid a potential
shortfall of hundreds of millions of dollars.

Consumers' DSL bills could go down if the savings were passed through
to them.

Under the plan adopted by the FCC commissioners, providers of Internet
telephone service, known as Voice over Internet Protocol, or VOIP,
would have to pay about 7 percent of their revenue into the fund under
the current contribution factor.

The contribution factor is usually adjusted each quarter, based on
payments received from providers.

Wireless carriers would have to increase their contribution to the
fund by about 1 percentage point to 4 percent of their revenue under
the new FCC plan. Agency officials said they expect the new levels to
take effect in the fourth quarter.

If the wireless or Internet telephone providers could prove that their
long distance and international revenue were less, they would be
allowed to use a smaller percentage as the basis for their
contribution to the fund.

The FCC has been weighing broader reform of Universal Service Fund
contributions for some time, and Republican FCC Chairman Kevin Martin
has supported a charge based on telephone numbers.

Copyright 2006 Reuters Limited.

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