Internet phones must pay into subsidy fund, says FCC
Wednesday June 21, 12:03 pm ET By Jeremy Pelofsky

WASHINGTON (Reuters) - 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. (NYSE:VG - News) 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.

Thank you.


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