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
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
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.
RAD-INFO, Inc. - NSP Strategist
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