House Bill Has VoIP Providers Paying USF

To date, VoIP providers have been exempt from paying into the Universal Service Fund (USF), thanks to their classification as information services providers. So traditional landline providers are left funding the $7.3 billion pot, and consumers and associations alike complain about shouldering the weight. One way to bolster the fund would be to require IP services providers to contribute to the USF, and a House bill recently introduced would do just that.

Rep. Rick Boucher, D-Va., and Lee Terry, R-Neb., in late March presented the Universal Service Reform Act of 2006 to the House Energy and Commerce Committee. Citing concerns the USF will not be sustainable if only traditional carriers make payments, the bill would add IP telephony service providers to the list of contributors.

“The legislation will control the spiraling growth of the Universal Service Fund while ensuring that universal service support is available to rural carriers which rely on it to provide service,” Boucher said. “Our measure will expand who pays into the fund, cap the growth of the fund and modernize the fund by allowing its use for the deployment of high-speed broadband service.”

Presumably, Alaskan Sen. Ted Stevens, chairman of the Senate Commerce Committee, one of the driving bodies behind a new communications law, would support this move. His state gets more USF proceeds than any other, and he is hawkish about making sure that amount does not dwindle. Broadband deployment in the nation’s most rural, geographically diverse state is not high, and one of the House bill’s provisions would incent broadband providers to build out their networks by allowing them to fund the projects with USF proceeds.

Associations such as the Coalition to Keep America Connected – which was founded by the Independent Telephony and Telecommunications Alliance and the National Telecommunications Cooperative Association – have been calling for IP services to contribute to the USF. So, they are pleased with the Boucher-Terry bill. It “has the potential to aid in the continued building and maintenance of broadband-capable network infrastructure that delivers advanced telecommunications services to all consumers, no matter where they live,” said Kelly Worthington, coalition representative and executive vice president of the Western Telecommunications Alliance.

USTelecom, which represents large carriers, also praised the bill. "We applaud Congressmen Boucher and Terry for their leadership to help ensure a sustainable future for universal telecom service for Americans living in rural areas,” said Walter B. McCormick Jr., president and CEO of USTelecom.

Other provisions in the USF Reform Act call for administrators to control the fund’s growth by capping all high-cost support mechanisms given to carriers, and allow providers to use USF monies to deploy broadband, with the caveat that download speeds reach at least 1mbps within five years of the bill’s enactment.

Meanwhile, the VON Coalition, an advocacy organization for VoIP, favors more general reform of the USF program.

"We have said the USF is an important program and ought to be reformed," said Jim Kohlenberger, executive director of the VON Coalition. "The current revenue-based approach doesn't make sense to apply to VoIP, but, if it were reformed to a numbers-based or connections-based approach, that makes more sense going forward."

"Rural American have perhaps the most to gain from VoIP and broadband deployment," Kohlenberger added. "One of the goals of the USF is to bring affordable service to every American. If there were ever a technology that can reach that goal, it is VoIP."

The current legislative proposals "while well-intentioned may be too broad," Kohlenberger said, such as the Smith-Dorgan bill, titled the Universal Service for the 21st Century Act. That bill was introduced in July 2005 – and has remained in committee ever since – and calls for USF contributions from "providers of information services that are capable of supporting two-way voice communication," Kohlenberger said. "Presumably, if you had a VoIP service over dial-up, you would pay twice. There are ways to get this right and ways not to."

While USF is a hot potato issue, there has been little momentum on the USF Reform Act of 2006, partly due to lawmakers’ focus on other parts of telecom reform – such as net neutrality and video franchising – and partly due to Congress’s Easter recess, which ends April 24.

Since last year, lawmakers and industry alike have hailed 2006 as the year of new telecom laws. Yet dozens of hearings and the introduction of various bills from the House and Senate have added up to little more than a mish-mash of possibilities. Legislators have said they want to push through an all-encompassing communications law in a scant few months – before summer break, before midterm elections. But nothing solid seems to be in the works yet.

Coalition to Keep America Connected www.keepamericaconnected.org
Independent Telephone and Telecommunications Alliance Inc. www.itta.us
National Telecommunications Cooperative Association www.ntca.org
U.S. House www.house.gov
U.S. Senate www.senate.gov