Internet phones must pay into subsidy fund

Iran Materials 22 June 2006 11:41 (UTC +04:00)

(Reuters) - Consumers who use wireless or Internet-based telephones could see their bills rise, as the U.S. Federal Communications Commission approved on Wednesday an interim 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, reports Trend.

The agency also increased the amount wireless telephone providers would have to pay into the fund. The move may lead to higher wireless and Internet telephone bills 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 mid-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.

Republican FCC Chairman Kevin Martin and the other commissioners said the move was only an interim step to overhauling the contribution system. Martin has pushed for a payment based on telephone numbers.

"Our work in this area is far from complete," he said.

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.

A spokeswoman for Vonage said the company did not expect the decision to have a big impact on customers, particularly since bills were already expected to drop because of the elimination of a 3 percent excise tax.

"It's likely to be around net zero, or a slight increase for our customers," Vonage spokeswoman Brooke Schulz said.

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

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.

There are also efforts in Congress to reform the USF, with senior members of the House of Representatives calling for it to be reined in amid allegations of waste, fraud and abuse. Top lawmakers in the Senate want to revamp and expand the program.