FCC Adds VOIP to Universal Service Fund

The U.S. Federal Communications Commission on June 21 approved two changes in Universal Service Fund charges for carriers.

The first was to change the “Safe Harbor” percentage for wireless carriers from 28.5 percent to 37.1 percent. The second was to require VOIP (voice over IP) carriers to contribute to the USF with a “Safe Harbor” percentage of 64.9 percent.

The “Safe Harbor” percentage is the percent of communications revenue that is presumed to come from interstate or international traffic.

Carriers can use the commission’s assumptions as a base for their contributions, or they can do traffic studies or use actual calling revenue to calculate contributions.

Whichever method is used, carriers contribute 10.9 percent of those revenues to the USF. The USF is used to subsidize communications infrastructure in areas where coverage is difficult and not otherwise cost-effective.

According to a statement by FCC Chairman Kevin Martin, the increase in the “Safe Harbor” amount for wireless revenues was due to the rapid growth of the technology, and the fact that users are more likely to be using their cell phones for long-distance calls.

“The current safe harbor no longer accurately reflects the extent to which wireless consumers utilize their wireless phones for interstate calls,” Martin explained in a prepared statement.

Martin also explained why VOIP calling is now included in the contributions to the USF. “Many of these VOIP providers claim that their services are ‘inherently interstate,'” Martin said, also in his prepared statement.

“Thus, we could require these providers to pay based on 100 percent of their revenues,” he said, noting that instead the VOIP carrier contribution will be based on a safe harbor of 64.9 percent.

While the commission approved the USF change, not everyone agreed with the details. FCC Commissioner Michael Copps noted that the FCC had agreed to drop DSL from the USF because it was really an Internet service.

Copps said in his prepared statement that he was concerned that the loss of revenue from DSL would be not be offset by the increase to the wireless percentage and the imposition of a USF charge for VOIP. DSL is set to drop the USF fund charge in August 2006.

Wireline carriers for the most part supported the changes announced by the FCC.

According to BellSouth vice president Jeanine Poltronieri, the change makes things more fair. “We were very supportive of it,” Poltronieri said. “We think it’s a good step towards making the fund spread more equitably among carriers, including VOIP.”

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Poltronieri noted that the changes to the “Safe Harbor” provisions may not make any difference to wireless bills. “They can still report actual interstate or international telecom revenues or do a traffic study,” she said.

VOIP users, however, will be subject to the USF for the first time, and they could see the increased charges in their bills.

“A carrier has the option of passing the fee along to the customers as long as they comply any applicable law,” Poltronieri said.

She said that such laws may include state laws on truth in billing that could control how the USF charges appear on the bill. She also noted that carriers have the option of not passing the charges along to consumers, but in any case, they can’t charge more than the actual amount of the USF contribution.

Poltronieri said that BellSouth already has a number of VOIP customers, and that they would be subject to the USF contributions, but she added that the company has not yet decided whether to pass those costs along.

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