USF Bills Call for VoIP Players to Ante Up


(USF), while still at billions of dollars, is dwindling, due to a decreasing number of contributors, and, in the interest of sustaining the fund, many in the telecom industry want IP operators to ante up. One House bill and one Senate bill call for this change directly, but the outcome of those proposals is difficult to anticipate in light of Congress frenetic schedule, and the fact that members have paid more attention to telecom reform details such as net neutrality and video franchising. Less movement on the USF front, though, has given analysts and associations a chance to bend the ears of policymakers.

Most recently, Reps. Rick Boucher, D-Va., and Lee Terry, R-Neb., presented the Universal Service Reform Act of 2006 to the House Energy and Commerce Committee. Citing concerns that the USF will not be sustainable if only traditional carriers make payments, the bill would add IP telephony services to the list of contributors. At press time in late April, the Universal Reform Act of 2006 had been referred to the House Subcommittee on Telecommunications and the Internet. 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, Boucher said.

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

Also, in July 2005, Sens. Gordon H. Smith, R-Ore., and Byron Dorgan, D-N.D., introduced the Universal Service for the 21st Century Act. That bill, which has remained in committee since its introduction, would expand the contribution base for Universal Service and establish a separate account within the USF to support the deployment of broadband services. Jim Kohlenberger, executive director of VoIP industry advocacy group Voice on the Net (VON) Coalition, says that potential legislation calls for USF contributions from providers of information services that are capable of supporting two-way voice communication. Presumably, if you had a VoIP service over dialup, you would pay twice. There are ways to get this right and ways not to.

$ by the numbers

Estimated 2006 Support: $7.3 billion
High Cost: $4.2 billion
Low Income: $820 million
Rural Health Care: $45 million
(Funding Year 2006)
Schools & Libraries: $2.25 billion
(Funding Year 2006)

Source: Universal Service
Administrative Co.

The VON Coalition favors more general reform of the USF program, explains president Staci Pies. The group represents service providers, software developers and equipment makers, and wants to see legislative language that promotes continued investment in IP-enabled networks, applications and services by focusing on overall, complete reform of both intercarrier compensation and USF, she says. The association advocates a connection-based methodology, which would require the FCC to assess USF contributions based on a providers two-way voice connections, says Pies. This would ensure the sustainability of the fund and make sure contributions are assessed in a fair and economically efficient manner, she adds. The group further supports exceptions for households that either are low-income or rarely use their connections, allowing them to pay reduced USF taxes.

Still, the VON Coalition is concerned about legislative language that would require providers to make costly investments to track outdated jurisdictional distinctions between categories of traffic, Pies says, referring to phantom traffic. Congress should not force IP service providers to invest in new technology by attempting to shoehorn VoIP into the outdated access charge regime under the guise of fixing Universal Service. To do so will have the effect of imposing extraordinary costs on new technologies and the consumers who would otherwise benefit from them, she says.

Intercarrier compensation remains one of the biggest sticking points in USF policy reform. Telecom consulting firm McLean & Brown in April released a white paper, Universal Service: Rural Infrastructure at Risk, Release 2.0, that asserts rural carriers should be compensated for use of their networks by other carriers, including VoIP and other IP-enabled service providers.

Like the Boucher-Terry bill, the paper, written by Glenn H. Brown, contends the USF will not be sustainable unless IP providers pitch in. Brown then suggests establishing uniform criteria for identifying rural areas that can support only one carrier of last resort. To accomplish this goal, it will be critical to assure that support is targeted only to the highest-cost areas, and not wasted by supporting customers located in cities, towns or other densely populated areas, he writes.

Meanwhile, the Coalition to Keep America Connected which was founded by ITTA Inc. (Independent Telephony and Telecommunications Alliance) and NTCA (National Telecommunications Cooperative Association) agrees with the many calls for lawmakers to require IP operators to contribute to the USF. The group has actively pushed for such change and is 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, says Kelly Worthington, coalition representative and executive vice president of the Western Telecommunications Alliance.

USTelecom, which represents large carriers, also says the bill is good for Americans in rural areas.

Coalition to Keep America Connected
ITTA Inc. (Independent Telephone and Telecommunications Alliance)
McLean & Brown
NTCA (National Telecommunications Cooperative Association)
United States House of Representatives
United States Senate
USTelecom (United States Telecom Association)
VON Coalition Inc., The

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