IP Democracy: Martin Eyes VoIP USF Fees

Nothing makes my eyes glaze over more than the phrase “universal service fund” (unless of course it’s “intercarrier compensation”), but today there is news that FCC Chairman Kevin Martin is readying a proposal that would levy USF taxes on VoIP providers. The $7+ billion fund is designed to provide subsidies for the delivery of phone service to low-income and rural areas and so far VoIP providers have not been required to pay into the fund.

What sounds kind of crazy is the percentage of revenue that the universal service funding formula would apply to — the funding mechanism gathers 10.9% of interstate or international revenue from carriers. In the case of VoIP, the FCC is thinking of applying this ratio to 64.9% of VoIP revenues.

So, on a $25 per month VoIP phone bill, the USF fee would be $1.80. Not an extraordinarily high amount, but enough to eat into the pricing competitive advantage of VoIP providers.

Martin is also proposing to raise the fees for wireless voice providers, which currently pay into the USF fund on up to 28.5% of their revenue. The new cap suggested by Martin is 37.1% of wireless customer revenue.

Posted by Cynthia Brumfield on June 2, 2006 9:10 AM to IP Democracy