Tug of War Over VoIP Universal Service Fund Contributions Continues

June 2, 2006

Seems like the back and forth regulatory tug of war involving the FCC and VoIP service providers has entered yet another round.

According to a report by Paula Musich of PCmag.com, the FCC is once again weighing to tax VoIP services to the tune of 10.9 percent of 65 percent of revenues in order to line the coffers of the Universal Service Fund -- an archaic regulatory remnant designed to protect rural America from the old Bell System monopoly. The fund apparently brings in around $7 billion a year from interstate and international calls and is designed to subsidize the cost of providing phone service to poor and rural subscribers.

Apparently, this move by the FCC is designed to help offset a projected loss of $350 million in the fund due to the coming August exemption for DSL and broadband Internet services.

I expect VoIP providers to continue to wage war over this, and to take strong issue with the suggested contribution percentages...but at some point I believe a deal will inevitably be reached that will require VoIP service providers to ante up something to the fund (unless of course some arrangement can be reached to make this fund go away -- an idea that has been mulled over in the past.)

This will of course mean that the rock bottom, flat rate VoIP calling packages we have come to expect (and love) may be coming to an end.

For Vonage, this news just adds more pressure on their stock price -- so if you were thinking about buying in to take advantage of the current discount, I'd probably wait to see how this plays out. I fear the company's stock price may still go lower before it eventually recovers...

Tags: fcc, universal service fund, voip, vonage

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