Google recently weighed in on the Universal Service Fund (USF) and carrier access charges, which will affect the future of both broadband and VoIP. Over the past few years, there have been past court skirmishes over whether VoIP service providers must contribute to the FCC. VoIP has changed the landscape of telecom regulation and the FCC is scrambling to keep up, while not killing innovation or slowing the fast growing VoIP industry in the process.
With Google offering the popular Google Voice offering, which technically isn't VoIP, but could head in that direction, Google is leery over having to pay into the USF or pay carrier access charges. After all, if Google carries the voice call over IP, why should they have to pay into the USF, which was designed to help rural areas have subsidized access to the PSTN network? However earlier this year the FCC recently proposed expanding the USF, converting the $8 billion fund that subsidizes rural telephone service into one that also helps pay for broadband Internet in underserved areas.
More Americans are using alternative communications, including Facebook and Skype, or using a cell phone exclusively and dropping their home landline, which is cutting into the USF budget. To make up for any budget shortfall, Google and others are concerned that the FCC may apply the USF tax to VoIP offerings even if the call is 100% IP-to-IP -- or more likely the call is IP all the way until the last mile where it hops onto the PSTN. Additionally, Skype, Vonage, and other VoIP providers have been exempt from paying the same exchange rates that traditional carriers pay to carry swap calls on the PSTN, which the FCC is also looking to address.
Google recently met with the FCC and sent a letter to the FCC pointing out Google's views on USF reform. In part, Google stated, "Noting the genesis of the “information services” definition in the Telecommunications Act of 1996, and the FCC’s earlier decisions to promote enhanced services by treating their providers as local end-users, we reiterated that the FCC should hew closely to the statute in classification decisions and continue to encourage services that provide end users with the capability to store, access, transform, process, and utilize data. Regarding carrier compensation and traffic exchange, we explained that reform must be responsive to evolving traffic flows. Voice traffic is decreasing relative to other forms of communications traffic, and based on Cisco estimates, is projected to be just 0.3% of all network traffic in just a few years."
With voice becoming just 0.3% of traffic, it's no wonder the FCC wants to re-evaluate current regulations. Further, Google and VoIP providers are standing behind the landmark Telecommunications Act of 1996, which say they are an information service rather than a telecommunications service and therefore should be exempt from paying interconnection fees. Google is hoping this exemption remain should they start offering direct SIP calling via their Google Voice platform or any other voice-based black project they're working on. But they also see the writing on the wall and that the FCC is moving to include VoIP services in intercarrier compensation.
In the letter, Google stated, "At the same time, market-based arrangements for transport of IP-based traffic typically focus on capacity or port size, and are not based on per-minute fees. Thus, imposing today’s ICC regime on all forms of IP traffic exchange in order to retain per-minute access charges for voice minutes would be allowing “a very small tail to wag a very large dog.” We also noted that a rate of $0.0007 per-minute has been agreed upon by some parties (e.g., Bandwidth.com and Verizon), underscoring that market-based commercial terms typically reflect rates far lower than interstate access charges. Further, we suggested that such a rate could represent a sensible starting point in a transition to a bill-and-keep regime. Bill-and-keep, as an endstate for ICC reform, better reflects current market-based arrangements and future network and traffic realities, and maximizes carriers’ network upgrade incentives."
Google doesn't like the idea of paying access charges, but they certainly prefer the idea of a low flat-rate .0007 cent per-minute ICC (Inter-Carrier Compensation) instead of paying interstate/intrastate access charges, which have complex federal and state regulations and rates that are much higher.
Verizon stated, "The top priority remains the urgent need to decide the proper compensation rate for VoIP traffic," Verizon stated in its filings with the FCC. "The commission should immediately set a single, low national default rate of $0.0007 per minute for this traffic."
Smaller rural carriers are concerned that if VoIP providers get a $0.0007 per-minute access charge, which is a much lower than the rate for traditional voice calls, their profits will be cut drastically. The carriers will simply re-classify their voice traffic as VoIP (since many have IP backbone network carrying the voice) to pay the lower rate. This could be devastating to the rural carriers profits.
There are no easy answers in the changing landscape of telecom regulations. The Internet and VoIP has changed the game in such a short time. There is a spaghetti of state and federal telecom regulations that have built up for decades. Perhaps trying to fit a square peg (VoIP) into a round hole (legacy FCC regulations, state, and federal taxes) isn't the answer. Maybe the proposed $.0007 makes the most sense. It's so simple, it might just work. Kind of reminds me of the Fair Tax, whose aim is to simplify the spaghetti of tax laws. But that's a whole other debate.