The news below could spell disaster for the VoIP broadband providers, including Vonage, Packet8, AT&T CallVantage, Broadvoice, SunRocket, Voicepulse, etc. Basically, this legislation states that monies collected already by the broadband VoIP providers must be turned over to the state - in this case Pennsylvania, but it won't be long before other states follow suit.
As you may or may not know, many of the VoIP providers charge a "regulatory recovery fees", usually $1, but the VoIP providers have been keeping that money. Whether or not they've been spending these fees or using it to increase their balance sheets for any potential IPO (See Vonage IPO) remains to be seen. But it appears the VoIP providers can no longer get away with this. Considering margins are already tight and VoIP competition growing, this could really hurt the pocketbook of the smaller players that included the regulatory fees in their budget planning.
CORMAN'S LEGISLATION SAYS VoIP PROVIDERS MUST SEND 911 FEES TO PENNSYLVANIA
(HARRSIBURG) -In the wake of a Federal Communications Commission (FCC) ruling which mandates that voice over the internet (VoIP) providers provide E-911 services to customers, Sen. Jake Corman (R-34) has introduced legislation requiring these companies to forward those 911 fees to the Commonwealth.
In May of this year, the FCC issued an order requiring E911 service from interconnected VoIP providers.These companies are similar to traditional telephone providers in that they enable customers to receive calls from and terminate calls to the public switched telephone network.Examples of VoIP providers include Vonage, Packet8, AT&T's CallVantage, Broadvoice, SunRocket and Voicepulse.
Corman noted that many of these companies already collect fees for providing 911 services to customers.However, Pennsylvania currently has no law that compels them to forward those 911 fees back to the Commonwealth like traditional and wireless phone companies must do.
This week Corman introduced Senate Bill 936 to update Pennsylvania's Public Safety Emergency Telephone Act.
"VoIP companies have been charging their customers fees for 911 services and scantily worded ‘regulatory recovery fees' for years," Corman said."But they keep these fees and do not send them back to the states like their competitors in the landline and wireless industries must do, to the detriment of our county 911 centers.With this legislation we change that."
Corman's bi-partisan Senate Bill 936 requires all interconnected VoIP companies to charge customers $1 for each line and forward that money to Pennsylvania.The Pennsylvania Emergency Management Agency would then provide the fees to the counties where the customers are located.
"In 2003 we responded to counties who said they were losing 911 fees to the wireless industry by placing a charge on each cell phone," Corman said."Now must respond to the increasing market share of the VoIP industry and ensure that they also send 911 fees back to our counties to help pay for the infrastructure and services they use," Corman said.
CONTACT: DONALD HOUSER (717) 787-1377 dhouser@pasen.gov
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Tom,
Looks like Andy Abramon came up with the same analysis the day after you did. In fact, it almost looks identical. I'm sure he reads your blog, so I'm surprised he didn't cite you. Sems to me he "borrowed" your thoughts. Just thought you should know. You both basically said having to pay the regulatory recovery fee to the state could affect the balance sheets and any IPO.
andyabramson.blogs.com/voipwatch/2005/10/pennsylvania_to.html
here's a snippet for comparison:
The timing is rather fortuitous for those investors looking at the possible Vonage IPO as the 12 dollars a year for users in the Keystone state will have some impact on how Vonage has to show revenues and expenses. The same applies to all the rest who haven't volunterily paid the state.
Don't be surprised to see other states follow suit if they don't have a law on the books like Corman's proposal.