Will VoIP Ante up For USF Dues?

Lawmakers hope a new plan would expand payment obligations to VoIP providers and cable companies offering Internet telephone services.

By Roy Mark | Posted Nov 15, 2005
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Two lawmakers want the Universal Service Fund (USF) to help finance broadband deployment in rural and underserved areas.

According to a draft bill by Rick Boucher (D-Va.) and Lee Terry (R-Neb.), the USF contribution fund, originally created to support the roll out of telephone service in rural America, would be expanded for the use of broadband deployment.

Boucher's office stated the bill would "ensure the continued viability of the USF and its continued ability to support the provision of communications services in rural and underserved areas."

The USF currently provides funding for broadband networks only for schools and libraries through the fund's E-rate.

Since 1996, local and long distance telephone companies, wireless providers, paging firms and payphone companies are required to contribute to the USF.

With the advent of Voice over IP and other IP-based services, however, the revenue base that supports the USF has eroded. In addition, the E-rate has been criticized in Congress as mismanaged by the Federal Communications Commission (FCC).

The USF system, critics contend, creates inequities and incentives for companies to avoid contributing to the fund. Neither VoIP providers nor cable companies providing VoIP services, for instance, pay into the USF.

Originally designed to expand telephone service to rural and underserved areas, USF payments go to high-cost areas to create telephone rates reasonably comparable to those charged in urban areas. Consumers foot the subsidy through their telephone bills.

Gordon Smith (R-Ore.) and Byron Dorgan (D-N.D.) introduced similar legislation in the Senate in May. Their bill expands USF payments to include the "greatest extent possible" all services that are capable of supporting two-way voice communications.

The bill also authorizes up to $500 million a year from the USF for broadband build-outs to underserved areas. The legislation keeps control and administration of the USF in the hands of the FCC.

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