New FCC Chief Not So VoIP-Friendly

Voice over IP Service providers, accustomed to a generally regulation-free environment under FCC Chairman Michael Powell, may find things are a bit different under, Kevin Martin, President Bush's appointee to replace Powell. Martin has advocated policies that would require VoIP providers to contribute directly to a Universal Service Fund, which some say is like forcing new technologies to subsidze the aging PSTN system.

Kevin J. Martin, President Bush's appointee as Chair of the Federal Communications Commission may not be as friendly to Voice over IP service provider as Michael Powell, whom Martin replaces this week.

Martin, a 38-year-old attorney and FCC boardmember, clashed over regulatory issues with Powell in the past, advocating, for example, even greater government regulation in areas such as television broadcast program content than his predecessor.

Unlike Powell, who espoused a “hands-off” approach to government regulation of the fledgling VoIP industry, Martin has said that all providers using the public switched telephone network — including VoIP providers — should contribute to the Universal Service Fund (USF), an FCC-managed program to subsidize basic telephone services in areas where the costs of offering such services are high, primarily sparsely populated rural areas, and to provide telephone service discounts to low-income consumers.

USF funds are not used for new technology or wider bandwidth, which are needed for VoIP services. Instead, they finance only the most basic twisted pair telephony. Critics suggest that if wireline carriers were not subsidized they would be more likely to develop alternative wireless services for their rural customers — something they currently have no incentive to provide.

VoIP service providers do not directly contribute to the USF. And some believe that requiring them to make such contributions, is in effect, forcing new technology to subsidize old technology — or forcing new providers to subsidize their legacy competition.

“We support the general principles behind the USF,” said Ravi Sakaria, CEO of VoIP service provider VoicePulse. “However, the bulk of USF dollars go to traditional telecom infrastructure. It doesn't go in fair share for broadband access. Because broadband is a requirement for our services, we view this as funding competitive technology.”

Martin made public his views on expanded USF contributions on at least two separate occassions.

In a February 2002 statement, Martin, who has served as an FCC commissioner since 2001, said, “we must make sure that all providers of telecommunications services … make an equitable and nondiscriminatory contribution to the preservation and advancement of universal service.”

In October 2003 during the U.S. Telecom Association conference, Martin said he favored a funding mechanism based on “active phone numbers,” because it “would ensure that as emerging platforms develop, those players would be put on an equal standing with current players in terms of their contributions to USF.”

Sakaria says VoIP providers already indirectly contribute to the USF through access charges they pay directly to telecommunications carriers who terminate IP-originated telephone calls to the PSTN network. The difference, Sakaria points out, is that while PSTN service providers usually pass on USF charges to their customers in the form of a separate line item on their phone bill, VoIP cutomers do not pay a separate USF charge for the service.

Although Sakaria would like to see more of the USF funds spent to increase broadband access, he sees any simplification of the system, such as a per-phone charge, as an improvement.

“That would achieve one thing — simplifying how USF dollars are collected,” Sakaria said. “We're behind that. I think that's a fair representation of a customer's ability to pay.”

In May the FCC's Wireline Competition Bureau will present its recommendations regarding whether VoIP providers should be asked to contribute the USF. Mark Wigfield, an FCC spokeman, said that while he could not comment on the nature of those recommendations, “we need to move away from long-distance revenues as the basis [for USF contributions].”

According to Wigfield, the agency is considering alternatives including connection-based and capacity-based approaches to replace the current revenue-based approach.

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