Numbers Might Make USF More ‘Equitable,’ ‘Stifle’ Internet Innovation
The Internet voice industry is divided on a popular proposal to base universal service fund contributions by carriers on phone number count rather than interstate revenue. Vonage and other interconnected VoIP carriers support a numbers approach as making the fund technology- neutral. Others say a numbers world would force overhaul of business models at Google’s GrandCentral and other enhanced service providers. That shouldn’t be, Feature Group IP CEO Lowell Feldman said in an interview. Ten-digit phone numbers represent “1970 technology, not 2008 technology,” he said. “The numbers scheme is really a sleight of hand to try to force the industry to always use numbers.”
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A numbers-based system “could greatly hamper innovative IP-enabled and information services such as the GrandCentral platform,” Google said ex parte filing this month (CD April 7 p11). Users of GrandCentral, a free “virtual office” service, get one phone number that simultaneously rings home, work, mobile and any other phones. To make money, GrandCentral sells customers a paid plan with premium features.
GrandCentral’s business plan of low-revenue and high phone-number count would die under a numbers-based system, Feldman said. Having to pay “a lot more” into universal service would kill the free plan, he said. And a purely paid model probably wouldn’t fly with consumers, because GrandCentral forwards calls to phone services that they also pay for, VON Coalition Executive Director Jim Kohlenberger said in an interview. In effect, a GrandCentral customer would be paying twice for universal service, he said.
Interconnected VoIP carriers support a USF contribution revamp as a path to more “equitable” USF rates, Kohlenberger said. A typical user pays $2.12 in universal service fees for VoIP, compared with a $1.21 USF fee on wireless service and $1.38 on wireline service, he said. “Part of this is presenting a fee that’s predictable and easy for consumers to understand,” Stephen Seitz, Vonage’s regulatory affairs vice president, said in an interview. Imposing different USF fees on similar services makes no sense to consumers, he said.
Parity is important, but regulators also must “be very careful not to stifle, stall or stop technologies just as they're emerging,” Kohlenberger said. “Some of the most exciting innovations are on those services that don’t look like substitutes for traditional telephony.” Remaking the contribution system could “disrupt free services” like GrandCentral, he said. Still, the revenue-based approach must go, he said, because it’s slowing the spread of new technologies.
A numbers approach could be “felt harder” by companies providing free phone numbers, said Jason Talley, CEO of Nuvio, another interconnected VoIP carrier. But then again, “maybe they should be contributing to the system.” Seitz agreed: “My guess is a lot of those folks aren’t paying into the USF fund right now.” Vonage wants a numbers-based system partly because it’s paying a “hefty chunk” to USF, he said.
“People are wrong when they say GrandCentral or other [enhanced service providers] don’t pay” universal service, Feldman said. The FCC doesn’t treat ESPs at carriers that must pay directly into the fund. But ESPs buy local service from carriers that contribute to universal service, and pay USF fees passed on to customers, Feldman said. ESPs and interconnected VoIP also buy phone numbers through carrier partners, because the North American Numbering Plan Administration only gives numbers to local carriers.
It would be fairer to set USF contribution by capacity, said lawyer Jonathan Askin. He represents Feature Group in a petition seeking to exempt VoIP from paying access charges when connecting to a traditional switched network. “The network is going to be used for a lot more than numbers-based voice calls,” Askin said. And measuring capacity is as easy as counting phone numbers, he said. Better, measuring capacity “gets away from the implicit subsidies that have been the bane of carrier relations,” requiring “massive amounts of both FCC and state oversight in trying to determine what the fair price of access is.”
‘Relic’ of Switched Networks?
It’s technologically myopic to base USF contribution on phone numbers, Askin said. “In an Internet-enabled world, numbers are largely irrelevant,” he said. He called them a “relic of our many decades-old decision to use a 10-digit numbering system” and “one of many signals” along with domains and URLs.
Incumbent phone companies’ stranglehold on telephony keeps numbers alive, Askin said. “ILECs consider numbers so sacred and so part of their signaling and call processes” that VoIP carriers have to “play into that system now,” he said. “We're basically trying to be backward-compatible.”
Vonage uses phone numbers so customers see it as a viable option to standard phone service, Askin said. The company could as easily assign URLs, he said. Feldman agreed that it’s “backwards-looking” for a VoIP company to use numbers, perpetuating an obsolete system.
That’s not the “mainstream” view, Talley said. “These are the same guys who were saying, ‘We're not going to be using Microsoft Windows on our desktop.'” Numbers aren’t going away the next 10 years, he said. “Most if not all” U.S. businesses use them, and that won’t change soon, he said. If regulators are afraid to make 10-digit dialing permanent, don’t “hard code” the definition of “phone number,” he said. Even if phones someday use a different identifier, “I can guarantee you that a lot of people are still going to call it a number.”
“You're never going to have the perfect, future-proof solution,” said Talley. “The minute you put any type of regulation in place, there’s going to be something that doesn’t fit in the box.” Eventually it won’t make sense to use phone numbers for USF, but the change proposed is nonetheless “an incremental step forward,” he said. It’s too much to expect “the FCC to be able to see into the future,” he said.