States, Rural Telcos Urge State USF Contributions By VoIP

The FCC should immediately require interconnected VoIP providers to contribute to state universal service based on intrastate traffic revenue, said the National Association of Regulatory Utility Commissioners. The association urged the FCC to clarify that a June 2006 order provided a method for assessing a state USF charge. In that order, the commission created a “safe harbor” for setting federal USF contributions, because of the difficulty of separating intrastate and interstate revenue with VoIP. The FCC said 64.9 percent of VoIP revenue is subject to federal USF contribution. The association asked the FCC to clarify that states may assess USF to VoIP providers “based on the complement” to the safe harbor.

Rural carriers unanimously supported the proposed rule. “Prompt issuance of a declaratory ruling will help preserve the integrity of state universal service funding mechanisms and help assure competitive fairness among all providers of local and intrastate voice calling services,” said a joint filing by the Independent Telephone & Telecommunications Alliance, National Exchange Carrier Association, National Telecommunications Cooperative Association, the Organization for the Promotion & Advancement of Small Telecommunications Companies, and eight other rural associations.

Google altogether rejected the states’ petition, saying VoIP technology blurs the distinction between interstate and intrastate. “Legacy state telephony laws would saddle VoIP services with carrier responsibilities and regulatory uncertainties,” it said. The proposed rule would raise costs of VoIP -- a “killer” broadband app -- when the FCC is supposed to be lowering barriers to broadband adoption, it added.

Verizon urged the FCC to rule that all VoIP services are interstate and subject to the FCC’s “exclusive jurisdiction for regulatory purposes,” and “resolve the regulatory classification of these services going forward.” In addition, the carrier urged the FCC to revamp the current revenue-based USF contribution system and replace it with one based on phone numbers. “It is not feasible for the Commission to address universal service contributions for VoIP services apart from broader USF contribution reform,” Verizon said. The current system “is based on distinctions between telecommunications and information services and between interstate and intrastate services that are unworkable and ultimately … not even relevant in an IP environment.”

Vonage isn’t against paying into state USF funds if the FCC establishes rules permitting states to do so “consistent with federal policy,” the VoIP carrier said. But the matter will require a separate rulemaking, it said. “In a rulemaking proceeding, all interested parties, including other states, would be able to bring their concerns to the table, and the Commission would be able to develop a better record on which to establish clear rules of the road for states and industry.”

VoIP carriers should pay state USF, but the FCC will have to open a rulemaking first, AT&T said. The commission “plainly preempted such assessments in the Vonage Order,” it said. In that decision, the FCC preempted Minnesota regulators from applying a law requiring state USF contributions from Vonage and others selling “IP-enabled services having the same capabilities.” The VON Coalition agreed the Vonage order necessitates a rulemaking. “Nothing has changed [since 2004] to warrant a change in policy.”