Friday, June 02, 2006

VoIP News:Get Ready for the VoIP Tax


If the Federal Communications Commission (FCC) has its way, businesses and consumers alike will be paying more for their Voice over IP (VoIP) calling services. FCC Chairman Kevin Martin has submitted a proposal that would require VoIP service providers, including Skype, Vonage, and others, to pay into the Universal Service Fund (USF).

There is no clear indication of how much the USF surcharge will add to the cost of existing VoIP services. However, according to the VON Coalition, an advocacy group consisting of VoIP service and equipment providers, the USF surcharge might add as much as $1.77 per month to a $25 monthly bundle.

Lisa Pierce, an analyst at Forrester Research, said a VoIP tax has been in the works for a long time. "Voice over IP, by definition, is a voice service," Pierce said, "and the whole reason for the USF was to ensure the availability of voice services on an equitably built basis throughout the United States."

Growing Pain

As part of the Telecommunications Act of 1996, the USF is intended to guarantee the delivery of affordable telecommunications services to every citizen. The fund collects some $7 billion from interstate and international phone calls annually.

For VoIP service providers, the question has moved from whether they should have to pay into the USF to how much they should pay. The FCC is calling on VoIP companies to pay 10.9 percent of 65 percent of their revenues into the USF.

Pierce said there is no question that the cost of the surcharge will be passed on to VoIP customers -- both business and home users -- and that it will narrow the gap separating VoIP and traditional phone services.

Paying It Forward

In the near term, she said, the tax could affect consumers a lot, and companies like Vonage might suffer. "Depending on how far that margin is closed over time, if someone was going to VoIP purely or primarily for economic reasons, it would obviously remove a lot of the incentive," she said.

In the case of business customers, the applications and productivity are still good reasons to choose VoIP over traditional phone services, Pierce went on to say.

"As far as economics are concerned," she said, "in the business market over the long haul, VoIP still has a lot of legs. This doesn't change that."

Were the FCC proposal to pass, she said, it is a good indication that the industry has gained legitimacy and that the government recognizes it is a growing revenue stream.
"This is some of the pains of puberty or adolescence," shd said


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