Industry Officials Debate Policies For VoIP

Industry Officials Debate Policies For Internet Telephony

March 9, 2005

By Drew Clark

A regional Bell telephone company, a rural carrier, a cable company and an Internet phone company disagreed Wednesday about the obligations and prices that communications companies must pay when they offer Internet telephony to rural America.

Speaking at a telecommunications forum hosted by a task force of the Congressional Rural Caucus, Vonage CEO Jeffrey Citron said subsidies between long-distance and local telephone service must be eliminated.

Kevin Hess, vice president of federal affairs for the rural firm TDS Telecom, disagreed and said the current inter-carrier subsidization systems "remain the appropriate mechanism of compensation." Hess also said voice-over-Internet protocol (VoIP) providers like Vonage must contribute equally to the universal service fund (USF), which is designed to finance phone service to all Americans.

Reps. Charles (Chip) Pickering, R-Miss., and Rick Boucher, D-Va., also addressed the task force, and each outlined their bills to pre-empt state regulation of Internet-based services. Pickering's bill is focused on VoIP; Boucher's deals with all Internet services.

On USF and inter-carrier compensation, Pickering said Voip providers must make "proportional compensation" when they connect with traditional phone carriers.

Currently, Voip providers need not make any payments to the fund, and what they need to pay to dominant phone carriers is a hotly debated subject in the industry and before the FCC.

Citron said Vonage supports "a fair, equitable, revenue-based system into which all providers, telecommunications and non-traditional services alike, can contribute and from which new technologies can draw out." But he said that "USF is in dire need of an overhaul to meet new policy goals and the realities of the competitive marketplace."

He found some support for that proposition from Bill Smith, chief technology officer at BellSouth. "The one that is in place today needs to be revised and replaced," he said of USF.

Neither Citron nor Smith specified what type of USF compensation system should replace the current system.

Richard Cimerman, director of state telecom policy for the National Cable and Telecommunications Association, said USF should be funded with a number-based contribution. That means that a cable, Internet or phone company offering phone service would pay a flat fee based on the number of phones they serve.

Because Voip relies upon high-speed Internet service, the question off how to spur broadband access also was debated at the forum. Cimerman criticized the role of the Rural Utilities Service in making loans that are "being used to subsidize competitors in markets where there are already two or more broadband providers."

Both Citron and Boucher said USF should be revised to permit monies for broadband networks. Currently, the $6 billion fund subsidizes only traditional phone networks.

"I personally think that broadband should be part of that equation," Boucher said, adding that "the time may come in the not-too-distant future in which USF can be greatly restricted in scope, and perhaps eliminated altogether."