VOIP, Cellphone Bills Could Rise for Subsidy

By Arshad Mohammed
Washington Post Staff Writer
Friday, June 2, 2006

Consumers could see their mobile and Internet telephone bills rise under a Federal Communications Commission proposal that would increase the amount such companies pay to subsidize telephone service in poor and rural parts of the country.

The proposal, which has been floated by FCC Chairman Kevin J. Martin and would require approval by a majority of the five-member commission, aims to ensure that the government continues to raise enough money to finance the federal Universal Service Fund, which is projected to pay out $7.3 billion this year.

The money goes to subsidize phone service in high-cost areas of the country, to make phone service affordable for more than 7 million low-income consumers, to offer reduced telecommunications and Internet rates to rural health-care providers, and to subsidize those services for schools and libraries.

The fund is financed through a 10.9 percent "contribution factor" that companies pay on the revenue they take in for interstate and international telephone calls. Most companies pass this cost along to their customers, but they are not required to do so, leaving it unclear how much more mobile and Internet phone customers might pay if the proposal is approved.

Wireless companies are assessed on up to 28.5 percent of their customer revenue. Under Martin's proposal, this cap would be raised to 37.1 percent, according to FCC officials.

Voice over Internet protocol providers, which are not currently required to pay into the Universal Service Fund, would have to contribute on up to 64.9 percent of their revenue. This would either cut their profit margins or, if passed along to consumers, raise prices. VOIP companies have been using low prices to establish themselves against standard phone service.

An FCC spokeswoman declined to comment, saying the agency could not comment on pending matters. The proposal could come up for a vote at the FCC's next open meeting, on June 15.

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