Bigger bills loom for users of wireless and Net phones
 

Subscribers of Internet-based phone and wireless services would face higher bills this year under a federal proposal to impose or increase universal service charges on those offerings.
Many Internet-based phone customers would be hit hardest, with monthly increases of about $1.75, narrowing the cost advantage those offerings now enjoy over traditional phone service.

Members of the Federal Communications Commission are reviewing the proposal by Chairman Kevin Martin and are expected to consider it at their June 15 meeting, say three FCC officials with knowledge of the agency's plans. They requested anonymity because the commissioners have not voted on it.

Passage is likely because a Republican commissioner, telecom lawyer Robert McDowell, should be sworn in soon, giving the GOP a 3-2 majority, says analyst Jessica Zufolo of Medley Global Advisors.

Now, universal service fees (USF) are assessed on landline and wireless long-distance phone services to help pay for phone service in rural areas, among other things. The 10.9% surcharge bankrolls a $7 billion annual fund.

As landline long-distance calls decline, Martin wants a flat tax for all phone numbers.

The immediate concern is that the fund faces a $350 million shortfall in July, when local phone companies' DSL broadband revenue becomes exempt from the tax. The FCC last year deregulated DSL, and Martin wants wireless and VoIP (voice over Internet protocol) services to fill the gap.

Some wireless carriers now pay the fee only on their total calls that the FCC estimates to be long-distance — 28.5% of all calls. That equals 3.1% of a consumer's bill. Under the FCC proposal, the estimated long-distance portion on which USF is assessed would rise to 37.1%, or about 4% of the total bill.

A customer with a typical $54 monthly cellphone bill would pay $2.16 in USFs, up from $1.67.

Yet many wireless subscribers would not pay more because some big carriers don't use the 28% standard. They analyze their traffic to determine exactly what portion is long-distance.

Customers of VoIP services, such as Vonage, would feel the biggest impact. They don't pay USFs, largely because the FCC has not yet determined whether VoIP is a "telecommunications service."

Under the proposal, they would pay the tax on the 64.9% of calls estimated to be long-distance, or 7% of their total bill. A typical VoIP subscriber with a $25 bill would see a monthly increase of about $1.75.

Some big cable companies that offer VoIP, such as Time Warner, have chosen to pay USF charges based on the same 28.5% standard wireless carriers use. They would have to shift to the 64.9% benchmark, adding about $1.60 to a typical customer's bill of $40.

"It could narrow their retail cost advantage," Zufolo says.

Jim Kohlenberger, head of the VON Coalition, an association of VoIP providers, criticized the proposal. He says VoIP subscribers should pay the same USF rate as wireless customers.