I was recently asked to give some comments on what I thought of the above proposed regulation (which is essentially ‘USF for VoIP’). I thought I’d share my comments here publicly.

1. What burdens does the proposed rule place on small businesses?

The burden on a small business is tremendous. Small businesses are currently offering low-cost solutions for consumers by maintaining a low overhead. Many (if not most) don’t even handle the actual voice data that travels to and from the end-users in an attempt to minimize overhead costs and maximize business solvency with very low pricing to the consumer. Adding a 64.9% theorized interstate revenue adjustment to small VoIP companies based on sheer guesswork and estimation, knowing full well that smaller companies can scarcely afford to pay salaries, much less commission FCC-approved studies for traffic flow, is going to put smaller VoIP companies in a position of being unable to compete.

With the global nature of the Internet, many small VoIP companies are taking advantage of the increased userbase that the world offers, allowing origination and termination in any number of countries. This regulation, however, would purport to offer that most voice traffic is US-centric and interstate and therefore subject to paying into the USF — a situation which is highly unlikely, and tantamount to taxation of non-US citizens, as any additional costs will have to be passed on to the userbase as a whole.

2. What significant alternatives should the FCC consider?

The FCC seems wholly unwilling to consider any alternatives until they can work out any issues they have with actual distribution of the collected funds — something that seems beyond the purvey of the FCC. If they have, until now, had problems with distribution, it is unlikely that in future they will be able to better regulate themselves. Such a decision will be external.

A solution the FCC could consider would be using less guesswork and more data in their arrival of a safe harbour number for VoIP providers. Alternatively, and more appropriately, the FCC could simply charge a fee based on every DID in the US local area to pay into the USF — bypassing the need to create traffic studies of any kind or to assume that all voice traffic is US-based.

3. Can wireless providers determine actual interstate and international end-user revenues.

This seems reasonable, considering they know which tower a phone is connected to (needed for authorisation on the network), as well as to which tower the call connects. There should be an easy one to one mapping for the purpose of creating absolute data.

4. Should originating and terminating cell sites be used to determine the jurisdictional nature of a call.

If the attempt is truly to determine which calls are interstate in nature, then yes. If the attempt is simply to collect a phone tax, then it’s somewhat irrelevant.

5. Is 37.1% for a wireless carrier appropriate or should it be raised or eliminated?

I’m of the opinion that, because of the nature of what the USF is used for, the rate should be eliminated.

Think, for a moment, back to what the USF is for. The USF is given to rural areas and areas with poor communications infrastructure in order to pay for communications infrastructure. VoIP companies and Wireless providers usually don’t have penetration into the rural areas, leaving the only ones out there to be the Wireline providers. What’s happening is that the wireline providers are paying the least into the USF, but getting a portion of that money back simply because they refuse to enhance the quality of the network infrastructure in rural areas. Meanwhile, VoIP companies and Wireless providers are, in essence, subsidising the wireline infrastructure in rural areas, thereby subsidising their competitors. The USF is clearly NOT suited for a non-homogeneous wireline telecommunications infrastructure. When you add VoIP and Wireless into the mix, it becomes severely anticompetitive.

6. How should the FCC set safe harbour percentages to better reflect market conditions?

Relying on a more accurate study than the TMS Telecoms study would be a good start. The FCC claims that, because of long-distance service bundling, wireless and VoIP companies are more likely to be doing interstate traffic than wireline providers. It is quite rare, however, to find a wireline provider who doesn’t also offer bundling. If it’s good for the goose, it should be good for the gander. The only way to fairly apply a USF tax is to make it a flat number across the board.

7. How can requirements on interconnected VoIP providers be improved?

Requiring a VoIP provider to pay into the USF for data that clearly never touches the PSTN until it hits an endpoint is a mess. That’s much akin to asking people to pay postage for email. While some would like it (most notably the USPS), it destroys the concept of a data stream for which one already pays. End users pay for bandwidth. VoIP companies pay for bandwidth. These payments may be flat rate or per megabyte charges, but the payments are still made, and somewhere along the line, those payments go into the pockets of companies that provide infrastructure for either telecom or data networks.

Where does it end? Is everyone along the line guilty of somehow subverting the USF system? Should everyone pay into the USF from the provider on down to the end user? How does one say that the provider of what amounts to being an automated phonebook for VoIP users is the one who should be paying into the USF to subsidise the wireline companies in rural areas? It seems to be a rather less based on how the technology works and more simply a line drawn in the sand at random.

8. Should the FCC change or eliminate the safe harbour for VoIP providers?

I believe there are other methods by which a more appropriate USF tax could be collected, but I still disagree that VoIP providers should be responsible for paying into a fund that goes to their direct competitors (wireline providers). If, however, the USF must be collected, and the competitors of VoIP must be governmentally subsidised, then the USF should be a flat safe harbour for all involved. No one method of communication is more or less guilty of providing interstate communication, and to assume otherwise is to penalise providers based on outdated and unproven assumptions.

9. Can VoIP providers identify actual interstate revenue?

Until VoIP providers are able to collect accurate and untampered-with IP data from all customers (difficult in the age of IP spoofing and redirection proxies), and until that data can be accurately mapped to an area (while the Geo-IP database is a handy tool, it is in no way perfect or 100% accurate), then no. There’s simply no way to accurately identify actual interstate revenue, and to create numbers — 23%, 31.7%, 64.9% — is to simply create an arbitrary system based on guesswork.