Internet phone service companies aren’t regulated by the Federal Communications
Commission and do not charge all the same fees and taxes as telephone companies
– but should they?
That’s the question the FCC, courts and the telecom industry are arguing.
Internet phone service – or Voice-over Internet Protocol (VoIP) – places calls using the public Internet, which is not regulated by the government.
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VoIP replaces the connection between the telephone and the phone company by connecting the phone to a broadband or DSL setup. The call is then routed over the Web to a VoIP service provider.
Internet phone calls are cheaper than regular calls because the VoIP is exempt from the fees and taxes applied to regular telephone service, which is regulated.
Those charges include federal and state taxes, a $6.38 FCC line charge; the 57-cent Universal Service Fund charge that helps interstate long-distance carriers subsidize telephone service to low-income households and high-cost areas; the 26-cent School and Library Fund to support those local institutions; and the 9-cent Telecommunications Relay Service Fund charge to support services for speaking and/or hearing-impaired individuals. Under Title IV of the Americans with Disabilities Act, all telephone companies must provide relay services free of charge to users.
Also, because Internet phone companies are not regulated, they are not mandated to carry 911 service and do not charge the $1 for 911 enhanced surcharge. Some VoIP service providers do offer free 911 service.
While telecom companies ask for some federal oversight, the acting solicitor general of the United States and the FCC oppose regulation, saying if the FCC does regulate Internet phone service it would regulate other forms of high-speed Internet access.
FCC Chairman Michael K. Powell issued a statement late last month saying high-speed Internet connections should not be treated as telephones because the service travels over the Internet. Powell has said applying taxes, regulations and “concepts from a century ago to today’s cutting-edge services will only stifle innovation and competition.”
Meanwhile, the cable and telephone companies are introducing their own versions of VoIP service, like Verizon with VoiceWing and ATT with CallVantage, to compete with Internet phone companies like Vonage.
Vonage is a telephone company provider using customers’ existing high-speed broadband Internet connection like DSL or cable modem to provide access to the public telephone network, via VoIP. It offers plans as low as $29.95 for unlimited calling within the United States and Canada and a number of added features, like caller-ID, directory service, voicemail and 911.
The company announced July 13 it doubled its subscriber base in less than six months to 200,000 users.
But unlike Vonage, telephone companies that also offer VoIP have to charge taxes and surcharges.
“We charge all the same taxes and any state-mandated fees to our VoIP customers as we do our regular phone customers,” said Verizon Communications spokesman John Vincenzo.
As more consumers switch to VoIP, programs that rely on funds provided through telephone bills – like the school and library fund – could suffer.
The problem hasn’t been experienced in Rhode Island yet, but if droves of customers switch to VoIP, as is happening in other states, programs could suffer financial loss, said Terry Mercer, chief information officer for the Public Utilities Commission.
Companies like Verizon advocate some federal oversight on Internet telephony so that all companies offering phone service are subject to the same surcharges.
“We feel the industry should be regulated with a light touch. We just want a level playing field,” Verizon’s Vincenzo said. “Whatever guidelines are set should apply to everyone in the industry. Right now we have all these different players in the telecom industry playing by their own rules.”
Robert Blanchard, president of the growing broadband telephone company VOIP2Save.com, said some FCC regulations should be implemented to keep the Internet telephony industry “honest.”
“With 100 percent accuracy, I can predict that some VoIP company will enter the market, make as much money as they can, and close down,” Blanchard said. “There are no regulations for these companies, so there is no consumer protection at all. … I’m afraid some VoIP company is going to come into the market, rip everyone off, there will be a ‘60 Minutes’ episode on it and no one will come near VoIP.”
Blanchard’s company is associated with RNK TeleCom, a fully licensed and regulated phone company in Rhode Island, Massachusetts and New Hampshire – a point he says makes his company a safe bet.
“If a customer has a problem with our service, they can go to RNK or the Public Utilities Commission and have it checked out. Some of these VoIP companies aren’t phone companies so if there is a problem, you can’t complain to anyone,” he said, mentioning Vonage.
Cox Communications may offer VoIP in the future, but that service would be through its own broadband network and not over the Internet, said Cox spokeswoman Leigh Ann Woisard.
“Not all VoIP is created equal. If we offered VoIP, it wouldn’t be over the
public Internet, because it is unreliable. If the electricity goes out, you
lose phone service and 911,” Woisard said.
