Small Business VoIP Services at the Heart of an FCC Dilemma

The widespread adoption of small business VoIP technologies has dealt a significant blow to operators that are obliged to deliver phone service over legacy PSTN lines.

Customers are leaving traditional carriers like Verizon and AT&T, in part, because small business VoIP outfits can offer services for minimal costs. VoIP providers are able to undercut conventional carriers on price partially due to the fact that they are exempt from paying some of the fees that traditional carriers do for connecting calls over legacy phone lines, according to a recent Politico.com article.

Not having to pay these fees has enabled VoIP providers to take even more market share away from owners of the old Ma Bell network. As one would expect, traditional carriers are none too happy about the inequity, and have asked FCC to force VoIP service providers to pay a flat per-minute fee for connecting calls to the physical network.

In an official filing to the FCC, Verizon said that the "top priority remains the urgent need to decide the proper compensation rate for VoIP traffic. The commission should immediately set a single, low national default rate of $0.0007 per minute for this traffic."

VoIP service providers have so far been resistant to this plan, noting that they are an information service not a telecommunications service, according to Politico.

The FCC is in a precarious position because tacking on fees to VoIP services could discourage the expansion of next-generation broadband networks, which the Obama administration has identified as one of its chief goals in the coming years. In fact, Obama recently set a goal of rolling out high-speed wireless to 98 percent of all Americans within the next five years, virtual-pbx has reported.

However, Politico points out that traditional carriers are sure to lose billions of dollars if the FCC doesn't step in. This drain in funds could impede their efforts to follow Obama's pledge and push broadband out to rural areas.

The answer to this dilemma may involve the Universal Service Fund, an $8 billion-plus program that helps subsidize costly phone service in rural locations around the country

FCC Chairman Julius Genachowski has called the program obsolete, and said that he will look to retool the fund by reallocating the majority of assets to operators that can provide high-speed Internet services to rural areas.

The program "was designed for a world with separate local and long-distance telephone companies, a world of traditional landline telephones before cell phones or Skype, a world without the Internet — a world that no longer exists," Genachowski said in April at the Information Technology and Innovation Foundation in Washington, DC.

“At the end of this transition, we would no longer subsidize telephone networks; instead we would support broadband," he added.

VoIP is soon to completely take over for traditional landline service. Until it does, the FCC has some decisions to make.

Beecher Tuttle is a virtual-pbx contributor. He has extensive experience writing and editing for print publications and online news websites. He has specialized in a variety of industries, including health care technology, politics and education. To read more of his articles, please visit his columnist page.

Edited by Stefanie Mosca