Universal Service Fees run, on average, 25% of your monthly telco charges and consume a lot of an organization's IT spend – understanding when they are and are not applied is important.
There has been a debate since the early days of non-interconnected VoIP over whether the technology should be considered telecommunications or information technology. You would think this distinction would be merely semantic, but that is far from the case! There is actually a huge difference between the two from a legal and regulatory perspective. As a result, many providers fear non-interconnected VoIP is going to be categorized as a communications technology and will start to face the same sort of regulation as the incumbent telecom players.
This uncertainty has led to an increasing number of my customers to ask for billing reviews, because, frankly, they cannot believe how high taxes and surcharges have become. When we perform these reviews and audits, we begin with a review of the Universal Service Fee (USF) which jumped to 26.5% this quarter, as the telecom carriers assess against almost everything except local service!
We help make our customers aware of this assessment fee and what effect it will have on the bottom line of their communications service’s bills. Unfortunately, the USF is not negotiable, and because it is an assessment in the form of a surcharge and not a tax, it is subject to state-levied sales tax.
Paying attention to these fees is important. Carriers are prohibited by law from charging more than the quarterly contribution factor. But we see a whole host of other charges they do charge to make it even more “fun”; such as a “property tax allocation” or an “administrative fee,” both of which seem like government-imposed fees and surcharges but are really just revenue grabs for the service provider.
VoIP & the USF
So back to VoIP; depending on where this technology winds up being classified, the additional cost to businesses may be considerable. Definitions are here:
- Enables real-time, two-way voice communications
- Requires a broadband connection from the user's location
- Requires Internet Protocol (IP)-compatible customer premises equipment (CPE)
- Permits users generally to receive calls that originate on the public switched telephone network (PSTN) and to terminate calls to the PSTN
- For purposes of compliance with the FCC’s 911 obligations, fulfills each of the above and permits users generally to terminate calls to the PSTN
Non-interconnected VoIP service differs from connected VoIP by not connected to the PSTN.
- Enables real-time voice communications that originate from or terminate to the user’s location using IP or any successor protocol
- Requires IP-compatible CPE
- Does not include any service that is an interconnected VoIP service
It remains to be seen which group of arguments the Commission will find most persuasive as it decides whether and, if so, how to extend USF contributions to One-Way VOIP services. We will know much more about this verdict in the upcoming months. Until then, if you have services that fall into this category be sure to be budgeting for the USF fee just in case the technology gets classified as telecommunications.