The FCC released its final order regarding the application of the Universal Service Fee (USF) to VoIP. The final order has some surprises in its definitions that extend the definition of what kinds of services the taxes apply to considerably. In the past , it was understood that when the FCC talked about VoIP telecommunications it was really talking about VoIP services that connected to and from the regular telephone network, the PSTN. But the FCC makes it very clear in the new order that by VoIP telecommunications it now means any and all VoIP services. Under the new definitions that includes not just services like Vonage, that were included before, but also Skype, GoogleTalk, Jabber, Yahoo! Messenger, and all other IP-to-IP communications as well. The only restriction is that it applies only to voice calls – so IM use is still free of the surcharge.

[update: Skype has stated that since the fee is based on revenue, most of its calls and services are unaffected by the new USF fee order, but Skype did not clarify what it is doing to comply with the order in the one area where the order does affect it - SkypeIn calls within the US. These are inbound calls to someone who has a phone number assigned by Skype that can be called from any phone. Skype charges for these calls and so will have to levy the USF fee on them.]

The USF is a tax that is intended to help pay for the provision of communications in hard-to-reach rural areas and in particular for services like hospitals and health care. It is a worthwhile and valuable tax that helps make sure that communications infrastructure is pervasive. However, the services the USF provide are very costly and the FCC has been projecting a shortfall for some time. The new charges for VoIP have all along been intended as one change to cover the shortfall. It is when you look at the details of the fee and how and when the FCC will collect it and correlate that with the budget for the USF that you realize the driving force behind the FCC's latest move.

The FCC made another change to its original plans with this order – it also doubled the fee for the first two quarters that it is required – although cell providers were excluded from that doubling – and said that the fee should be assessed immediately. In other words, the FCC is draining the USF fund dry and needs to replenish it rapidly and immediately.

To quote form the order, “Section 254(d) states that the Commission may require “any other provider of 'interstate telecommunications' to contribute to universal service, 'if the public interest so requires.' Pursuant to the Act’s definitions, a 'provider of interstate telecommunications' provides 'the transmission, between or among points specified by the user, of information of the user’s choosing, without change in the form or content of the information as sent and received.' Unlike providers of interstate telecommunications services, however, providers of interstate telecommunications do not necessarily 'offer' telecommunications 'for a fee directly to the public.' The Commission has previously used this permissive authority to require private carriers and payphone aggregators to contribute to the Fund. In the IP-Enabled Services Notice, the Commission sought comment on, among other things, its authority, including mandatory and permissive authority under section 254(d), to require universal service contributions by IP-enabled service providers.”

Later the document states, “Finally, the Commission previously determined that Vonage’s interconnected VoIP service is a jurisdictionally mixed service in which part of the service is interstate in nature. We believe that other interconnected VoIP services similarly are jurisdictionally mixed and thus are subject to USF contributions on interstate and international revenues. For these reasons, we conclude that interconnected VoIP providers are 'providers of interstate telecommunications' under section 254(d).”

One more comment reveals at least a little of the FCC's motivation, “Thus, based on the record before us, we find that interconnected VoIP providers, like telecommunications carriers, have built their businesses, or a part of their businesses, on access to the PSTN. For these reasons, we find that the public interest requires interconnected VoIP providers, as providers of interstate telecommunications, to contribute to the preservation and advancement of universal service in the same manner as carriers that provide interstate telecommunications services. Finally, we note that the inclusion of such providers as contributors to the support mechanisms will broaden the funding base, lessening contribution requirements on telecommunications carriers or any particular class of telecommunications providers.”

It is very clear that the large telcos will welcome that last sentence, but the question should be raised: Since they receive most of the USF funds back again in order to provide service in rural areas, they already have a lower burden – they basically pay to pay themselves, so surely that isn't so heavy a burden? And, of course, the burden doesn't fall on the service providers in any case – it falls on the consumer.

What isn't at all clear yet is how this will be implemented for the VoIP providers that are providing mixed services like Skype. Skype also provides chat and data transfer services. It also operates internationally and although it isn't terribly likely, a call from Buffalo to Chicago might well actually travel across a set of network pathways that takes it portions of the call outside the US. And outside the US is beyond the jurisdiction of the FCC.

In the past the FCC has been very uncertain about VoIP, choosing to wait and see, and when it has acted its actions have not necessarily had the intended effect. Plus, the effect for users of the FCC fee is an additional one dollar and change per month (with the doubling provision that is now two dollars and change) so it isn't a huge blow, but the trend towards lumping infrastructure and service on top of the infrastructure together as if they are one and the same is at best naive.