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FCC chief backs Net phone taxes

Chairman Kevin Martin says a top 2006 priority is expanding controversial tax so anyone with a phone number pays it.

WASHINGTON--Imposing new taxes on a wider swath of Internet phone users is likely to be one of the Federal Communications Commission's top priorities next year, Chairman Kevin Martin said Wednesday.

The policy at issue is the thorny question of which phone service providers are forced to contribute to the Universal Service Fund, a multibillion-dollar pool of money that's used to subsidize telecommunications services in rural and other high-cost areas, schools and libraries. The mammoth fund--$4.7 billion was distributed during the first nine months of this year--has been beset by charges of mismanagement and fraud during its seven-year history.

Right now, long-distance, wireless, pay-phone and telephone services are required to contribute a fixed percentage of their revenues to the fund, which they do by tacking additional fees onto their customers' bills.

But it still remains unclear how those taxes apply to voice over Internet Protocol (VoIP) providers. Some of those companies--particularly larger ones--already contribute to the fund, either directly or via the telephone companies whose wires they use to provide their services. Vonage, which has more than a million subscribers, imposes a "regulatory recovery fee" of $1.50 on each customer phone number.

But without a mandate in place, government regulators and politicians say they fear that as technology like VoIP becomes more widespread as a traditional telephone replacement, the fund will shrink.

"We need to move to collection for the Universal Service Fund that is technology-neutral," Martin said in a wide-ranging luncheon question-and-answer session here hosted by Comptel, a trade association representing communications service providers.

Martin did not say whether he wanted the Universal Service Fund to be expanded to VoIP systems like Skype or voice-enabled instant messaging that do not rely on telephone numbers. If those services prove to be increasingly popular, the fund could dwindle beyond its current billions-a-year figure--a prospect sure to alarm librarians and other interest groups that benefit from the government largesse and will lobby to maintain it.

Martin said he supported a "numbers-based approach," wherein taxes would be levied on all phone numbers, regardless of what kind of technology does the calling.

"I think telephone numbers are a good, easy mechanism to begin to address those issues," he said.

His remarks echoed suggestions made this summer by the FCC's joint federal-state board on universal service reform.

Congress is expected to mull its own changes to universal service reform next year. One draft rewrite of the 1996 Telecommunications Act calls on the FCC to determine whether VoIP providers should have to contribute.

And just before Thanksgiving, two U.S. congressmen released draft legislation that proposes an even broader approach than that advanced by Martin: levying the new fees on any provider that uses telephone numbers or IP addresses to supply voice communication services.

Martin said the FCC would welcome more explicit direction from the legislators in that and other policy areas, noting that "the commission is really inherently a creature of Congress."