Moving Forward: Opportunities For States to Expand Access to Affordable Telecommunications


Access to affordable communication services is a critical issue for low-income and rural communities. Progressive state legislators have an opportunity to level the playing field when it comes to telecommunications - and it even comes with a revenue stream attached to it. Last Friday, the Federal Communications Commission issued an order requiring Internet phone providers (formally referred to as Voice over Internet Protocol or VoIP) to add their share to the pot in states’ Universal Service Funds. VoIP transmits voice communication over a broadband Internet connection, and can be either nomadic or fixed (it is nomadic when a customer can use a telephone service by connecting to the Internet wherever a broadband connection is available; in contrast, a fixed VoIP service originates from a fixed geographic location). Now, nomadic VoIP providers like Skype and Vonage will have to contribute to the fund just like their landline phone competitors do in order to support critical state universal service programs.

Each state’s Universal Service Fund, like its federal version, provides telephone services to residents of rural and urban areas who could not otherwise afford these services. Thanks to the collection of minimal fees on phone lines, millions of American households can now easily access a landline connection. Access to a landline phone, especially for the elderly and rural residents, is often the only way they can communicate with the outside world. This communication becomes critically important when an emergency arises, making it a needed tool for survival.

The FCC order is a response to an 8th U.S. Circuit Court of Appeal’s decision in 2009 that held that states were preempted from imposing such contribution requirements, and that asked the FCC to issue a blanket order to VoIP companies before states could collect Universal Service Fund fees. Subsequent to that court ruling, the states of Kansas and Nebraska petitioned the FCC to issue a declaratory ruling clarifying whether they could also collect fees from these providers.

In ruling in favor of states collecting USF funds from nomadic VoIP providers, the FCC reasoned that such charges would not hinder interstate commerce or interfere with its preemption powers. It based its decision under the conditions that (1) the relevant state’s contribution rules are consistent with the FCC’s universal service contribution rules (in other words, states can only treat as intrastate the same services that the FCC defines as intrastate), and (2) the state does not apply the contribution rules to intrastate VoIP revenues attributable to another state (in other words, no two states can impose USF assessments on the same intrastate revenues). In this regard, the FCC commented favorably on how states have handled the state-by-state allocation issue in the wireless context.

The FCC ruling is a victory for rural residents who do not have access to telecommunications services. A recent report by the Department of Commerce found a huge disparity in telecommunications services between rural and urban residents. Even when controlling for socio-economic differences, urban residents are more likely than their rural counterparts to have access to telecommunications services. The ruling is a win-win situation for all. As signaled by a spokesperson from the Kansas Corporation Commission, “People that live in lower-cost areas benefit as well, because they are able to call their friends and relatives that live in the high-cost areas that might otherwise not be able to afford telephone service.”

In a moment where access to telecommunications is crucial to our economic survival, states must ensure that they call on those who have the responsibility to level the playing field for all. Click here to read more about the policy resources Progressive States Network provides legislators on issues relating to state broadband and technology investments.

Full Resources

Progressive States Network – Broadband and Technology Investments: Policy Options for 2011
Telecom Law Monitor –FCC Clears States to Impose USF Fees Prospectively on Intrastate Nomadic VoIP Services
Federal Communications Commission Order
Economics and Statistics Administration and the Department of Commerce 's National Telecommunications and Information Administration – Exploring the Digital Nation: Home Broadband Internet Adoption in the United States
Kansas Reporter -FCC rules internet phone companies have to pay Kansas industry fees