01 June 2007

Internet
telephone companies like Vonage must contribute to the Universal
Service Fund (USF), a federal appeals court ruled Friday afternoon. If
VoIP providers follow the lead of local, long-distance and wireless
services that already pay into the USF, the costs will be passed on to
consumers.

The
decision is limited to VoIP providers that interconnect with the public
switched telephone network (PSTN). The USF subsidizes phone service in
under-served and rural areas. Through the E-rate fund, the USF also
subsidizes Internet connections in schools and libraries.

After the Federal Communications Commission (FCC) ruled
last year VoIP providers were obligated to pay USF fees, Vonage
challenged the decision. The Holmdel, N.J.-based company claimed the
FCC exceeded its authority in the ruling, in addition to overestimating
how much VoIP providers should pay.