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WHEN MONOPOLISTS CALL FOR a “level playing field,” beware: Most often, what they really want is to hold back the competition. Such is the case in telephone service, as local phone monopolies are trying to saddle high-tech competitors with fees designed to subsidize the traditional phone network.

At issue is how federal and state regulators will treat voice over Internet protocol, or VOIP, services like Vonage that use high-speed Internet connections, not conventional phone circuits, to transmit calls. So far, these services have been able to escape much of the byzantine regulation that permeates the telecommunications business. In particular, they’ve avoided the access charges that long-distance and wireless companies have to pay local phone companies when connecting to their customers. These charges not only cover the cost of connecting calls but also subsidize phone lines in rural and other high-cost areas. VOIP also has been exempt from federal and state “universal service” fees, another source of subsidies for traditional phone lines.

Those exemptions are in danger, however. The House has passed a bill that would let the Federal Communications Commission and state regulators impose access charges or universal service fees on VOIP. On Thursday, the Senate Commerce Committee is scheduled to take up a similar proposal. Meanwhile, the FCC is expected to rule this week that VOIP firms must pay federal universal service fees.


Backers of the changes argue that VOIP users should pay to maintain and extend the phone network just like everybody else who places calls. In reality, though, firms like Vonage already are paying indirectly, through contracts with the companies that connect their calls to local phone networks. Besides, the current system is already rife with inexplicable inequalities. Local phone companies demand anywhere from a fraction of a penny to more than 30 cents a minute, depending on the source of the call.

More fundamentally, these proposals don’t recognize how radically communications have changed over the last decade. Traditional phone lines aren’t being displaced by VOIP services; they’re being replaced by high-speed Internet connections, which offer a slew of communications alternatives. VOIP, like e-mail and instant messaging, is just an application.

With the distinction between local and long-distance evaporating, the FCC has been struggling to phase out access charges and overhaul universal service. Rather than dragging VOIP services into the morass of subsidies for phone circuits, lawmakers and regulators should focus on pushing high-speed Internet connections to every U.S. home and business. If that means people using VOIP save a few bucks at the expense of those who use other phone services, so be it. With luck, VOIP will drive up the demand for broadband and hasten its spread, diminishing the need to subsidize plain old telephone lines.