Handle that person exactly the same as anyone whose performance is slipping. Try to analyze what's causing the problem, discuss it openly with the employee, and get him/her involved in the problem-solving. Most important - make it clear that the continued ability to telecommute will depend on bringing performance levels back up to what's needed to meet your expectations.

While most employers have telecommuting policies or telecommuting agreements that give the manager the right to bring the person back into the office if performance slips, that should be your last resort, not your first resort. Manage this performance problem just as you would (and should) for any employee.