FCC Approves New Internet Phone Taxes

basotl writes to tell us CNet is reporting that the FCC has approved a new round of taxes for internet phone service. Some 4 million users could receive this nasty little surprise as early as their next monthly bill. From the article: "The VoIP industry wasn't alone in questioning the FCC's move. In a letter sent last week to commissioners, attorneys for the U.S. Small Business Administration urged the agency to postpone its action until it had done a thorough analysis of the economic effect on smaller providers."

Questionable conversion rate

[boldtbanan]

FTA:

By one VoIP industry estimate, customers could owe as much as $2.12 extra on a $30 monthly bill because of the changes, said Jim Kohlenberger, executive director of the VON Coalition, which represents the Internet phone industry. Traditional wireline users would pay $1.38 on a comparable bill, while wireless users pay an average of $1.21, he said.

The above is due (FTA) to the fact that the FCC assumes ~65% of VOIP calls are long distance, while less than 30% of wireline and wireless calls are long distance. That makes it sound (to me) like some underhanded lobbying was involved.

In fairness, VOIP that does not connect to the POTS system (e.g. p2p calls) should be excluded as it does not use the same infrastructure and thus should not face the same tax burden. In fact, services such as Skype are excluded from the taxes for this exact reason, so some calculation should be made to determine the percentage of VOIP calls that never touch the POTS system. Other than that, I don't see any reason that VOIP services that use the same resources as the POTS carriers should be granted special exemption from the taxes collected for consuming the same services/infrastructure.

On a side note, my first impression from the summary was that the FCC was levying new taxes specifically against VOIP providers. I got the impression that the FCC was creating new taxes (No taxation without representation!) and that really pissed me off. Upon reading the actual article, that was definitely the implication, however the facts make it obvious that these are existing taxes and VOIP services are only being reclassified so that they fall under the same category as other voice carriers Anyone who thinks they don't -- specifically for services that access the POTS system, not p2p like skype and vonage to vonage calls -- is either ignorant or in denial. Of course, the conversion rate seems extremely off and weighted toward the destruction of VOIP and there doesn't seem to be an allowance for VOIP to VOIP calls which should bypass the regulation. I'm pissed about the extremely questionable fairness of this proclamation, but please present the facts without insinuating that things are happening (FCC creating new tax laws) which are clearly not.

Re:so why didn't they tax the rest of the internet

[affliction]

A VoIP call is just another internet connection between two individuals, sending data back and forth. What makes VoIP so special that it needs taxation? Are they going to tax internet video conferencing and Netmeeting next? Instant messaging? Just another example of old people in government not understanding the differences in new technology.

If you would have read TFA, you would have found out that they are only taxing calls made to the PSTN, not internet only calls. I don't have a problem with that. I do, however, have a problem with the rate discrepency between VoIP companies vs the Bells vs the cell companies. VoIP companies are paying double the amount the incumbents are paying based on an arbitrary percentage (a number not justified in any sort of way).

Oh also that fund that is supposed to "subsidize" rural areas is such a waste. My parents have lived in a rural area for years without DSL and it wasn't made available until a couple years ago. And then, it's 128kbps and it wasn't funded by this stupid fund, but by the local telephone co-op. I'd rather the tax go away.

The rural telephone co-ops in my area are heavily subsidized by Universal Service Funds. I am 99% certain that your DSL is funded by USF.

FCC overstepping its boundaries, class action suit

[Anonymous Coward]

The FCC seems again try to overstep the legal boundaries of its authority. In fact, the legislative underpinnings of the FCC's foundation have become increasingly questionable and, contrary to widespread believe, its authority does NOT extent to internet based personal communication, namely VoIP. This means that should the FCC try to collect taxes from VoIP users you can simply refuse to pay and take the matter to court. There is already a class action lawsuit underway that addresses this issue and that will most likely put a final end to the FCC's attempts to overstep its legal boundaries.

Re:I hate extraneous taxes...

[TheSHAD0W]

OTOH Vonage has some drawbacks... Here in El Paso, TX, retailers like Best Buy are selling Vonage's VoIP appliances on endcap displays and offering great rebate deals - and it's not until you bring the thing home, unpack it and try to sign up that you find out Vonage can't give you a phone # in El Paso's 915 area code.

Re:Civics?

[maxpublic]

The poster is exactly right. The executive branch of every government (local, state, federal) levies taxes without consulting the legislature all the time, getting around little roadblocks like the Constitution by calling them 'fees'. Apparently if you call it a 'fee' rather than a tax then you can do whatever the fuck you want. This is especially true if you limit your fees to specific groups of the electorate who lack the power (or votes) to protest effectively against this sort of thing.

The sad thing is that most people are perfectly okay with this so long as they aren't the ones getting the shaft. And when their turn comes around their neighbors simply see it as payback for the fees THEY had to pay at some point for some government service that they used (or a commercial service the government decided to tax...er, levy 'fees' against). Basically it's a "I didn't hear you complaining when I had to pay fucking fee X for service Y, so don't expect me to speak up on your behalf now that you're the one being roughed by the government protection racket - asshole."

Good luck trying to change things. Governments are as addicted to their fees as smack whores are to heroin - and they've got the guns (metaphorically and literally) to make sure you can't do shit about it.

Max

Re:I hate extraneous taxes...

[Fatal67]

It's only a requirement if they offer the service as a 'primary line' service, which is why I said he should ask his provider. Even from the same provider the service will differ between areas.

Re:As Reagan said...

[eviltypeguy]

The original quote in context has a different meaning in my opinion:

Well, anyway, it's wonderful to be having this White House Conference on Small Business again after almost 6 years. Things certainly have changed in the meantime. Back then, government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it. [Laughter] Well, with your help, I think we've turned all that around. We cut taxes. We squashed inflation. We brought interest rates down, threw out needless regulations, setting the economy on a growth path that has created somewhere in the neighborhood of 11 million new jobs in under 4 years. Now, most people know that history. What isn't widely enough recognized, however, is the leading role of entrepreneurs and small businesses in our ongoing expansion.

Remarks to State Chairpersons of the National White House Conference on Small Business
August 15, 1986
http://www.reagan.utexas.edu/archives/speeches/198 6/081586e.htm [utexas.edu]

Re:For the love of God!

[Dausha]

Bush the Elder didn't lie. He was out maneuvered by a Democrat-led Congress that sent a tax bill he had no chance of beating in a veto battle.

"Bush initially presented Congress a proposed budget containing steep spending cuts and no new taxes, but congressional Democrats dismissed this out of hand. . . . The alternative would have been to veto any budget bill that came out of Congress, risking a potential government shutdown and possibly triggering the automatic cuts of the Gramm-Rudman-Hollings Deficit Reduction Act. . . . [Eventually,] Bush agreed to a new resolution, and soon after the Omnibus Budget Reconciliation Act of 1990 was finally passed. This new proposal replaced some of the fuel taxes with a 10% surtax on the top income tax bracket (thus raising the top marginal tax rate to 31%) and also included new excise taxes on alcohol and tobacco products, automobiles and luxury yachts."[1]

It is worth mentioning that Bush (or any President) is not able to pass tax legislation. That's for Congress. He can make recomendations and he can veto (not that he has yet, AFAIK), but he can't enact legislation.

[1]: http://en.wikipedia.org/wiki/Read_my_lips:_No_new_ taxes [wikipedia.org]

Re:so why didn't they tax the rest of the internet

[nathanh]

Just another example of old people in government not understanding the differences in new technology.

It's actually an example of you not understanding the fee.

If you read the fine article it says in the second sentence that VOIP will be charged when it connects to the PSTN network (yeah yeah, ATM machine, deal with it). This isn't discriminatory against VOIP; all other voice services including cell phones are charged when they connect to the PSTN network. VOIP to VOIP won't be charged because that's independent of the PSTN network.

So far the VOIP companies have been getting a free ride because they've been sending voice traffic over the PSTN network without paying the fee. This makes VOIP->PSTN look cheaper than PSTN->PSTN partly because the customer isn't paying the same fees as the PSTN providers. With the fee in place there will be even more encouragment for customers to switch to pure VOIP->VOIP.

Re:so why didn't they tax the rest of the internet

[Kordmp]

The point of this tax is to only tax those voip services who use land lines. It is the same as when telcos tried to backhaul all their long distance calls across their backbone and circumvent charges and taxes. If you use point to point voip w/o using land lines or a service that uses land lines then you won't or shouldn't be taxed. But if you use Vonage or such who do use land lines to make calls then you will be taxed.