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Beyond Technology: Changes in Telecom

With communication technologies rapidly changing, the year 2006 will be marked by more than just advancements in VoIP and wireless.  Sweeping changes are taking place in how telecommunications are charged.  The first change is the end of an 108 year old federal excise tax on long distance calls.  The second is the work of the Federal Communications Commission (FCC) to change the way that fees are assessed on telecommunication services.

Federal Excise Tax Changes

In May, then Treasury Secretary John Snow announced the removal the federal excise tax on long distance phone calls that had financed, among other efforts, the Spanish-American War from 1898.  The repeal was a result of multiple court decisions against the Internal Revenue Service (IRS) in their attempts to enforce and collect the tax.

The end result will be almost $15 billion in tax refunds to individuals and businesses on their 2006 taxes in January 2007.  For individuals and small businesses without their long distance bills going back three years, the IRS is developing a plan for estimating the refund based on average usage.  However, for larger firms with large long distance usage than the average, the 3% refund could represent a sizable refund.  For example, a firm averaging $100,000 long distance charges over the past three years can expect a $9,000 refund toward their 2007 tax returns.

Clearly for larger companies the refund can be substantial, but the key is having the ability to find this tax information.  Organizations using telecom expense management solutions are able to extract this information easily to prepare their refund.  These systems are able to breakdown the billing data, including taxes on long distance. 

New Wiretapping Fees

Also in May and unassociated with the changes announced by the Treasury Department; the FCC announced new fees to support wiretap facilities for law enforcement.  These fees will provide accommodations to support the 1994 Communications Assistance for Law Enforcement Act (CALEA).  Unfortunately, this represents a majority of the firms who provide or utilize voice over IP (VoIP) communications.  Also, here are questions about the FCC ruling:

 

These two questions, among others, cast uncertainty about how VoIP providers and consumers will be impacted.

The fees collected by the FCC will support the government’s wiretapping efforts.  Organizations, who have to support these wiretapping efforts, may have to bear the costs associated with the upgrades to their networks on their own.  For VoIP providers, this represents a significant impact to their competitive advantage as a lower cost option for telecommunications services.

For consumers of VoIP services, either via in-house implementations or purchase from third party providers, the FCC changes could represent anything from a single point of access for law enforcement to the ability to monitor all voice related traffic throughout a network.

Universal Service Fund Changes

In June, the FCC is considering changes to the way the Universal Service Fund (USF) is financed.  Like the soon to be removed federal excise tax, USF charges are assessed on long-distance usage charges.  The usage formulas were applied either based on the type of telecommunication service and the estimated usage of long distance calls; or by the actual usage.  The charge implementation was decided by the telecommunication service provider.

However, soon there could be a much easier to determine flat tax assessed for all phone numbers.  This change would inlcude existing landline and wireless numbers.  However for the first time it may include all VoIP associated numbers as well.  Currently, VoIP server providers include USF charges, again, based on the decisions of the service provider.

Conclusion

As a whole, service providers and consumers need to be aware that the telecommunications environment is changing and in particular how telecommunications services are regulated; and how those regulations impact the billing for those services, which make the case for telecom expense management solutions all the more important.   Most of all, the lesson should be learned that VoIP implementations and providers are not immune from these changes to telecommunication regulation.

 

 

 

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