MBG Article
The Treasury Gives and the FCC Takes Away
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.
Last month, the Treasury Department with a little help from the US Courts decided that Federal Excise Taxes should not be levied on long distance calls. This month the Federal Communications Commission (FCC) decides that all VoIP traffic is subject to Universal Service Fund (USF) taxes. In fact, in the near term, the FCC has decided that VoIP providers should pay double taxes to make up for lost time.
Pulver Sounds Off
Since the FCC posted its opinion just before the July 4th holiday, the scrutiny and understanding of this order are still being developed. However, here is some initial analysis from Internet telephony evangelist Jeff Pulver’s Blog:
- Requires VoIP providers to register with the FCC starting on August 1, 2006.
- USF taxation is not limited to VoIP traffic that touches public switched telephone networks (PSTN). It alls to all VoIP including peer to peer traffic.
- Requires VoIP traffic to be taxed at 64.9% rate unless a pre-approved traffic study proves otherwise.
It should be noted that Pulver is a noted advocate for free Internet telephony and is a founding member of Vonage. Pulver would probably find any interference in the operation of VoIP services by the FCC to be just this side of heresy, but he raises some interesting questions.
Where could this lead?
While not of the zero interference group led by Jeff Pulver, the FCC ruling offers all sorts of questions:
- Who pays USF taxes on a peer to peer (Skype) VoIP call? The originating party? The terminating party? Both?
- How are taxes collected on a zero revenue peer to peer call?
- If taxes are ever collected on a zero revenue call, who is liable for the taxes? The parties on the call? The business or university upon whose network the calls are made?
These are the types of issues that are unclear from the FCC’s order and will need investigation and hearings to determine. However, these are all issues that could adversely impact a telecommunications organization that has recently moved toward a VoIP implementation to save costs or to maximize network infrastructure.
Conclusion
The FCC has made far reaching decision that may indicate a fundamental shift in the way that VoIP services, in particular and Internet services in general, are regulated and taxed…. Or it might just be the FCC’s way of indicating that in the future VoIP service providers will be treated like their local exchange carrier (LEC) brothers.
Should it be the former, VoIP service costs will increase and potentially in-house VoIP implementations could be impacted. If it is the latter, VoIP service providers and telecommunication organizations should start planning for the increased costs associated with parity associated with a level playing field between VoIP and PSTN network calls.
