FCC slaps VoIP providers with universal access tax

* Government telecoms legislation fails to understand how tech is changing

In our last newsletter, we discussed the FCC ruling that requires VoIP providers to offer "lawful intercept" (or CALEA compliance) of phone calls and associated data by May 2007. Looks like the FCC didn't stop with CALEA compliance in making VoIP look more like plain old telephone service. Last week, the FCC ruled that - like POTS subscribers - VoIP providers must also pay into the Universal Service Fund.

Basing their assumption that most VoIP calls are long distance, the FCC ruled that providers like Vonage must now pay a 7% USF charge. Vonage sees the tax as a glass half full. In a statement, Mike Snyder, Vonage CEO said: "Now that VoIP customers will be contributing directly to the fund, we hope as a result of this interim rule, VoIP companies will now be able to utilize universal service funds enabling Vonage and the industry as a whole to bring new technologies like ours to rural America."

So chalked up three ways, VoIP services today look a lot like POTS based on FCC rulings. First, VoIP subscribers must have full E-911 access. Second, VoIP calls are subject to CALEA compliance. And now, VoIP providers will have to pay USF fees just like regular phone companies.

However, we believe that - once again the legislation around new technologies has failed to get a big picture view of how regulation must change with technology. In addition to whether Skype and others should be subject to CALEA enforcement, should Skype calls be subject to taxation? We think the answer is no for the time being. And when (not if) voice is eventually offered "for free" as part of a broadband service bundle, is free voice also subject to USF taxes?

It looks to us that, with a little legislation here and there, the FCC doesn't recognize that fact that the way people communicate is changing radically. For example, if the FCC really wants to provide E-911 access, should it not also require instant messaging or Web chat users the capability to reach out in an emergency? Or as users accept and receive more personalized video, should CALEA legislation be amended to provide lawful intercept of video calls? And since e-mail is the most frequently used person-to-person tool in business today (vs. phone calls), should the government tax e-mail communications with USF obligations?

Maybe it's time for a more comprehensive governmental strategy that addresses emergence service, law enforcement and a realistic tax model. If you'd like to add your opinion, please send us an e-mail or post your comments to the innovations and legislation blog at Webtorials.

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