Tuesday, June 27, 2006

Telecom Taxes

A Network World blogger writes, "the long-overdue repeal of a portion of the Federal Excise Tax, which levied a 3% luxury tax on phone services. The good news? The long-distance portion of the FET is finally going away. The bad news? The Treasury Department fought tooth and nail to keep that from happening (and indeed, will continue to collect FET on local calls). At its June 15 meeting, the FCC expects to assess a proposal to expand the USF taxes to VoIP providers ... increasing the typical customer's bill by about 7%. There are a couple of perspectives on all this. First, taxes shouldn't discriminate by technology - otherwise, you're distorting the free market. Making some technologies artificially expensive by taxing them - or alternatively, artificially inexpensive by not taxing them - amounts to asking the government, not the market, to choose winners and losers. By this logic, VoIP providers should pay USF charges just like TDM providers. ___ But the USF is an unmitigated disaster. It's badly managed and ineffective. Supporters claim it's necessary to enable universal broadband, but as currently configured the USF doesn't do that. Moreover, the definition of what is and isn't broadband, for USF purposes, is remarkably malleable. At the moment, for example, DSL isn't considered broadband. The current taxincrease proposal is on the table in part to address a $350 million shortfall in the USF, which resulted from a decision last year to declassify DSL as a telecommunications service and thus exempt DSL providers from paying into the fund."

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