Tax VoIP to fund USF? Bah!

June 2, 2006
So now the U.S. government wants to tax VoIP to help fund the USF. Rich discusses this in a post today worth checking out. eWeek also has a story on this. FCC Chairman Kevin Martin is proposing that VoIP service providers such as Vonage, Skype and others begin paying 10.9 percent of 65 percent of their revenues into the USF.

According to the eWeek article, "the USF will lose as much as $350 million starting in August when DSL and other broadband Internet access services become exempt from having to contribute to the fund." Ok, so let me get this straight. broadband Internet access providers are going to be made exempt from contributing to the USF resulting in a $350 million shortfall? What kind of stupid economics is that? What I want to know is which broadband provider paid off FCC Chairman Kevin Martin to get this sweet tax break only to offloaded onto VoIP providers. Where's Jack Abramoff in all this? Did he lobby for the broadband providers or is Kevin Martin alone in suggesting we tax VoIP. Shall we inspect Kevin Martin's freezer for $90,000 in cold hard bribery cash?

Ok, kidding aside, in all seriousness, what is Kevin Martin thinking? VoIP is an application that runs over IP networks, including the Internet. If you're going to start taxing Voice over IP, why not tax email over IP (as Bill Gates once suggested), instant messaging over IP, or web traffic over IP, or any other application that rides on the Internet.

Nobody wants the USF to go bankrupt - it does serve a useful purpose in offsetting the costs of providing phone service in rural areas. However, why should VoIP companies be held responsible for building the PSTN infrastructure in rural areas? Heck, many VoIP companies ride on top of broadband coax/cable wires that have nothing to do with phone wires. Yet the FCC wants to force the VoIP providers to subsidize an industry that they have little to do with. Sure, many VoIP subscribers have DSL and run VoIP over their broadband DSL connection, but they also currently pay into the USF since they have a regular PSTN landline as well. Very few DSL providers offer "naked DSL" where you can get just broadband connectivity without also paying for a landline.

Finally, let me just point out that VoIP can be provided from anywhere in the world, not just in the U.S. How is the U.S. going to enforce such a tax? Suppose Skype refuses to pay into the USF tax, will the FCC ask that all the ISPs start blocking Skype traffic and even ban the Skype.com web address for all U.S. citizens? Last I checked that was China, not the U.S.

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» FCC approves new VoIP taxes from VoIP & Gadgets Blog
Well, we knew it was inevitable that the FCC would pass on USF (Universal Service Charges) taxes onto VoIP service providers and thereby unto VoIP subscribers. I griped about this pending tax just recently. Well, the FCC voted unanimously yesterday... [More]

Tracked on June 22, 2006 11:47 AM

Comments to Tax VoIP to fund USF? Bah!


  1. Hoodia :
    June 3, 2006 12:50 AM

    I don't think it will or can happen. Just as you pointed out, the tax on email has not taken, and I don't think this will either. It's pushed by those who stand to losen, and for the wrong reasons...


  1. tax foreclosures :
    September 25, 2006 4:45 AM

    That's sounds good,However it is a possibility due to the elimination of Federal Excise Tax (FET) from VoIP services the new USF tax will result in a net slightly higher customer bill. Vonage is assessing which method of contribution will be most beneficial for its customers.


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