TELECOM Digest OnLine - Sorted: Re: Pricing Comparison, was: Vonage's Citron Says VoIP...

Re: Pricing Comparison, was: Vonage's Citron Says VoIP...

Garrett Wollman (
Sun, 6 Mar 2005 23:05:03 UTC

In article <>, TELECOM Digest
Editor noted in response to Danny Burstein <>:

> [TELECOM Digest Editor's Note: Yeah, and can you imagine there are
> folks who want to place the blame on VOIP because it is so
> inexpensive; they seem to feel all those taxes and fees the landline
> telcos pay are justified. Why they want to blame VOIP instead of
> placing the blame of the government, squarely where it belongs, is
> anyone's guess. PAT]

Regulated telcos don't pay taxes. Only their customers pay taxes.
Some of those taxes are itemized on the bill, and some are just buried
in the rates, but one way or another, every dime of tax paid by the
telco comes ultimately from the ratepayers.

This is not a problem insofar as the taxes in question are general
taxes that apply to all businesses (or, more specifically, all
businesses which offer a service which is substitutable for the
service the telcos offer, in proportion to the service's relative
value). At present, we have a regulatory system where some services
are taxed specifically, and other, eminently substitutable services
are not so taxed or indeed regulated at all, depending entirely on
where in the protocol stack these services are implemented.

There is no question that substitutability is valuable in a
competitive marketplace; indeed, it is a necessary condition of having
a competitive marketplace. The problem, however, is that differential
taxation and regulation of otherwise substitutable services causes
consumers to make choices between services for reasons external to the
market, to wit, on the basis of that differential taxation.

Telcos see this problem most clearly, because they are the ones being
discriminated against in the current scenario. Unfortunately, the
approach they have taken in their campaign, demanding that everyone be
regulated and taxed in the same way as they are, is both
counterproductive for the economy as a whole and ultimately futile as
more and more non-telco voice services are designed to be
unregulatable and untaxable.

The telephone regulatory regime needs to begin the process now of
phasing itself out of existence. A good start would be eliminating
direct taxation and cross-subsidy of telephone services (e.g., USF,
franchise fees, state sales and excise taxes), while simultaneously
prohibiting the itemization of non-tax costs of doing business, so
that consumers are able to make a reasoned choice among different (but
substitutable) communications offerings.



Garrett A. Wollman | As the Constitution endures, persons in every | generation can invoke its principles in their own Opinions not those | search for greater freedom. of MIT or CSAIL. | - A. Kennedy, Lawrence v. Texas, 539 U.S. ___ (2003)

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