FCC chief backs Net phone taxes
WASHINGTON—Imposing new taxes on a wider swath of Internet phone users is likely to be one of the Federal Communications Commission's top priorities next year, Chairman Kevin Martin said Wednesday. — The policy at issue is the thorny question …
Context & Ripple Effects
Chairman Kevin Martin staked out two positions at once in this December 2005 appearance: extending telephone-style taxes to a wider swath of Internet phone users is likely to be a top FCC priority next year, while adopting rules protecting consumer access to the Internet is unnecessary for now. The wire-service pickup framed his remarks around the net-neutrality question, showing how Washington read the two debates together — the chairman declining conduct rules even as he signaled a wider tax reach.
The statements land in Martin's first year running the commission, and fit a pattern visible in the surrounding coverage: an earlier report had him backing à la carte channel pricing over bundled cable packages — an unconfirmed claim, but directionally consistent with a chairman who intervenes on market structure where he judges consumers ill-served while keeping hands off network conduct. On VoIP, his target is not what providers do but who pays to fund the telecom system as calls migrate onto IP networks.
First-order effects
- Internet phone providers serving customers whose calls stay entirely on IP networks would see the FCC's contribution base widened to include them, adding per-line tax costs many currently avoid — the direct effect of Martin's stated 2006 priority.
- Incumbent telcos and cable companies, which already pay into universal-service funds, gain a partial answer to their complaint that lightly taxed VoIP rivals undercut them on price — even as Martin's refusal to back net-access rules denies them the other remedy they sought.
Second-order effects
- State utility commissions would come under pressure to mirror any expanded federal definition of taxable VoIP, since states weighing their own treatment of Internet phone service typically calibrate against the FCC's line.
- A heavier tax load narrows VoIP's price advantage over traditional phone service precisely when its growth depends on that discount, pushing smaller providers toward price increases or feature bundles to absorb the cost.
Third-order effects
- If the pattern holds, regulators treat IP-based communications as taxable telecommunications wherever it functions like phone service — the precedent that decides whether universal-service funding survives the migration off legacy networks.
- Martin's pairing of 'no new net-conduct rules' with 'yes new net taxes' sketches a doctrine of regulating money flows over network behavior, a split competitors and consumer advocates alike will press to test in the courts and Congress.
The trend: As voice traffic migrates to IP networks, regulators are moving to extend legacy telecom levies to Internet services rather than let the universal-service tax base erode.