FCC Serves Up Tax Break - Why charged by FCC now?

Posts: 8 · New Forum Member Joined: Oct 09, 2006 Posts: 8

The new charge for Vonage consumers "Federal Universal Service Fund tax"

Doesn't the FCC contradict itself?

Did Vonage lawyers try to beat this? Or did Vonage throw in the towel Because of big brother?
I want my phone to be affordable but how is that going to happen then the government keeps tacking on taxes?

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Vonage - FCC Serves Up Tax Break

FCC Serves Up Tax Break For Net Calling

November 9, 2004

By Scott Moritz

Federal regulators handed the Internet calling business a victory on the tax front Tuesday.

The Federal Communications Commission ruled that Net calling isn't the same as local phone service and therefore not subject to state jurisdiction. The decision means that services offered by companies such as closely held Vonage -- a well-chronicled leader in selling voice-over-Internet-protocol calling -- shouldn't be subject to conventional state telecom regulations.

The decision not only frees Vonage from state-by-state oversight, but also allows the company to avoid collecting various fees and taxes typically added to conventional phone bills.

Though the decision was anticipated, industry observers say it helps clarify the rules.

"We believe that this is positive, because it is clearly in everyone's best interest to have a nationwide policy on Voip, rather than 50 separate rule-making bodies issuing disparate orders," CIBC World Markets analyst Tim Horan wrote in a note Tuesday.

VoIP's freedom from state jurisdiction is also good news to cable companies like Comcast (CMCSA:Nasdaq), Cox (COX:NYSE) and Time Warner (TWX:NYSE), which have Net calling plans through telco partners like MCI (MCIP:Nasdaq) and Sprint (FON:NYSE).

Vonage is required to provide emergency call location information known as E911 so operators and dispatchers can identify where calls originate.

The ruling didn't help shares of the regional phone giants, which continue to watch competing technologies siphon off revenue and customers. Verizon (VZ:NYSE) shares fell 13 cents to $40.97 and SBC (SBC:NYSE) was down 19 cents to $29.10 in midday trading.

Despite the apparent threat to its core business, Verizon said in a press release that it supported the FCC's decision. The company has in the past indicated an interest in rolling out voice-over-the-Net services of its own, though it hasn't gone beyond trial marketing so far.

"Treating Voip with a consistent and light regulatory touch is the best way to spur its development and serve the needs of consumers," Verizon said in a statement.

http://www.vonage-forum.com/article1341.htm

Posts: 1424 · Posted: Mon Oct 09, 2006 8:15 pm Post subject:

The point of the FCC's ruling was to prohibit state regulation of Voip. The FCC has not stepped in to prohibit taxing Voip at the state level as a telecommunication service. Taxes on Voip were specifically excluded from the prohibition on Internet sales taxes.

Sales Vertex Tax State Activity Update wrote:

The federal Internet moratorium, the Internet Tax Non-Discrimination Act (P.L. 108-435) specifically excludes Voip, allowing states to tax it as a telecommunications service.

In the case of the USF it is a federal program and therefore neither of these truly apply. The FCC shifted the USF burden from DSL providers to Voip providers. This made sense according to the goals and structure of the USF program.

It should be noted that Vonage is in favor of Voip carriers paying into the USF specifically because they see it as a way to obtain more business, business that would not be available to them if they did not pay into the USF. Furthermore since the FCC allows them to pass the costs directly to the customer there is no downside for the Voip provider.

Posts: 8 · New Forum Member Joined: Oct 09, 2006 Posts: 8

Thanks scerruti for the heads up Target