Organizations such as the National Taxpayers' Union have sent missives to the Federal Communications Commission (FCC) urging it to keep the heavy regulatory burden that controls the public telecommunications network from applying to voice over Internet protocol (VoIP) communications.
The rationale for this is pretty simple, and it is similar to that which has kept jurisdictions from placing heavy taxes on the Internet and many transactions thereupon. Heavy regulations make the burden on invested capital more substantial, thus deadening the spending appetite of the capital markets to roll out this new service to more and more American homes and businesses.
This comes at the same time when federal legislation has been released that would qualify VoIP services as informational, rather than common carrier-based, thus releasing them from the telecom regulation imposed on circuit-switched communications networks.
I agree with this principle. What I don't agree with is the fact that the regulations are now going to be unevenly applied on competitors providing what, functionally, is the same service. Verizon (NYSE: VZ), SBC (NYSE: SBC), even Citizens Communications (NYSE: CZN) and Motley Fool Income Investor selection Alltel (NYSE: AT), have a web of taxes and universal service provisions they must adhere to (including, the NTU points out, an excise tax on communications established to fund the Spanish-American War and is still being collected today. Wily Spaniards.) that greatly increase the cost of service and the cost to customers.
By avoiding these taxes, VoIP companies like 8x8 (Nasdaq: EGHT) and underlying providers like Level 3 Communications (Nasdaq: LVLT) can compete unencumbered with the bigger companies. Does that seem right?
Regulations from one era have a strange way of impacting the next. It is likely that a flood of taxes and regulations would dampen the development of VoIP, but how many of the existing regulations that burden the existing circuit-based carriers actually do what they intended to do? And if they are effective in, say, ensuring that all Americans have access to basic telecommunications, then why on earth would legitimate competitors for this business not be responsible for playing under the same rules? If the myriad of regulations are damaging to newer companies, certainly they're just as damaging, if not more so, to the old-line telecommunications companies.
I'm with the NTU here, but rather than creating yet another special interest by declaring VoIP to be information rather than common carrier (which doesn't make that much sense), doesn't it seem more logical to have the regulatory and tax burden adjusted so that all common carriers are competing in an even regulatory and taxation environment?
Government should not play favorites.
Got a take on VoIP? Information service, or carrier? Come give us your view on the Telecommunications discussion board. Only on Fool.com.
Bill Mann owns none of the companies mentioned in this article.
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