The PhoneBoy Blog

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Tax the Pipes, Not the Application

So I’ve seen enough on the Universal Service Fund for VoIP Order. You can thank Jeff Pulver for doing all the hard work of reading it and posting his analysis. Obviously this order was written by people in the back-pocket of the incumbent telcos.

I’m not going to debate the merits of the USF, because that in itself is a topic. Let’s assume for the moment that the USF serves a useful purpose and the money in it isn’t being squandered. The solution I offer here is simple: apply the USF tax to the pipes, not the application.

A “pipe” is a physical wire that carries some kind of data, whether it be circuit-switched like a POTS line or packet-switched like a DSL or Cable Internet connection. Wireless is kind of a special case, but at some point the wireless connects to a physical network, be it the Internet or the telephone network. It too would be subject to this tax. The phone companies should like this. It evens the playing field since the Cable companies would be subject to these taxes as well.

The main problem the legislatures seem to have a problem with is this concept that a pipe–namely that pair of wires jacked to the side of your house, and an application, namely the ability to make and receive telephone calls. That “call” can be voice in nature, or along with a device called a modulator/demodulator, more commonly a modem, you can make a data connection. Regardless of the types of calls you make, you’re charged a USF fee.

The same should apply for an Internet connection. Regardless of how you choose to use that pipe, if you have a pipe, you pay. It doesn’t matter what you use the pipe for, you should be charged. End of story.

How many VoIP companies are out there? Hundreds? Thousands? And the FCC wants them all to register? Think about how many people it’s going to take to process all that paperwork and deal with all the providers. Doesn’t seem like a smart use of time. Meanwhile, how many Telcos and Cable Companies are in the US? Far less than the number of VoIP providers. Instead of choosing to deal with a small number of well-established players, they are choosing to deal with hundreds of smaller players, many of which whom don’t have their act together. Can someone explain the logic behind this?

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