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No state regs, taxes for VoIP, FCC says

Telcos 1: states 0

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Washington Roundup The US Federal Communications Commission (FCC) has decided that states do not have a right to regulate VoIP. FCC - for now at any rate - believes that the matter is best left to the federal government, because VoIP is, in its view, an interstate service. This is generally an "if it ain't broke don't fix it" stance; but it does not necessarily mean that there will never be taxes or other surcharges, but rather that if there should be, the Feds will be the ones deciding who can collect them, and how much they will be.


In a related development, the House and Senate passed a bill establishing a three-year moratorium on Internet access taxes. Both dialup and broadband connections are covered, but the bill has no effect on VoIP that makes use of the telephone networks. This might seem contradictory in view of the item just above, but isn't, sort of. Congress simply decided that its moratorium does not extend to VoIP, not that taxation is either desirable or undesirable. This basically leaves the issue in FCC's court.

States that have had dialup taxes in effect since before the first moratorium in 1998 are not affected, except Wisconsin which will begin phasing its taxes out. Restrictions on multiple sales taxes in e-commerce transactions have been added, along with restrictions on any tax that has no counterpart in the real world, e.g., a tax on e-mail.

Last year the House passed a permanent moratorium, but the measure failed in the Senate. The President is expected to sign the three-year version passed this week.


A $388bn must-pass spending bill has got jammed up due to a comical provision that would reportedly allow some Congressmen and their assistants to examine the tax returns of any American citizen at will.

The bill slashes budgets for education, health care and environmental protection to accommodate the President's tax cuts, although there are a few winners, such as NASA, which will see an increase of $822 million over last year. And there will be 20,000 more hi-tech work visas available. Assuming Congress can get the thing signed, that is.

The culprit appears to be US Representative Ernest Istook (Republican, Oklahoma), who claimed that the IRS put him up to it. (Why the IRS would eagerly welcome Congressmen mucking about in its files was not explained.) He also denied that it would have led to the perusal of individual tax returns.

Others see it differently, so it will be necessary for the House and Senate to agree on a workaround later this week. It's common for bizarre language to be attached to a critical piece of legislation at the last minute, so that it will not be noticed by legislators until long after they've passed it. (This tradition makes for great fun on the campaign trail, when one candidate accuses his opponent of voting to waste millions on some hare-brained scheme that he had no idea was even in the bill).


National security was high on the Congressional agenda, as members struggled to pass the intelligence reform bill that the 9/11 Commission advocated. The bill is actually quite controversial, when one looks beneath the veneer of smiling politicians and bureaucrats who have no stomach for expressing even a whiff of skepticism towards anything with anti-terror implications.

The most controversial element is the creation of a national director of intelligence, who would be taking over some very precious turf long held by DoD. A number of hawks in Congress and the Administration think this would be an exceptionally stupid move. So, while the President and several Administration conservatives lobbied half-heartedly for it, the Secretary of Defense and Chairman of the Joint Chiefs worked their legislative back-channels in simultaneous opposition. The wind-up is that the bill is now stalled in the House.

However, there is some hope that the bill could pass next month, as the 108th Congress is not formally in adjournment. The leadership declined to pull the plug, perhaps in hopes that some manner of face-saving compromise can be arranged before the 109th convenes, and has to start the whole thing over from scratch. ®

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