POWELL ENDORSES REFORM OF TELECOM ACT
FCC Chmn. Powell endorsed reform of the Telecom Act during his testimony Tues. before the Senate Commerce Committee. He told the committee regulation of new technology such as VoIP couldn’t be resolved under the Telecom Act of 1996, and legislative reform should occur. Powell said the current law wouldn’t allow such services as VoIP to be “harmonized” and would make it difficult to resolve intercarrier compensation. “The days are numbered on the way we're doing this under the current statute,” Powell said: “I do believe there is going to have to be a statute in the future that recognizes these dramatic technical changes.”
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
Powell said all data should be treated the same way for intercarrier compensation, but it would take a “torturous path” to get there. In answer to a question, he said he believed a tax on VoIP would stifle its growth. Members also asked several questions about how VoIP might affect services like 911, law enforcement access and disabled access. Powell said while the regulatory requirements seemed difficult, technology would likely make public service obligations easier to meet. Several members said they were worried about VoIP firms’ moving offshore if regulations were too burdensome; Powell agreed that was a danger.
Several members said any reform of the Telecom Act would have to emphasize definitions within the act. Senate Communications Subcommittee Chmn. Burns (R-Mont.) said: “It all boils down to the definitions; how we define and what we define.” Burns said E911 and universal service fund reform were other critical issues that needed to be resolved. Sen. Cantwell (D-Wash.) said she worried that VoIP could develop into a proprietary system, instead of an open access system.
Stan Wise, NARUC pres., said many states had applied a “light touch” to VoIP regulation. A few states have asked VoIP carriers to register as telecom services, which has led to court challenges, Wise said. He said state regulators would play a pivotal role in dialogues about how to reform intercarrier compensation and universal service.
CenturyTel CEO Glen Post said that through its VoIP petition with the FCC, AT&T was seeking to avoid paying legitimate costs for the use of phone company loops and switches. “While the FCC considers this petition, AT&T’s abuse of the system continues by their pocketing the difference and not lowering their customers’ bills,” Post said. He said little changes when a company transitions to IP, and VoIP providers shouldn’t be able to “unilaterally exempt themselves from potentially billions of dollars in access payments.” Peter Jacoby, AT&T vp-congressional relations, said in response: “We're hopeful that policymakers will let this nascent technology develop in all its forms and not require it to subsidize the entrenched local telephone monopolies.”
Sen. Alexander (R-Tenn.) testified at the hearing that if the FCC classified VoIP as an “information service,” state and local municipalities could be banned from collecting taxes on it. Alexander said this was possible if Congress adopted HR-49, legislation from Rep. Cox (R-Cal.), which would permanently revive the Internet tax moratorium. The Senate bill, S-150, is “somewhat less of a threat,” Alexander said, but could still cost states up to $10 billion per year from taxes collected on the sale of telephone services. “There is no justification whatsoever for Congress deciding to give telecommunications companies such a bonanza -- and then turn around and send the bill to state and local governments,” Alexander said. “This is the worst kind of unfunded federal mandate. Banning a tax is just as much an unfunded mandate as requiring a service.”
Alexander testified in support of his bill, S-2804, that would extend the current Internet moratorium for 2 years, which he said would keep intact state rights to tax telephony service. Alexander also had a tax policy suggestion to help encourage broadband deployment. Taking off from an idea adopted in Tex. when President Bush was governor, Alexander said states and local govts. should give a $25 monthly exemption from sales taxes to consumers who buy Internet access. The cost to states would be about $2 billion, which Alexander said the federal govt. should reimburse by raising the federal excise tax on phone service from 3% to 4%.
Alexander was challenged by Sens. Wyden (D-Ore.) and Allen (R-Va.), who introduced S-150. After Wyden asked whether Alexander supported letting every taxing jurisdiction apply a tax to VoIP, Alexander said he supported allowing state and local jurisdictions to tax transactions in their jurisdictions, including on telecom. Wyden said Alexander’s position contradicted the U.S. Supreme Court Quill decision, which limited state taxation of remote sales. Alexander said Wyden mischaracterized his position.
Allen said he would offer an amendment to S-150 that would clarify that it exempted VoIP. “VoIP will not be adjudicated in our bill,” he said: “It only deals with access taxes.” He said the amendment would be clear and he would even “underline” the amendment if it would help make clear the exemption.