Senator, others call for VOIP regulation

WASHINGTON - A U.S. senator, a state public utilities commission and a telephone company executive have asked the U.S. Federal Communications Commission (FCC) and Congress to slow down their rush toward declaring voice over Internet Protocol (VOIP) service essentially free from government regulation.

Most members of the Senate Commerce, Science and Transportation Committee called for the "light touch" approach to regulating VOIP advocated by FCC Chairman Michael Powell during a hearing Tuesday, but Senator Lamar Alexander, a Tennessee Republican, said efforts to exempt VOIP from telecommunications taxes will take money away from state and local governments.

State and local governments across the U.S. currently collect about $20 billion a year in telecommunications taxes and fees, and if VOIP is exempted from those taxes, that number will shrink as more telecommunications carriers and more consumers switch to VOIP, said Alexander, who participated in the hearing as a witness. Exempting VOIP from state taxes would be an "unfunded mandate" from Congress, something the Republican majorities in Congress pledged to avoid, Alexander said.

Some committee members suggested VOIP adoption would drive investment and expansion of broadband services, because most VOIP service is available only over broadband, but Alexander questioned why Congress should give broadband and VOIP special treatment.

"There's no justification ... for Congress deciding to give telecommunications companies such a bonanza, then turn around and send the bill to governors and to mayors," Alexander added. "If Congress really wants to pick and choose among American business enterprises and decide that high-speed Internet access business is one we all want to subsidize, then Congress ought to pay the bill and not send it to the states."

Earlier this month, the FCC began a rule-making process to determine the appropriate level of regulation for VOIP, with Powell suggesting the emerging voice service should be treated more like unregulated Internet service than heavily regulated telephone service.

Alexander also criticized congressional efforts to extend a temporary ban on taxes unique to the Internet, including Internet access taxes. The Internet Tax Non-Discrimination Act, a version of which passed the House in September, would make permanent the Internet tax ban that expired in November, but Alexander and other opponents say the bill's definition of "Internet access" could be interpreted to include VOIP as exempt from taxes.

If Congress wants to encourage broadband adoption, it should instead follow the lead of Texas and give customers of broadband Internet service a sales tax exemption on the first $25 of their monthly broadband bill, Alexander said. The sales tax exemption might cost $2 billion a year, while exempting VOIP from taxes could eventually cost states and local governments more than $10 billion a year, Alexander said.

Committee member George Allen, a Virginia Republican and co-sponsor of the Internet Tax Non-Discrimination Act, responded to Alexander's testimony by saying he would introduce an amendment to the bill that would clearly state that VOIP services are not exempt from taxes under that bill. While Allen said the bill isn't designed to address VOIP, other senators at the hearing questioned if VOIP should be subject to state and local taxes.