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Predatory Telecom Taxing

In past posts I've lamented about the government taxing of our industry. Carriers are paying excessively for rights-of-way fees to traverse public property that is owned by the public and in turn, the carriers' costs are reflected in charge backs to their customers. Everyone continues to pay for what they already own in trust. Never mind that the carriers also pay for development and maintenance of these rights-of-ways. But the federal government coffers never stay satisfied because you remember that for 108 years everyone was taxed on their phone bill to pay for the Spanish-American War. The lesson here is that inaction on behalf of government is what we can expect whenever someone attempts to stop using telecommunications as the sacred cash cow to raise tax revenues.

For those that don't recall the anti-competitive measures of State and local jurisdictions to further expand taxes on telecom, I'd invite you to read what I wrote previously in A la Carte Telecom Market Share: "Another hit to come will be the US government, followed by state and then local jurisdictions wanting to exercise their taxing authority to raise the revenues coming into the treasuries."

Last week, Josh Long (Channel Partners) wrote in Wireless Tax Moratorium Moves Forward that,

"Over the past few years, state or local governments in Arizona, California, Delaware, Georgia, Hawaii, Kentucky, Maryland, Maine, Nebraska, New York, Oregon and Wisconsin have imposed or attempted to impose new discriminatory taxes on wireless service," said Scott Mackey, a partner and economist at Montpelier, Vt.-based KSE Partners LLP, in written testimony in March on Capitol Hill. "And wireless users have every reason to be concerned about the possibility of new targeted taxes in other states and localities as well."

What I find particularly amusing is that the federal government is shaking the State and local taxing authority trees for bad behavior without examining their own excessive taxing policies on telecommunications. Then, I still think the FCC's policies are largely misdirected. Coupled with prior remarks from the Pentagon that, "a cyber attack from another country can be an act of war" and with the recent remarks about national security as it pertains to the Internet by outgoing DOD official William Lynn, we will likely see new and increased taxes. I've also stated in the past that, "Applying the use of the old model to the Internet today and the NGN is definitely bad karma." This is what the FCC I think is doing today and the FCC direction still comes from both Capital Hill and the White House.

In my travels and prior contacts with school administrators I've learned another pain point that they are experiencing. E-Rate, another tax that we all pay so schools and libraries can build networks with Internet access, was used to buy not the "best fitting solution for the organization’s application;" instead these purchases were "best in class" or Cisco. I don't fault Cisco for playing the E-Rate game, they are great at it and so was the former 3Com.

What I find particularly amusing is that the federal government is shaking the State and local taxing authority trees for bad behavior without examining their own excessive taxing policies on telecommunications. Then, I still think the FCC's policies are largely misdirected. Coupled with prior remarks from the Pentagon that, "a cyber attack from another country can be an act of war" and with the recent remarks about national security as it pertains to the Internet by outgoing DOD official William Lynn, we will likely see new and increased taxes. I've also stated in the past that, "Applying the use of the old model to the Internet today and the NGN is definitely bad karma." This is what the FCC I think is doing today and the FCC direction still comes from both Capital Hill and the White House.

In my travels and prior contacts with school administrators I've learned another pain point that they are experiencing. E-Rate, another tax that we all pay so schools and libraries can build networks with Internet access, was used to buy not the "best fitting solution for the organization’s application;" instead these purchases were "best in class" or Cisco. I don't fault Cisco for playing the E-Rate game, they are great at it and so was the former 3Com.

Now, the problems some school Administrators currently suffer because of declining tax revenues and disruption to their tax bases is they're stuck and can't afford to upgrade, maintain and expand on their costly Cisco IPT efforts. Recently, I sat with an Administrator that could not afford to implement SIP trunking because they can't get Cisco phones in all the schools because it's too far out of their budget. Then, they don't have the staff resources to support the changes and effort. Another Administrator of a public school system cannot get connectivity because there is not viable (enough of and affordable) access to bandwidth. FCC ballooning USF is another testament about how government goes wrong in using telecommunications as a cash cow. Maybe it's just too much to expect that government needs to take its cue from the private sector on learning how to cope and to do more with less.

Not only is telecommunications taxed unfairly and disproportionately for the value received, we haven’t built a national infrastructure in our country suitable to withstand more imminent attacks of weather, latency and even natural or man-made EMP attacks. Fiber infrastructure is costly to deploy in some regions of the US, but it still holds the best hope in solving the most problems. Naysayers initially gave Verizon low marks for their FIOS efforts, yet Verizon has shed jobs (less maintenance) and increased revenue because of fiber. Where Verizon is getting killed on profitability is wireline services--the good old PSTN. Wireless holds promise because it could be the backup and in many cases it remains the primary and only service available next to the PSTN.

The FCC's new call for discussion on shutting down the PSTN is still one more misguided and premature effort. Early this year, the FCC demanded from Verizon an investigation into why Verizon's wireless network hung up on 10,000 wireless callers dialing 911 public safety access points (PSAPs) in the Washington, D.C. metro area. Everyone agrees that outside copper cable plant is expensive to maintain, and while IT analysts and prognosticators continue to chant that the PSTN is dead, public safety is being overlooked and jeopardized. The recent past and current economic conditions and economic climate have brought out the worst in government and carriers. Convergence, I think, stands to suffer the effects of quality and reliability for the sake of lower costs; and then without having a world-class national infrastructure we are putting ourselves at risk. This is when and where government would argue for higher taxes.

The disconnect that government (Local, State, Federal) retains is their myopic thinking hinged on lining the tax war chest instead of providing the best-in-the-world infrastructure that will grow and change as fast as our technology and still remain affordable. Government for over 100 years continues to throw our money at attempts to solve problems that just don’t go away. It's not that I think we shouldn't pay any taxes, it's that our telecom taxes and fees are misdirected and the opportunities to build value into a better infrastructure are misguided and this will affect our competitiveness as a nation.