Declan McCullagh on Thu, 2 Apr 1998 21:18:34 +0200 (MET DST)

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<nettime> [US news] The modem tax is back!


The Netly News
April 2, 1998

        *  *  *

       Is the "modem tax" back? FCC Commissioner Susan Ness said on
   Monday that ISPs might have to pay so-called universal service charges
   that help subsidize cheap rural phone service and school and library
   Internet connections. At issue is whether ISPs should be classified
   with phone companies as "telecommunications services," which are
   required to pay a 4 percent tax on customer billings. It's not helping
   matters that the software for making voice calls over the the Internet
   is getting toward OK.

        *  *  *


Some excerpts from Commissioner Ness' remarks:

	"Local telcos complain that data calls typically last much
	longer than voice calls, tying up switches and requiring
	the addition of more capacity in the loop and the central

        "An appropriations measure passed by Congress last fall, at
	the urging of Senator Stevens, requires the Commission
	to review the statutory definitions of
	"telecommunications," "information services," and related
	terms. It directs us to evaluate the impact of the
	Commission's interpretations of these terms on the
	provision of universal service.

        "A variation of this argument is that information services
	and telecommunications services no longer constitute a
	dichotomy but overlapping groups. As a result, some, but
	not all, information services are subject to Title II

        "Perhaps some new services, like Internet telephony, ought
	to be subject at some future date to [government
	regulation], but it's really too soon to do anything
	about this."

Starting this year, companies providing interstate "telecommunications
service" must hand over to the government approximately four percent of
what they billed customers. This is to pay for universal service -- rural
phone service and wiring schools and libraries -- and the percentage is
subject to change. Currently "telecommunications carriers" include local
telcos, long distance companies, paging companies, payphone providers,
cell phone firms, etc. (Some pager companies have sued, claiming the FCC
has levied an unlawful tax; this is before a federal appeals court now.)
Question is: should ISPs be subject to the taxes now applied to
"telecommunications services" -- which means higher prices for customers?
At least one FCC commissioner seems to think so.



The 1996 Telecommunications Act's definitions:

        `(41) INFORMATION SERVICE- The term `information service' means
            the offering of a capability for generating, acquiring,
            storing, transforming, processing, retrieving, utilizing, or
            making available information via telecommunications, and
            includes electronic publishing, but does not include any use
            of any such capability for the management, control, or
            operation of a telecommunications system or the management of
            a telecommunications service.

        `(48) TELECOMMUNICATIONS- The term `telecommunications' means the
            transmission, between or among points specified by the user,
            of information of the user's choosing, without change in the
            form or content of the information as sent and received.

        `(49) TELECOMMUNICATIONS CARRIER- The term `telecommunications
            carrier' means any provider of telecommunications services,
            except that such term does not include aggregators of
            telecommunications services (as defined in section 226). A
            telecommunications carrier shall be treated as a common
            carrier under this Act only to the extent that it is engaged
            in providing telecommunications services, except that the
            Commission shall determine whether the provision of fixed and
            mobile satellite service shall be treated as common carriage.

        `(51) TELECOMMUNICATIONS SERVICE- The term `telecommunications
            service' means the offering of telecommunications for a fee
            directly to the public, or to such classes of users as to be
            effectively available directly to the public, regardless of
            the facilities used.'.


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