Byliner: Sununu on Taxing New Internet Voice Communication Technology

[Dave Farber <dave () farber net>]

Byliner: Sununu on Taxing New Internet Voice Communication Technology

(Op-ed column by Republican senator for New Hampshire) (810)

(This column by Senator John Sununu, Republican of New Hampshire, was
published in the Wall Street Journal February 24 and is in the public
domain. No republication restrictions.)

(begin byliner)

Voice Over Internet Protocol (VOIP) of the People
By John Sununu

Should local governments have an inherent right to regulate and tax any
communication between two individuals that utilizes a human voice?  Should
we discourage the use of broadband networks for fast, reliable and cheap
communications simply because a new technology doesn't fit neatly into an
existing regulatory slot?  Should regulations discriminate between two
data files simply because one carries instant messaging and the other
someone's voice?

Until quite recently, these questions were relegated to circles of
academics, techies or regulation junkies (yes, they do exist) speculating
about how the Internet might affect entrenched telephony providers.
Today, these issues have become practical, substantive questions that will
make or break the implementation of Voice Over Internet Protocol (VOIP) --
a new technology that utilizes the packet-based method of Internet
communications and, in some instances, the architecture of the Internet to
bring new voice applications to consumers.  VOIP generates significant
network efficiencies, reduces capital expenditures and produces
considerable cost savings.  Moreover, the innovative features and robust
functions underscore that VOIP is not just a fancy phone network and must
not be treated as such.

The debate has just begun, but the wagons are already being circled by
those determined to protect a regulatory scheme based on the copper wire
telephone system invented by Alexander Graham Bell.  Our goal should be to
allow this new technology to evolve, which will dramatically reduce the
cost of voice communication to a level commensurate with that of any other
bit of data transmitted over the Internet.  To ensure that a misguided
approach does not develop and to provide certainty to the marketplace, I
will introduce VOIP legislation in the coming weeks to establish several
key protections for this new technology.

-- First, my legislation will treat VOIP as an information service.  The
broadband cable, DSL or high-speed line you are using does not care
whether data packaged using the Internet Protocol is a spread sheet,
e-mail, instant message or voice traffic.  Recognizing this simple fact
helps establish a level playing field for all forms of data in order to
fit a regulatory system designed five, 10, 20, 30, 50 or 100 years ago.
Conversely, there exists no sound basis for discriminating among different
types of data.  Would anyone argue that taxes for e-mail should be
different from those imposed for transmitting financial spreadsheets or
power point presentations?  The same principle should extend to an
Internet voice call as well.

-- Second, we should establish federal jurisdiction over VOIP
applications.  Internet packet switching routes data across a global
network requiring a national framework and treatment.  Allowing thousands
of state and local regulators to wrap their tentacles around VOIP will
place costly and unnecessary burdens on a growing interstate
communications network.  What would happen to e-mail or instant messaging
if states imposed regulations on those applications?  The role of the
federal government should be to establish a clear and efficient regulatory
structure that will not discourage investment in the development of these
new systems.

-- Third, my bill will protect this data service from taxation.  The
Internet-access tax-moratorium debate has highlighted the need to prevent
tax commissioners from imposing oppressive tax treatment for
telecommunication on VOIP.  Those who believe that e-mail should be taxed
will disagree on principle.  All others place themselves in the awkward
position of trying to differentiate different sets of ones and zeros in
binary code in order to protect tax collections or corporate revenues.
Both attempts are signs of short-sightedness -- one on the part of big
government, the other on the part of big business.

Since our nation's founding, legislators have justified regulations on the
basis that they serve the public interest.  A regulatory framework may be
advanced to improve public safety, inform consumers or protect public
health.  In fact, public-interest concerns such as enhanced 911,
disability access, and interaction with law enforcement will be among
those considered by comprehensive legislation.  But extending these
obligations must be done with an understanding of the unique architecture
and technical aspects of this new application.  Unfortunately, within the
developing VOIP debate, this governing principle of public interest has
been turned on its head.  The defenders of the existing regulatory scheme
seek to protect the existing tax, distribution of revenues, or other
vested interests, at the expense of sound public policy.

If there is one thing we have learned about the information economy, it is
that innovation circumvents a flawed regulatory regime.  Let's get this
one right from the start.

(Mr. Sununu is a Republican senator for New Hampshire.)

(end byliner)

(Distributed by the Bureau of International Information Programs, U.S.
Department of State. Web site: http://usinfo.state.gov)
NNNN 

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