Fergie's Tech Blog

Federal Appeals Court Weighs Internet Phone Taxes

Anne Broache writes on C|Net News:

A federal appeals court panel on Friday heard a challenge against taxes that were extended last year to some Internet phone providers, but the judges did not clearly signal how they might rule.

Some members of the three-judge panel at the U.S. District of Columbia Circuit Court suggested the Federal Communications Commission had not fully justified certain requirements it imposed in an order last June. The panel appeared less swayed, however, by arguments that the FCC had overstepped its authority in setting the mandate.

At issue is a unanimous FCC decision to require all voice over Internet Protocol (VoIP) services that connect to the public-switched telephone network--as opposed to using peer-to-peer technology, such as Skype--to contribute a percentage of their long-distance revenues to the Universal Service Fund. The multibillion dollar pool of money subsidizes telephone service in rural and low-income areas, certain health care providers, and schools and libraries. Previously, specific contribution requirements existed only for wireless and wireline telephone carriers, leaving it less clear where VoIP fit in.

If the FCC's rules are upheld, Americans could continue to see taxes levied on their VoIP bills--and at a steeper rate than on their cell phone or wireline bills. That's a situation the relatively young VoIP industry fears will drive away business.

posted by Fergie @ 2/09/2007 03:30:00 PM