Proposed "Voice Over Internet Protocol Regulatory Freedom Act" Threatens To Strip States And Localities Of Billions Of Dollars In Annual Tax Revenues

Publication Date: July 2004

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Michael Mazerov

Research Area: Media, telecommunications, and information

Keywords: State budgets; Economic projections; Information technology; Telecommunications

Type: Report

Abstract:

The Senate Commerce Committee is scheduled to mark up S. 2281, the “VOIP Regulatory Freedom Act of 2004” on July 22. Sponsored by Senator John Sununu, S. 2281 would limit the application of existing federal and state telecommunications regulations to new “voice over Internet protocol” (VOIP) technologies. In a variety of ways, these technologies use the Internet itself or the Internet’s underlying “language” to carry telephone calls. As is the case with e-mail and World Wide Web “pages,” VOIP breaks voice phone calls into small digital “packets” that are transmitted over various public and private telecommunications networks and then reassembled into voice at the receiving end.

S. 2281 does not address only regulatory issues, however. Section 7 of the proposed legislation provides that “No state or political subdivision [thereof] shall impose any tax, fee, surcharge, or other charge for the purpose of generating revenues for governmental purposes on the offering or provision of a VOIP application.” This is a major problem because it is widely anticipated that all or nearly all voice communication eventually will be transmitted using Internet protocol-based technologies.