At the local level, taxes on wireless services may be referred to as franchise fees, utility fees, or right-of-way fees. To collect money, local governments often attempt to force a modern technology — wireless service — to comply with tax statutes that belong to another age. One jurisdiction in Missouri is attempting to levy a local business privilege tax on wireless consumers, based on ordinances that deal with trimming trees and putting up telephone poles—something that the wireless industry doesn’t need to do.
As wireless services grow and landline services decrease, these jurisdictions are seeing their existing source of revenue— discriminatory taxes on landline companies—go away. "Local governments are challenged," says Canning. "They are fighting very hard what's coming with convergence and technological change. They don't want any change in the regulations, taxes, or fee status that apply to the wireless industry, because under the old utility system they were provided with a lot of money.” The governments are responding to changes by trying to impose outdated monopoly-era fee structures on a competitive industry.
“In the past, it was easy for state and local governments to assess these taxes, because there was just one company providing service, and that company didn’t have to worry about passing the cost on to the consumer; there were no other providers,” adds Neal Osten, federal affairs counsel for the National Conference of State Legislatures (NCSL).
“But deregulation helped to enhance competition and those taxes started to become a problem. As new companies form and new ways of communication become an option, people have choices about telephone service and not paying taxes — with VOIP, for example. What’s happened is that taxes have become a competitive disadvantage for landline, wireless, and cable companies that are providing services.”
Wireless taxes hurt consumers
Excessive wireless taxes are regressive, hitting the most vulnerable customers the hardest. “Governments can’t seem to get rid of the ancient mindset that telecom services are some kind of luxury. But what was deemed a luxury just five years ago is now very common even to working class families,” says Pete Sepp, Vice-President of Communications, National Taxpayers Union. “With wireless communication becoming cheaper than landlines to maintain and own under certain circumstances, a telecom consumer is likely to find wireless more attractive than landline from the most basic value standpoint. Governments know this, which is why they’re working so hard to find ways to trap wireless communications in some kind of tax web.”
The money that people spend on taxes is money they don’t use to buy services, which can ultimately slow technological development. “As we are able to sell more services to consumers, those resources are reinvested in newer, high speed, broadband networks and in new innovative services,” Canning says. “The impact of these taxes means that we’re not going to see the same innovation and wireless broadband deployment and capacity that legislators want to see.”
