Communications vs Telephony

There’s an interesting case brewing right now between voice-over-IP (VoIP) services that provide something like telephony without necessarily using phone service, and state regulators that want to tax these services.

There’s a fundamental old-world/new-world divide here.

In the old world, if you wanted to communicate, you got a phone and talked with people. In the new world, if you want to communicate, you can get some form of Internet access–which could be over a plain-old phone line, a DSL line (which almost invariably comes with phone service attached), cable modem, or the wifi signal at your neighborhood coffee shop (if you want to get exotic, there are more options)–and then you use some kind of communications service (AKA the application layer)–email, ICQ, web-based forums, and now, VoIP. So where the service and the access used to be tied together and inherent in the technology, today, voice is just another service on a layer that is more or less independent, on top of the medium transporting it.

The old-world regulatory regime can’t keep up with that, so it needs to change. The proposed taxes on VoIP are already somewhat arbitrary in that they really don’t cover all VoIP applications. Anyone can download a video chat program (like iChat AV). This gives service that’s an awful lot like the services that regulators want to tax, but is completely outside their control. Regulators are only concerned with services that act like general-purpose telephony, and can interact with the public phone network. In the short term, one might argue that it’s OK to treat services that act as gateways between the traditional phone network and the Internet as telephony providers; in the long term, that won’t work, because more and more communications will move onto the Internet.

Some of those taxes are specifically for the common good–the charge for 911 service, taxes to subsidize phones for poor people and provide Internet access to libraries. Others just go into the pot. But let’s assume that they’re all necessary. How would they get divvied up under a new-world regulatory regime? By taxing the VoIP at the application layer? This is a huge can of worms that I would hate to open up, as it would mandate spyware on your computer to keep track of whether you use it for voice services. This would be even worse than the broadcast flag. Taxing the physical layer? This strikes me as closer to what we have now, and less problematic in some ways, but moreso in others. Open wifi nodes are already prevalent, and are becoming moreso. In fact, some cities are installing them in public places for public access, making it easy for people nearby to get a free ride. This is for the good, but if the node’s connection carries all the tax, it will tend to increase the number of free riders and decrease the number of nodes, which is bad.

I really don’t have the answers to this, but it’s an interesting question. One thing I am sure of is that we need to recognize the application/connection separation and allow VoIP to grow.