The following text is copyright 1999 by Network World, permission is hearby given for reproduction, as long as attribution is given and this notice is included.

Real taxes for virtual phones?

by Scott Bradner

It does not look like much of my current phone bill would survive a transition to Internet-based telephony. Unless the regulators notice their revenue seeping away, Internet phones certainly do look economically attractive. Attractive enough that many users will quite willingly put up with poor quality, as they currently do with cellular phones, to save the money.

Inspired by a column in the May issue of Business Communications Review I decided to take a look at my phone bill to see what I am being charged for. The last bill from Bell Atlantic for the phone line I have for my fax machine totaled $32.59. (Well it actually totaled $58.37 because I forgot to pay the previous bill.) Of the $32.59 for the previous month's service $6.94 was for the basic Bell Atlantic service, $1.26 was for various federal and state taxes, $17.94 for mandated fees of one type or another, $2.11 for touch tone service and an unlisted number, and $2.74 for actual phone calls.

Parenthetically, I will say it seems quite strange that I have to pay extra to not have the phone listed and for touch tone dialing, which costs Bell Atlantic less to provide.

The mandated fees included a $9.91 access line charge, $6.07 for a federal line charge, $1.70 for an AT&T carrier line charge and $1.86 for the universal connectivity charge.

How many of these charges would I expect to see on a bill from an Internet-based telephone company? Not many. No fee for not listing, no touch tone fee, none of the mandated fees, and few of the taxes. Even if one assumed the charge for the calls and the basic service would not change, the result might be less than $10 -- one third of the current bill. But I'd expect that the base charge would be less, and the calls less except when the call was to a non-Internet phone.

Removal of the line charges would mean a loss of revenue for telephone companies, which would break my heart, and the state and federal governments, who might not like it. Their autonomic reaction will be to put real taxes on the virtual phones but it is not clear if those taxes could look anything like the ones we now have. I can run dozens of virtual phones over my one physical cable-based Internet connection. Will they try to put line charges on what I could do, and charge for the potential connections, rather than what I actually do? How can they find out what I actually do, I can change the protocol so that the packets do not look like telephone traffic. Might they have to stop treating voice as a cash cow? That may be wishful thinking on my part.

disclaimer: Wishful thinking is the main job of any educational institution, including Harvard, but the above wish is my own.