Hit & Run

Rearguard Action Against Telecom Revolutions

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The IRS and the Treasury Department are seeking comments on a possible plan to impose an existing 3 percent federal excise tax (whose roots lie in an "emergency" Spanish-American War measure) on voice over Internet protocol (VoIP) telecommunications; frequent Reason contributor Declan McCullagh has the whole story. An excerpt:

The IRS notice opens up another, unexpected front in a burgeoning battle over the regulatory status of VoIP, which already has pitted state regulators against the Federal Communications Commission and has led the FBI to propose that wiretapping laws designed for the traditional phone network be extended to Internet voice communications. About 2.8 million people make phone calls over their broadband connection, a figure that includes about 2.2 million cable customers using circuit-switched technology. Roughly 600,000 people of the 2.8 million total use VoIP. Corporations are gravitating toward VoIP even faster than consumers, with as many as one in 10 business calls that once traveled over the traditional voice network taking place completely over the Internet.

Analysts expect significant growth in the sector for the next five years, especially now that Cox Communications and Comcast are committing more of their budgets to building up their VoIP services.

Those predictions worry state regulators, who say they fear losing tens of millions of dollars--from fees and subsidies provided by telephone companies--if more calls flow away from traditional phone networks and onto the Internet.

The official announcement from IRS and Treasury here.