Verizon's Policy Chief Urges Senate to Reject Taxes on Internet Access and Broadband-Based Services

WASHINGTON - Verizon senior public policy executive Tom Tauke today urged the U.S. Senate to end unfair tax treatment of high-speed broadband consumers by approving a key piece of legislation that would permanently ban taxation of Internet access and services and end discriminatory policies that tax different broadband providers at different rates.

The bill, known as the Internet Tax Non-Discrimination Act (S. 150), is expected to come up for a vote next week.

"At a time when we are focused on trying to reduce the digital divide and increase Internet usage, why would we want to do anything that will make the Internet experience more expensive for the average consumer?" Tauke, senior vice president of public policy and external affairs, asked in a speech this morning at the International Internet Learning Association at the Ronald Reagan building in Washington.

Tauke warned that without a permanent moratorium on taxation of all types of Internet access, it would be open season for tax collectors.

"Jurisdictions could devise taxes on the number of e-mails you receive, the number of bytes you use, or the amount of bandwidth you purchase," said Tauke. "Tax rates would vary from state to state, location to location, and product to product. All of this adds uncertainty to our business-planning process, and if the disparity between cable and telcos is allowed to continue, investment by telecommunications companies will be less attractive."

Tauke explained that digital subscriber line (DSL) service is categorized as a "telecommunications" service, subject to state and local taxes and contributions to the Universal Service Fund, while consumers using cable-modem service, which is categorized as an "information" service, pay neither. In some states, up to $6 of the $30 to $35 consumers spend each month for DSL is going towards taxes.

"That's a pretty significant chunk of change that thwarts both investment and the consumer demand for these services," said Tauke, who expressed concern that additional taxes on DSL access would stifle competition, narrow consumer choice, and put the service out of reach of many consumers.

The issue of state and local taxation of Internet access will be deliberated next week in the Senate. Two different bills are in play. S. 150 would place a permanent ban on taxation of Internet access and services and broaden the definition to include DSL and wireless platforms in addition to cable-modem service. S. 2084 calls for a two-year extension of a now-expired moratorium on state and local taxation of cable-modem service, but consumers using DSL or wireless platforms would continue to pay state and local taxes.

Congress passed a temporary moratorium in 1998, with language restricted to cable-modem service because DSL was just developing at the time. Last fall, the House of Representatives passed a bill making the tax ban permanent and including the newer technology platforms.

"The deployment of broadband facilities is key to improved productivity and continued economic growth," Tauke said. "Experience tells us that this consumer market is very price- sensitive. Imposing taxes on Internet access simply prices some consumers out of the market."

Tauke also urged regulators to take a broad view on broadband and follow four simple rules to foster an environment that will encourage widespread broadband deployment:

  • No economic regulation of networks
  • No economic regulation of services
  • No special taxes on broadband facilities and services (like we have on telephony)
  • And, most important, equivalent regulation on all broadband platforms

"In cases where regulation is necessary, it should be implemented with diligence, dispatch and determination," said Tauke.

Verizon Communications

A Fortune 20 company, Verizon Communications (NYSE:VZ) is one of the world's leading providers of communications services, with approximately $68 billion in annual revenues. Verizon companies are the largest providers of wireline and wireless communications in the United States. Verizon is also the largest directory publisher in the world, as measured by directory titles and circulation. Verizon's international presence includes wireline and wireless communications operations and investments, primarily in the Americas and Europe. For more information, visit www.verizon.com.