Home / Business VoIP / The VoIP Market’s Gotten a Lot Tougher for the Little Guy (Pt 1)

The VoIP Market’s Gotten a Lot Tougher for the Little Guy (Pt 1)

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The government has never really known what to do with VoIP.

On the one hand, VoIP is a telephony service, and as such some people argue it should be regulated and taxed in the same vein as other telephony services (such as traditional PTSN networks).

On the other hand, VoIP is an online service, a platform that isn’t so different from any other online application you might utilize, and one that should be open to new, small service providers. Seen from this angle, the notion of taxing and regulating VoIP has been a thorny issue, to say the least.

Over the years, as VoIP has increased and improved the services it’s offered and gradually transformed further and further into a full-service telephony platform, VoIP has seen increasing regulatory and tax burdens placed upon it. These burdens have dramatically changed the VoIP landscape- especially for small VoIP providers and organizations looking to become VoIP providers.

Back in the Day

In the early days of VoIP, back in 2002/2003, just about anyone could make themselves a VoIP provider with little to no fuss. If you had, or if you acquired, an open source PBX platform you could develop your own hosted solution and start selling your services in no time flat. In fact, back in those days there wasn’t much stopping you from getting your platform together and launching your VoIP service over the course of an afternoon.

These days the technology involved in VoIP is better developed, more powerful, and easier to access. But despite the fact the technological boundaries to opening a VoIP service have dropped even further, it’s now much harder to open a VoIP service than ever before, and that’s solely due to the increase in regulatory and tax burdens.

Back in 2002/2003 there weren’t many regulations placed on VoIP services, and service providers weren’t taxed in the same way they’re taxed today. VoIP was still primarily considered an online service that the government kept their hands off of, due to a combination of free-speech concerns, lack of interest, and general confusion and disagreement about how to treat the technology.

Now that the government seems to have decided that VoIP is a telephony technology first, and an online service second, it’s much harder for a new service provider to enter the market. And even beyond the barriers to entry having risen over the years, it’s also becoming increasingly difficult for existing small VoIP service providers who want to stay in the game.

A Good Thing or a Bad Thing?

There are pros and cons to this change in the regulatory and tax environment. As VoIP is increasingly adopted and moves closer to one day overtaking PTSN phone services, it’s probably a good thing that VoIP service providers need to meet certain quality standards, need to offer access to emergency calling services, and need to help contribute to universal access to telephony services across the country.

Unfortunately, the financial and regulatory burdens placed on VoIP providers can be too much for new service providers to take on. And what’s more, these burdens can be too much for existing small service providers to adopt. While there are certainly democratic elements to these taxes and regulations, larger service providers are often better equipped (and funded) to shoulder these burdens than smaller service providers.

Even though the larger service providers have been fighting tooth-and-nail to keep the VoIP industry as de-regulated as possible, it’s arguable that it’s smaller service providers who find themselves more hurt by the movement to treat VoIP services like PTSN services.

Does that mean VoIP shouldn’t be taxed or regulated? Not at all, but it does mean there are more concerns at play here other than how to classify this growing telephony technology.

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