Back in 1996, it was still possible for telecom companies to split their service plans into a number of different revenue streams. Telecom companies were able to say, with total specificity, how much of their revenue came in from international calls, how much of their money arrived from beeper use, how much money they had coming in from local calls, and yes, how much end-user revenue they earned from interstate communication. Telecom companies could do this because these providers tended to charge based on specific usage. Each time you wanted to communicate with someone interstate you had to pay to do so, creating a firmly defined revenue stream that was easy to track, add up, and, yes, tax for the sake of bulking up the USF.

Nice Pricing Models = New Taxation Headaches

With the massive explosion of mobile devices fewer and fewer telecom providers continue to charge their customers based on usage. At least usage that’s as specifically defined as it was back in 1996. These days pricing tends to follow the model of flat-rate pricing, which basically states “a call is a call is a call is a call.”

Local calls and interstate calls now cost the same amount of money. And that’s to say nothing of the various other simplified payment plans that really mess with the idea of the USF’s tax plan. How can you accurately tax interstate communication if it’s included within an unlimited calling plan? How much of the cost of an unlimited calling plan’s price goes towards providing interstate communication?

We’re Not Going Back

Flat rate pricing plans aren’t going anywhere; we’re never going to go back to usage-based payment plans. Telecom providers have realized how much more predictably lucrative it is to charge a flat-rate fee. They’ve become addicted to the record profits they’ve been pulling in over the last decade. In the mobile world, flat-rate pricing plans are here to stay.

VoIP providers have taken note and almost exclusively offer flat-rate pricing plans now as well. It makes a little bit more logistical sense with VoIP. Unlike traditional telephony providers, VoIP providers use the same network (the Internet) to enable all of their communications. It doesn’t really matter whether you’re calling locally, nationally or internationally. Whether you’re sending a text message or talking inter-state, VoIP communication begins and ends as bits and bytes traveling across broadband. VoIP companies are just doing what comes naturally within the unique structure of their industry.

The USF Needs to Change its Revenue Model

Regardless of why different segments of the telecom industry utilize flat-rate pricing plans, the fact remains. These plans are fundamentally incompatible with the current strictures outlining how involuntary contributions flow into the USF. Fewer and fewer companies these days can tell you how much of their revenue comes in from interstate communication specifically. Thus fewer and fewer companies have any good idea how much money, exactly, they owe to the feds to help make the country a better-connected place to live.

These telecom players no longer see an objective way to determine these tax revenues. It means they have been determining them subjectively. And whenever tax revenues find themselves open to interpretation you better believe most companies will interpret the code in favor of paying as little money to the feds as possible.

Plain and simple- the USF needs to change its taxation guidelines to reflect the realities of modern telecom pricing plans. Until the government determines a new revenue stream to tax, one that can be measured objectively, the USF will find itself underfunded and unable to perform its important, but costly, mission.

Universal access to high-quality communication technology matters. It makes a difference when it comes to ensuring everyone receives the same opportunities as everyone else. With a little tweaking, the USF can continue to help ensure that access indefinitely. However, as it stands, it’s headed for a run of financial trouble in the coming years.

Leave a Comment