Minnesota Government Getting Bigger: Vonage fights plan to Tax Internet Communication

ZDNet News ^ | August 21, 2003, 10:52 AM PT | Ben Charny

[ThinkFreedom]

Vonage said Thursday it intends to fight the first-ever decision by a U.S. state to regulate companies that provide Internet-based phone services.

Minnesota's Public Utilities Commission unanimously decided two weeks ago that the New Jersey-based voice over IP (VoIP) provider is subject to the rules and regulations that cover traditional phone companies.

The state has ordered Vonage to get the proper telephone company business licenses and to immediately pay fees to the state's Department of Administration to support 911 services, according to a representative for the Minnesota PUC.

Bill Wilhelm, an attorney for Vonage, called the decision into question Thursday, pointing out that the company's calls travel over the Internet rather than over a traditional phone network.

"We believe the Minnesota PUC is incorrect in its findings," he said.

Vonage, which lays claim to 40,000 subscribers, is exploring all its options, he said--which include suing the Minnesota PUC in a state or federal court.

Minnesota is the first U.S. state to attempt to regulate VoIP, according to Vonage. VoIP is a new breed of cheaper phone service that lets people place calls through the Internet, avoiding telephone companies' local and long-distance networks.

The Minnesota PUC decision could have a widespread impact. While it only targets Vonage, it has set a precedent that regulators from all 50 U.S. states can use with regard to other VoIP providers. Michigan authorities have said they are considering a similar move, for instance.

The ruling could also help sway the Federal Communications Commission (FCC), which is in the process of deciding whether it considers VoIP a traditional phone service.

Such VoIP regulations are backed by major telephone companies Verizon Communications, BellSouth and Qwest Communications International. These carriers have come under competitive pressure from Vonage and major cable providers, which sell the lion's share of the 2.3 million VoIP calling plans in the United States.

Vonage was given 30 days from the publication of the Minnesota PUC order to comply with the state's phone company regulations--which should come in five to 10 days.

[ThinkFreedom]

If the world needed another example of government bureaucracy taxing innovation, this is it. Companies like Vonage provide competition to the old fixed line monopolies, by offering consumers voice calls over the internet. If Minnesota's PUC gets its way, it could set up a slippery slope for all internet communication, including MSN / AOL / ICQ / Jabber, and programs of their ilk. While, at the moment, services like Vonage's have only $1 tax, if this passes it will mean a significant, back door tax increase on these services. Don't believe the line that said tax increases will be used to fund schools and hospitals; most of it will go to fund more government bureaucracy, to further attack innovation.

For Minnesotans, the likely outcome is that competition to the fixed line monopolies will cease offering their services in the state, meaning a less competitive telephone market.

[zarf]

I wouldn't worry about Vonage. The founder of the company, Jeffery Citron made out like a bandit at Datek, even after his supposed punishment by the SEC for his shady activities on Wall Street.

The customer will either pay the government taxes through higher fees or the customer will line the pockets of shady CEO's like Citron.

[ThinkFreedom]

My concern is not about Vonage, the company, businesses come, and businesses go. My concern is with bureaucracies, like the Minnesota PUC, using outdated regulation and taxation to kill innovation.

The regulations they are trying to apply were designed for fixed line phone companies. These companies own both the physical phone lines, and the phone service. The new VoIP (voice over IP) companies provide a voice service over the internet, and in many cases (yeah, companies like Quest are an exception) don't own fixed line networks; and thus the regulations that the PUC are trying to apply are outdated.

How, exactly, do taxpayers benefit from this, aside from keeping a bunch of eliminatable bureaucrats in jobs? At least, with the baby bells, an argument could be made about keeping monopolies in line. This new regulation, by saddling innovation in red tape, acts to protect these outdated monopolies at the expence of more competition. Is that good for consumers? For taxpayers?

And, more than that, this is a grab for cash. Another revenue stream for bureaucracy to get hooked on. Unless action is taken against it now, how long before government bureaucracies benevolently decide to cut it themselves?

[Those_Crazy_Liberals]

You've stated this very well. I completely agree.

[Atchafalaya]

For the children.

[July 4th]

Minnesota is apparently pissed that Vonage's bills don't look like a shopping list. If one were to look at their regular phone service bill, they'd see about 10 different taxes. It really gets me every time I look at mine...

[ThinkFreedom]

If anyone here wants to Freep the PUC:

Website: http://www.puc.state.mn.us/
E-mail: consumer.puc@state.mn.us

Burl W. Haar
Executive Secretary (since 1993)
E-mail: Burl.Haar@state.mn.us
Phone: (651) 296-7526
Secretary: Mary Swoboda
Phone: (651) 297-4788
E-mail mary.swoboda@state.mn.us
Phone: (651) 297-4788

Catherine Hennessey
E-mail: catherine.hennessey@state.ms.us
Phone: (651) 296-7940

LeRoy Koppendrayer
Chairman
651/296-0621
Republican
E-mail: LeRoy.Koppendrayer@state.mn.us
Phone: (651) 296-0621
Secretary: Ronnie Slager
Phone: (651) 297-4993
E-mail: ronnie.slager@state.mn.us

Gregory Scott
Commissioner
651/296-0621
Independent
E-mail: Gregory.Scott@state.mn.us
Phone: (651) 296-0621
Secretary: Mani Heu
E-mail: mani.heu@state.mn.us
Phone: (651) 296-6902

Phyllis Reha
Commissioner
651/296-0621
Democrat
E-mail: Phyllis.Reha@state.mn.us
Phone: (651) 296-0621

R. Marshall Johnson
Commissioner
651/296-0621
Independent
E-mail: Marshall.Johnson@state.mn.us
Phone: (651) 296-0621

http://www.puc.state.mn.us/about/contact.htm

[Those_Crazy_Liberals]

Thanks! Done!

[ClintonBeGone]

The customer will either pay the government taxes through higher fees or the customer will line the pockets of shady CEO's like Citron.

Who cares if he makes money? If you're saving cash while he's making a little too, what's the rub?