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Reason Foundation

Will the pols let you stay home?

Ted Balaker
May 24, 2004, 5:43pm

Here's an interesting interview with Michael Gallagher, the Bush administration's principal advisor on telecommunications policy. Gallagher heads the Commerce Department's National Telecommunications and Information Administration, an agency charged with creating jobs in the telecommunications industry, encouraging competition, spurring innovation and helping improve the economy. Some of the best bits: Q: Will voice over Internet protocol technology become a replacement [to wireless]? A: Voice over Internet protocol is a very powerful offering. I've had the privilege to see most companies' platforms and what their intentions are with their customer bases. But you look at what this is. This is the inexorable march of IP in countering voice telephony. It's already cut through text data – it's called e-mail, it's called word processing – and it's cut through photographs. It's cut right through music, and we've seen what it has done to that industry. Well, now it's encountering voice telephony. And why do we care? Because we have a hundred years of regulation and taxation that we've built up around voice telephony, and here comes IP right through it. What are we going to do about it? That's the question that goes to policymakers. The fact is you have to have broadband to do it. ..... Q: Cities would lose a lot of tax revenue if residents turn to VOIP. Should there be a way to replace those taxes, or should local government be able to offer the services? A: You have to approach the notion of government competition very carefully. It's not the traditional American way. Where we already have a competitive market and it's serving the needs of consumers, the government doesn't need to get in there as yet another provider, yet another competitor. It doesn't make a lot of sense. Now about taxation, there's an absolute potential impact. And the arbitrage can be pretty significant. If you go to the Council on State Taxation website, it gives you, state by state, the breakdown of what the taxes are on consumers' telephone bills. And it turns out that telecommunications is, I believe, the third-most-taxed industry behind alcohol and tobacco. So there is a burden on policymakers at all levels – federal, state and local – to make sure we don't make VOIP a gray market, that we make it a foundational piece of our economy. We need to rationalize those tax burdens in a way. That's what legislatures are for. Getting politicians to leave telecom alone will certainly be quite a chore. Progress in this area could potentially have quite a big impact on our daily commutes. The more, for instance, broadband advances, the more people will be able to work from home. The problem is there are lots of problems and they're sort of tucked away in policy areas that aren't always obvious. To truly realize the full promise of telecommuting we'll certainly need to free technology, but we'll also need to reform other areas, like the tax code and land use policies, that are currently unfriendly to stay-at-home workers.

Ted Balaker is Producer


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