In the News

Published July 1, 2006

Treasury Kills Federal Phone Tax

The U.S. Treasury Department will end collection of the 3 percent excise tax on long-distance telephone calls beginning next month. The decision, announced in May by outgoing Treasury Secretary John Snow, ends a tax created in 1898 to fund the Spanish-American War effort.

Consumers and businesses will be eligible for refunds going back three years and will be able to claim them on their 2006 tax returns, using actual records or a standard refund that has yet to be determined. The tax generally was applied to landline and wireless bills, although some Voice over Internet Protocol (VoIP) companies had begun collecting the tax as well.

The advent of flat-rate, bundled local and long-distance calling plans complicated collection of the tax, which legally applied only to the long-distance portion of bills. Over the past several years, a number of large corporations have been winning court challenges to the tax. The latest victory came in October, when a district judge ordered the Internal Revenue Service to refund Hewlett-Packard $6.2 million, plus interest.

AG Wants ISPs to Retain Customer Data

The U.S. government is stepping up pressure on Internet service providers (ISPs) to retain records of customer online activity should they be needed for anti-terrorism prosecution, CNET reported in late May.

According to the article, Attorney General Albert Gonzales and FBI Director Robert Mueller privately met with executives at AOL, Comcast, Google, Microsoft, and Verizon, telling them they should retain data on customer billing, email addresses, instant messaging, and Internet telephone calling for at least two years. Most ISPs either don’t keep this information at all or routinely discard it unless it is germane to a billing dispute.

The private meetings are bound to heighten controversy about the federal government’s reliance on the telecommunications industry’s collection of private transactions as an enforcement tool. Until now, the Justice Department had asked only for ISP cooperation in cases of child pornography and online predation–crimes specific to the online world.

If data retention becomes viewed primarily as an anti-terrorism measure, CNET reported, recent legal and political spats could complicate the Justice Department’s efforts to make it a standard practice.

Verizon, AT&T, and BellSouth recently came under fire for allegedly turning over customer data to the National Security Agency, although there have been denials on both sides since USA Today broke the story in May. Earlier in the year, Google reached a compromise with the Justice Department over a request for data on Web searches conducted by Google users.

Poll Finds Opposition to Wireless Regulation

Seven of 10 New Yorkers say new state regulations on wireless services would raise rates, according to a poll from, a coalition of wireless industry trade associations, taxpayer advocates, and state-level policy groups. A similar number, 71 percent, said they believe regulations would make service worse or do nothing to improve it.

The poll of 800 wireless users in the Empire State comes as the New York Legislature weighs a sweeping new wireless consumer protection bill. The bill, which the consumer groups say would be the toughest in the nation, would require wireless service providers to do more to disclose fees, surcharges, and taxes to consumers and make it easier for consumers to cancel their contracts without penalty.

A similar bill was proposed in California last year but was shelved over concerns that it micromanaged service providers and retailers. The California bill, for instance, mandated the size, color, and typeface that could be used on wireless carrier bills.

The New York poll, conducted in May by McLaughlin & Associates and Penn, Schoen & Berland Associates, found 56 percent of users oppose new regulations, compared to 24 percent who supported them. The survey also found 84 percent were satisfied with their cell phone service.

Steven Titch ([email protected]) is senior fellow for IT and telecom policy and managing editor of IT&T News.