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New York State Classifies Vonage As Phone Company
securitas writes "CNet's Evan Hansen reports that on Wednesday, the New York State Public Service Commission 'ruled that Vonage Holdings is a telephone company and thus subject to state regulation.' The decision is seen as a blow against the emerging voice over Internet protocol (VoIP) company and the industry in general."
Sounds like a bad call to me!
Does this state regulation mean the load of taxes thrown on it. The 911 tax I can't knock but all the others.
Evolution or ID?
Looks like another stifled and regulated monopoly to me. So much for innovation in this industry. This looks like a bad case precedent.
So, I use Vonage (and love it, btw) in New York State. And I have never known New York State to not charge a tax on something that it could. So, what kinds of extra taxes will I have to pay now?
If the taxes are large, then it is starting to look like I should just go back to having a cell phone again.
It does have to connect to a real telephone exchange SOMEWHERE... If it was internet to internet telephony only, then I would be against this, but considering that it has to be able to send/recieve calls to other telcos, it should be considered a Telco itself, and taxed/regulated accordingly... Certainly vonage users should have to pay the 911 taxes. This is one of the few taxes in our society that actually pays for a service that is used directly.
I hate taxes (in general) as much as the next telephone user, I'm not saying they're fair-- but as long as they are there, customers should be taxed equally.
Because of the internets coverage every state could regualte every VoIP company (in theory). I wouldn't be like a local phone company that has regions. Thanks to the internet they have a huge encompasing area they can reach which could lead to all states regulating it.
If each state sets down different regulations that could lead to a logistics nightmare.
Evolution or ID?
I'd imagine the taxes will be quite large; the state isn't going to let Vonage come in and undersell the market. If this caught on tax-free, they'd be expected to get a significant portion of the market...now who knows
If they are going to regulate companies that develop VOIP applications it will be interesting to see what happens with OS projects.
At the moment its only going to be 'minor regulations', but when it takes off and the "potential tax losses" start getting serious will we see all these companies/ projects move offshore.
Certainly not much could stop it if people want to use it.
You can't expect to wield supreme executive power, just because some watery tart threw a sword at you
Hell hath no fury like government that thinks it's not getting it's "cut".
This is an attitude of our government that frankly, you and I shouldn't put up with, this thinking that government is entitled to tax EVERYTHING.
Corporatism != Free Market
I thought Oregon or California tried this and they lost the case! Moreover, the FCC along with Congress wrote legislation to prevent them from being regulated and taxed, thus I'd think anything NY state does would automatically be void too! I see a supreme court case in the works here to settle it once and for all. Most of NY state is the old GTE (now Verizon) phone company and the company stands to lose alot of jobs, along with state revenue.
Is Vonage a phone company? First, lets look up the meaning of telephone. Telephone: Noun, An instrument that converts voice and other sound signals into a form that can be transmitted to remote locations and that receives and reconverts waves into sound signals. (Dictionary.com) So, by this definition the service that Vonage was offering was a telephone service. However, like practically all else, this is open to debate. So go debate.
HAH! I just wasted a second of your life making you read this, but I wasted a minute of mine thinking it up. DAMN.
The lesson here, especially to investors, is: "Don't try to provide innovative service in a heavily regulated industry." All that will happen is you'll blow a lot of money to get your business off the ground, only to be slapped down by a regulatory environment that, intentionally (through corruption) or not (through the law of unforeseen consequences), effectively acts as a defender of the status quo: the behemoth government-protected monopolies who've already learned the lesson.
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"only minimal regulations to ensure that it does not interfere with the rapid, widespread deployment of new technologies."
Riiiight. Because when you hand a new area of legislation to a bunch of bureaucrats the last thing on their minds is interfering.
Watch this space for a long list of restrictive and unneccesary regulations being pushed through by people who haven't suddenly become the phone companies best friends, oh no.
Hmmm...
1) Spot a new area of technology that threatens entrenched interests.
2) Start to legislate on it.
3) Let it be known your decision could be swayed either way.
4) PROFIT!!!
'Don't worry' said the trees when they saw the axe coming, 'The handle is one of us.'
This may be the deathknell for most small startups in the VoIP sector. Only the megaconglomerates (AT&T, Sprint, Verizon, SBC) will be able to compete in this kind of arena.
Very unfortunate. I had hoped to jump onboard the VoIP bandwagon in the near future (once my area code is available), but the cost benefit could be going out the window.
Eric Sarjeant
eric[@]sarjeant.com
New York State Public Service Commission said, "...saying that it nevertheless hoped to apply "only minimal regulations to ensure that it does not interfere with the rapid, widespread deployment of new technologies."
When was the last time a Government Agency applied "only minimal regulations" to anything? The tendency of bureaucracy, once involved in something, is to strengthen their involvement in that thing.
The incumbent telecoms companies ought to be really worried by VoIP. Right now they can get a slice of the action providing someone is trying to make a call to a legacy phone, by if its VoIP to VoIP they dont stand a chance.
Imagine, free unlimited and unrestricted (open source, of course) telephone services worldwide. Just like email. It will happen and there's nothing they can do about it.
And cell phones will be replaced by WiFi phones, with the gentle propagation of free WiFi hot spots in Cafes etc who's going to need to pay for a cell phone?
80N
Did we not expect this to come from a state so desperate for cash that on the tax forms this year you are required to report purchases over the internet? This is so that while you didn't pay sales tax up front, they will get it somehow. They even talked about requiring people to report inter-county purchases. The NY state legislature never met a dollar they couldn't spend, although I highly doubt NY is alone in this arena. I need to move to New Hampshire.
Okay, so most of us agree that this is a bad thing- it places more regulation on the Internet and protocals (taxes are just one step, wiretapping, etc. are of course going to follow and be required in all VOIP protocals (yes we know the reality is something else, nonetheless this is what I fear will happen).
But this does bring up an interesting point. Phone companies are regulated in what they are and aren't allowed to do with the phone conversations. They can't, for example, monitor your calls for marketing ala Gmail "Oh, you asked your wife to bring home some milk- well there's a deal at the local Megamart".
So can we as consumers now require that if VOIP providers are telephone companies, that ISPs be regulated in how they can and can't monitor us, and stop practices like purposefully slowing down connections from rivals? (Time Warner Cable vs Disney.com, etc.)
I would rather none of this existed, but maybe we can force the legal arm to swing in our favor as consumers.
By doing this, they are technically taxing Internet traffic. Right now Vonage adds on taxes for regulatory fees for the Phone number, but by doing this, what prevents New York from saying IM's or email's should be taxed as long distance communication?
It's also a government sponsored monopoly - not a multi-vendor competitive market. You can't pick your water company.
Price controls are warranted on government-created monopolies - not in the free market.
Given the differences in technology between Vonage, and the traditional telco, and some of the items in the article, it seems that there's going to be different standards applied to the VoIP company, which is a good thing.
As the traditional telcos move from the traditional circut switched networks of current phone systems to a more packet switched network, there needs to be a way for the regulatory agencies to keep up with the changes, and ensure that necessary services (e.g. 911) and quality are maintainted.
In the long run, this will probably be seen as a good move, since they're actually trying to keep up with changes in technology, rather than waiting to get run over by it.
Consitering that Time Warner just launched it's VoIP service in the past month. I have to wonder if they are pulling the strings in order to wipe out it's only signifigant competition in this area. TW's prices are ( of course ) much higher and provide fewer services than Vongae does.
Personally I hope this does not signal an end to their business model. I have had Vonage service for 6 months and I could not be more pleased. Thier billing and reporting is awesome. I can actually log into their site to view all incoming and outgoing calls. I can download my voicemail to a wave file. Meaning I can check it anywhere there is a computer with internet access and a sound card. But here is the real shocker. I had a problem sending faxes through their system. Called them up. Had a short wait time ~30 Seconds. They had my problem fixed within 5 minutes. Not only that but they actually asked about what hardware and software I was using to add it to their knowledge base. I was floored. Try having that type of service from Southwestern HELL. Not to mention saving $30.00 a month and having way more features. And the voice quality is excellent.
Yeah, this is what generally happens with government regulations. What was originally set up to keep a monopoly from exploiting the people eventually becomes a tool of that monopoly. This is exactly like how the railroads used the Interstate Commerce Commission to repress the trucking industry for decades on end. Bah!
"The question of whether a computer can think is no more interesting than that of whether a submarine can swim" -EWD
Well, since with Vonage, you can get a number in any exchange, If you lived in NY and they tried to levy taxes on vonage, get a NJ or CT phone number as your primary number and switch your current phone number to a secondary number that others can call you on, but your outgoing calls will never originate from.
On the other hand, I am pissed that a friend who switched to vonage on my recommendation has been paying for two accounts for six months. It seems that not only does one company own the phone line to your house, another the phone service, but another owns the phone number. They want to keep their original number, but company that give them service and the one that owns line aren't playing well together and they can't get the switch done. Vonage has been somewhat cool in giving them free service, but they have had to make a ton of calls to vonage to get this done. A bit of regulation in this case would not be too bad... In my state (PA) the state regulation board won't help.
So, NY people, pick a new area code. Voice over IP is completely illegal in Qatar, but there sure are people who use it over there, they just don't call the government regulation board when they have problems with their provider.
One of the arguments for regulating telco service is that it's effectively a natural monopoly. Barring any bullshit from broadband providers, VoIP is not a monopoly because the barrier to entry doesn't include tearing up the country's infrastructure.
Give a man a fish, he'll eat for a day, but teach a man to phish...
Great.. Now my packet8 phone line is going to be taxed too?!?! 20 bux a month so so sweet.
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Yes,
Free speech means you cannot be prohibited from speaking, not that you cannot be charged(monetarily or criminally) for your speech.
Food not Bombs is a nice platitude but it breaks down when you notice that the Bombees are usually well fed
Then it must be a telephone!
Who cares what technology it uses? If I can pick up the handset, dial a number, and expect a recipient on the other end to answer, then the state has every right (and obligation) to deal with it like any other telephone service.
If this were not the case, then cellular telephones would also be exempt from taxes.
Should that be regulated too?
Yes. There is a cry for regulation and legislation. Just only think about spam.
and on the other hand: who forbids you to write your own application to communicate? eg write your own private VoIP server. Friends only, ssl, safe from tapping.
Just a thought...
Privacy is terrorism.
This is pure nonsense. Weren't cellular telephones at one time considered an innovative service in a heavily regulated industry? Didn't the cellular phone industry manage to survive dispite regulation?
VoIP will survive as long as it provides a useful service that is in some way advantageous over existing land-based and/or cellular systems.
This means schools and libraries will now have a better shot at getting E-Rate funding from the Universal Service Fund Again. Millions and millions of dollars were spent getting schools VOIP and the FCC decided that VOIP wasn't real phone service so they lost funding for it, almost closing many schools, public and private. If you have no idea what I am talking about, go to www.sl.universalservice.org for more info. You might be interested to find out where your USF charge on your phone bills go. (BTW I am an E-Rate consultant for schools, stephenisu@yahoo.com)
Sigs? We don't need no stinking sigs!
Coming from the Slashdot crowd, all this excitement over whether Vonage is a phone company or not is particularly amusing.
Granted, not everyone that reads Slashdot is programmer, but clearly a lot either are or have more than a passing acquaintance with programming concepts and theory.
I think what we are seeing here is simply a bureaucratic manifestation of the separation of interface from implementation. The whole point of companies like Vonage is that the do all the stuff a normal telephone company does, but using non-standard methods. If they didn't, they'd have no customer base, and their users would stick with existing providers.
If the users think its a phone company, why shouldn't the regulators? Isn't that the whole basis of OOP over the last several decades? What a thing does is more important than how it does it.
Vonage is advertising their service as a replacement to phone service despite any disclaimers they make about feature limitations. Recently visiting their website would activate a pop-up that invited you to cut your phone bill. However Vonage and other VoIP providers have been immune from the regulations that increase costs for POTS providers, their competitors. The argument should not be whether Vonage should be treated as a phone company, but rather what taxes and regulations should be applied to the service components, and what taxes should be applied to the last mile physical components which are typically government granted monopolies. It also becomes evident that the Universal Service Fund now needs to consider subsidizing VoIP as an alternative to POTS where it is most cost effective. This creates additional business for VoIP providers. Ultimately VoIP should reduce, though not eliminate, regulations and taxes for all providers as the market determines what features providers must support. Disclaimer: I am still miffed at Vonage about the length of time my number transfer took.
or any programs that run on it.
What this is is a decision that a company that lets you call up people on any other phone companies network (Verizon etc) including calls to Emergency numbers shouldnt be granted an exemption from this particular piece of state legislation that regulates phone companies just because their phone connects to the Internet instead of to a regular phone network.
Programs (including voice chat progams and such), protocols and internet services that dont talk to the regulat PSTN network wont be affected by this decision.
Also, even programs that are used for services that connect to the PSTN wont be affected. The only affect this will have is on companies offering a telephone service that lets you ring up someone on the regular PSTN (or on a mobile etc) and lets them ring you.
It's easy. NYS already taxes the POTS lines that Vonage customers call or are called by in NYS.
Vonage does indeed offer the "service" of 911 for NYS customers if they want it.
Simply have a fee for NYS users who want to use the 911 service, thereby paying for that service. This is something even a bureaucrat could understand.
The problem is the addiction to force. It is easy for the politicians and bureaucrats to use force against anyone for any reason that they can dream up, and if it doesn't work out there is no "cost" to the bureaucrats and politicians. "Power Corrupts".
So, rather than charge Vonage customers the very understandable fee for the voluntary use of a service, they bring the full weight of the State and its myriad regulations behind this act to punish Vonage. The customers who don't want the service are punished as well by being "taxed" for something they do not use.
The State created the power to regulate telephone service on the theory that phone service should be (not "was", look it up) a "natural monopoly", and in order to get votes by forcing "universal service". The phone companies returned the favor, in effect writing the regulations themselves exactly like the railroads had done, because after all they were the experts.
So not only is the rationalization of "it's a telephone company" founded on falsehood, the "tax" is unnecessary as well.
Don't expect other states to keep their hands off as well, killing the golden goose.
When was the last time a Government Agency applied "only minimal regulations" to anything?
Environmental protection, mental health care, the Microsoft antitrust case, food safety inspections, just about anything where megacorporations are involved...