Additional Tax on Text Messages Might Soon Affect Californians

Texting Messaging On An Iphone With Case Credit: Wove Love / Shutterstock
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The California Public Utilities Commission is considering implementing a new surcharge for the use of text-messaging services by mobile phone users.

According to the proposal filed by the CPUC, the commission will determine whether text-messaging services revenue should be subject to the Public Purpose Program surcharges, which has been creating affordable voice services in the United States since the 1930s. The CPUC is responsible for ensuring consumers have safe, reliable, affordable and universal access to telecommunications services.

The tax hopes to increase funds for the telecommunication services that have seen diminishing revenue for the last few years because of the decreasing use of voice calls. This is due, in part, from the rise of the internet and the increasing popularity of online messaging services.

  • There are no specifics at the moment about the amount that would be charged under the proposed new tax.
  • The proposal states that new surcharge would be added to the existing telephone services charge in customers’ monthly cell phone bills.

However, the Federal Communication Commission classifies text messaging as an “information service” under a new ruling, which prevents the Commission from taxing it like other telecommunication services. The FCC argues that text messaging meets the definition of an “information service” because it includes data storage, transforming, processing and retrieving information as well as making information available.

The CPUC disputes this classification in their proposal on the basis that the service uses ordinary customer-premises equipment, originates and terminates from the Public Switched Telephone Network and does not undergo any net protocol conversion, making it a telecommunication service.

The Cellular Telecommunications and Internet Association, however, does not agree with the CPUC’s assertion and opposes the planned surcharge.

The CTIA argues that “subjecting wireless carriers’ text messaging traffic to surcharges that cannot be applied to the lion’s share of messaging traffic and messaging providers is illogical, anticompetitive, and harmful to consumers.”

“CTIA has demonstrated repeatedly throughout this proceeding that, as a matter of federal law, text messaging is an information service. This regulatory status is determinative, as the PD itself acknowledges that the Commission’s jurisdiction over communications services does not, and has not extended, to information services, except as authorized by the FCC, because the authority for the Commission to enact universal service is granted by the [federal Communications] Act.” said the legal filling submitted by the CTIA.

“The FCC has explicitly stated that ‘revenues from information services … have never been included in the contribution base,’ and states may surcharge information service revenues only if the FCC has specifically authorized such surcharges and prescribed a jurisdictional allocation methodology for the service at issue.”

The CTIA also argues that assessing Public Purpose Program surcharges on text messaging would violate Public Utility Code § 871.5(d) because it would cause inequity, discrimination and competitive harm to text messaging providers in the much larger messaging marketplace.

While the recent FCC ruling and other legal findings may require the CPUC to alter their original proposal, as it stands the FCC meets next Wednesday to review the issue and state regulators are scheduled to vote in January 2019.

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