Valdosta Daily Times

Features

July 2, 2014

Mobile web siphoning revenue from U.S. cities as landlines fade

LOS ANGELES — Tweeting, Facebooking, Skyping smartphone users are costing U.S. states and cities revenue as taxes rooted in old-fashioned telephone service fail to keep up with the Internet era.



In Phoenix, Ariz., the loss of $1.3 million in telephone tax revenue translates to the cost of training and equipping 10 police officers, said Mario Paniagua, the budget and research director. In Springfield, Illinois, a $200,000 shortfall in telecommunications revenue is keeping the library from extending hours.

"I imagine at some point you'll have an app called the 'Call Your Friend' app and you won't be using the phone network at all," said Max Behlke, the manager of state-federal relations for the National Conference of State Legislatures in Washington. "It is a concern for states and localities because this has been one of the most reliable revenue streams they have. Phone service is almost as much a necessity as food."

Just as they created new business models for retail sales, taxi service, short-term accommodations and watching movies and listening to music, smartphones and the Internet are changing how people dial each other up. Tax-dependent governments, still struggling to recover from the 18-month recession that ended five years ago, find themselves seeking to compensate for a once-reliable source of money.

Unlike voice calls, which face levies either on landline or mobile networks, data use can't be taxed under federal law. And that's where the growth is. Mobile Internet use more than doubled last year from 2012 to 3.2 trillion megabytes, according to a report released this month by CTIA-The Wireless Association, an industry trade group.

While voice use over cellular networks rose 14 percent, multimedia-messaging soared 29 percent, according to the trade group. Text messaging, which uses the same mechanism as voice calls and is also taxed, fell 13 percent.

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