What’s the Hang Up? The Future of VoIP Regulation and Taxation in New Hampshire

Authors

Kate Winstanley, Franklin Pierce Law Center, Concord, NH

Abstract

Alice in Austria wishes to call her friend Bob in Boston, using a Boston area code to avoid charges for an international call. Using VoIP, Alice may initiate her call from any location in Austria where she may find Internet access. Once Alice connects to the Internet, she can transmit her call with the aid of a VoIP service provider, such as Skype. In order to hear and communicate with Bob, Alice can rely on a microphone and a headset that she can plug into her computer. Through VoIP, not only may Alice carry on a telephone conversation, but most service providers also allow her to record conversations and manage other information, such as voice mail.

The rise of Voice over Internet Protocol (“VoIP”) services “means nothing less than the death of the traditional telephone business,” as the ability to make free calls over a high-speed Internet connection in the future “undermines the existing pricing model for telephony.” This disruptive, convergent technology is blurring the boundary between Internet services and telephone services because VoIP functions like the traditional telephone system, but travels as ones and zeros through a broadband Internet connection. As a result, the Federal Communications Commission (“FCC”) has questioned whether to classify VoIP as an information service, generally free from FCC regulation under the Telecommunications Act of 1996, or as a telecommunication service, subject to a comprehensive regulatory regime and common carrier obligations.

This note discusses why most VoIP services, with the exception of phone-to-phone Internet Protocol (“IP”) telephony, should be classified as information services and, as such, should remain free from state taxation – focusing specifically on the taxation in New Hampshire. Part II focuses on the technology of VoIP and how it differs from traditional telephony. Part III discusses the distinction between information and telecommunication services in the Telecommunications Act of 1996, whether VoIP may qualify as Internet access in light of the Internet Tax Freedom Act (“ITFA”) of 1998, and the federal regulation of VoIP. Finally, Part IV addresses the debate over taxation of VoIP in New Hampshire and discusses why VoIP services should not yet be taxed by the New Hampshire Department of Revenue Administration in light of federal law and the best interests of local businesses and consumers.

Repository Citation

Kate Winstanley, What’s the Hang Up? The Future of VoIP Regulation and Taxation in New Hampshire, 4 Pierce L. Rev. 531 (2006), available at http://scholars.unh.edu/unh_lr/vol4/iss3/8