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Editor's note: On Call runs every two weeks and alternates between answering your questions and discussing hot button issues for cell phone users.
If you have a cell phone, you're well aware that the base price of your monthly plans is only the beginning. Though your carrier may say your plan is $39 per month, you'll actually pay about $50 per month once you add in the long list of taxes and fees. But if a few members of Congress get their way, there would be a limit on just how much your bill could grow in the future. Legislation has been introduced in both the Senate and the House of Representatives that would ban future taxes imposed by state or local governments on cell phone service. The two bills are quite similar, but they differ on a couple points. The Senate bill, which was introduced last year by 2008 Republican Presidential nominee Sen. John McCain (R-Ariz.), would ban new taxes for three years, while the House bill, which was introduced last week by Rep. Zoe Lofgren (D-Calif.), proposes a five-year ban on new state and local taxes.
But on to the fine print: Lofgren's bill would not ban new federal taxes, nor would it eliminate any current taxes. As she said in a statement, her legislation would "not take away any existing revenue for state or local governments." Furthermore, the ban would not apply to fees meant to subsidize emergency 911 services nor the universal service charge, which funds telecommunications infrastructure for low-income and rural residents. So in other words, your bill may not get larger, but it won't get any smaller, either.
Are taxes hurting cell phone innovation? Talk back to me below.
Even so, it is a decent gesture and the wireless industry's lobbying arm, the Cellular Telecommunications Industry Association (CTIA), supports the House bill. It points out that the tax rate on cell phones services (15.19 percent) is more than twice the average sales tax rate (7.07 percent). The CTIA calls high taxes "roadblocks" that "stand in the way of progress." Lofgren echoed a similar belief when she said her bill would "help ensure that consumers make choices about communications technology based on the merits of that technology, rather than on the rate of taxation."
Those are nice sentiments, and while I'm not a fan of taxes--who is?--they're not a real barrier to cell phone innovation in the United States (check out this edition of On Call for further explanation). What about handset locked cell phones and closed networks? Those two practices have a much more negative effect on wireless innovation in the United States. As long as carriers lock their phones, close off their networks, and limit how customers can use their phones, real innovations with the latest phone and the fastest networks will continue to elude us. And as long as the FCC continues to dole out wireless spectrums in its current manner, we'll continue to lag behind our Asian and European cousins.
As an organization opposed to government regulation, it makes sense that the CTIA would support a ban on new taxes, but if that organization really wants to encourage innovation, it should also support efforts to ban locked phones. Though a Senate bill introduced last year promised to do just that, the CTIA has opposed the legislation and called it "unnecessary." That's not a huge shock considering the CTIA's membership includes the major carriers, but winds of change are in the air. Verizon Wireless certainly had the right idea when it announced last November that it would open up its network to unlocked phones and third-party applications. If the CTIA has any sense, it will cajole the other carriers to do the same.
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