One of the biggest things that VOIP has going for it is the fact that is costs way cheaper than traditional telephony and one of the main reasons for this low cost is the fact that VOIP services are not subject to the same taxes and charges that traditional telecommunications providers are. So what happens if VOIP providers become taxed? In Los Angeles, California, it seems that they are taking this route. Steve Stanek writes in Heartland:

Los Angeles voters have imposed a 9 percent tax on Internet phone calls, known as VoIP (Voice over Internet Protocol). VoIP calls had been tax-free in the city. Voters also enacted a 1 percentage point reduction in the tax on all other phone calls, from 10 percent to 9 percent. Most phone calls are still made over traditional wireline or wireless phones, but Internet phone service is a rapidly growing segment of the telephone market.

Measure S appeared on the February 5 ballot in Los Angeles and won by nearly a two-thirds margin. Voters were promised if they supported Measure S, the tax money would go toward police protection. Critics of the new VoIP tax say there is no guarantee any of the money will go to police or other public safety services, as the proceeds will simply go into the city’s general fund.

Tax Called Illegal
Last fall, Congress passed a seven-year extension of the federal moratorium protecting Internet access services from federal, state, and local sales or excise taxes. President George W. Bush signed the bill November 1.
Huffman said Measure S was sprung on voters with almost no notice, which bothered several taxpayer and business organizations, including VICA.

“We were disappointed at how the Los Angeles City Council placed this measure on the ballot. It came out of nowhere,” said Huffman, leaving almost no time for opponents to muster arguments against it. Huffman said association members are also upset the new VoIP tax was proposed barely two weeks after the Los Angeles City Council granted 20 to 25 percent pay raises for all city employees, making them the highest-paid city employees in California. City officials should have simply acknowledged they needed more revenue to pay for those high salaries and benefits instead of arguing it was a matter of public safety, Huffman said. “It’s a matter of honesty,” Huffman said. “They should have been upfront with us.”

As is expected, this issue involves more than VOIP service. As for now, though, VOIP users in LA can expect higher fees as a result of this law.

I suppose that if you think about it and that if there is really going to be a recession, then everyone should be concerned!  A recession will definitely affect everyone, no matter what.  All industries and sectors have to be prepared for the effects of a recession – if it does happen.  For the VOIP industry, however, a recession could both be a good thing and a bad thing.   If ever a recession does occur, the VOIP sector can both suffer ill effects and benefit from some things.  Let us look into these in more detail.

Negative effects
Logically, a recession would mean hard times in the financial sense.  We have to bear in mind that VOIP companies – both those who provide services and produce goods such as phones and other hardware – rely on other businesses and individuals for revenue.  During a recession, it is but normal that many businesses and individuals will have to cut back on their expenses.  This means that the orders – for both services and products – would go down.  As a result, the sales for VOIP companies will also go down, resulting in lower revenues.  Basically, VOIP companies could suffer the same fate as businesses in other sectors.

More so, the VOIP sector is relatively new that it relies a lot on the expansion of other businesses.  When businesses expand, they seek new technology that would make their operations more efficient – both in terms of cost and processes.  The VOIP sector is a very good choice for this kind of activity.  However, during a recession, a company would hardly think of expanding. In fact, companies would probably be tightening belts, again resulting in less revenue for VOIP companies.

Positive effects
On the positive side, however, VOIP companies have a bigger chance of staying afloat during a recession.  How so?  As mentioned above, many businesses would be looking for ways to cut their costs.  Everyone knows that VOIP is the system of choice when it comes to cost alone.  If, for example, a big business is using a conventional telecommunications provider, they could cut their costs considerably by switching over to VOIP.  During a recession, this would mean that VOIP companies can still get new clients.

Another thing is that a recession would mean that businesses would rely more on long distance communications rather than spend more on business trips.  If these companies use VOIP, then that means more revenue for the industry.

As you can see, the future is not at all that bleak for the VOIP industry if a recession does take place.

Perhaps the main attraction of VOIP services is the fact that making calls cost much less than traditional phone calls. Anyone who has tried calling overseas both using the traditional phone line and a VOIP line would know the considerable difference between the two and, in all probability, would stick to making VOIP calls. What some people might not know is the fact that there is a clear reason as to why VOIP calls are way cheaper than traditional telephone calls.

The fact is that the traditional telephone companies have to pay various fees and taxes to provide their service. Of course, these charges are carried over to the customers, who, in turn, have to pay higher rates on traditional phone calls. The great thing about VOIP is that, as of now, VOIP companies are not being charged these fees. This is the reason behind the fact that they can offer phone calls to anywhere in the world dirt cheap. The rationale behind this – not paying the fees that traditional phone companies have to pay – is the way that VOIP operates technically.

With VOIP, voice is converted to into packets of data, which are transmitted through the Internet. At the receiving end of the call, the packets of data are re-converted into voice. Technically, then, VOIP service providers cannot be classified in the same way that telecommunications companies are classified as of now.

This is the main argument that Vonage presented in their case in Nebraska. They were being hounded by the Nebraska Public Service Commission to pay into state Universal Service Funds. All phone companies which are labeled as “traditional” have to pay into the Universal Service Funds – no ifs and buts about it. When it comes to VOIP service providers, however, there remains a question. In Nebraska, a couple of VOIP service providers are reportedly paying into these funds. Vonage, however, has remained strong in its position that they cannot be classified as a traditional telco and as such will not pay into such funds.

Lucky for them, the judge overseeing the case agreed with their stand. Even more so, luckier for VOIP users in Nebraska, this means that Vonage and other VOIP companies servicing the area cannot use state fees as an excuse to increase their rates. Let us hope that this remains to be the case in most other parts of the world where VOIP companies are making it big.

For those who have not heard, Russell Shaw, one of the leading authorities in the VOIP world, passed away last March 14. He passed away in a hotel room in San Jose – what the reason was, remains unclear. According to a post at ZDNet, Russell’s girlfriend said “that Russell’s funeral will be a week from today (March 23) in Florida, but didn’t have much more detail than that at the moment. It’s also unclear what caused Russell’s death, but “he wasn’t feeling well at all Thursday night” and “he thought he could sleep it off.” We’ll pass along more details about the funeral home and other items as we get them.”

Anyone who has been involved in VOIP in the past years would recognize Russell Shaw as the foremost authority on the BlackBerry – he was THE BlackBerry Blogger for for ZDNet. Here is the announcement of his death at ZDNet:

Dan and I were emailed by Russell’s girlfriend Ellen, but details are still sketchy (see Techmeme). He died on March 14 in a hotel room. Like Marc Orchant, Russell, who covered VOIP, broadband and Research in Motion for ZDNet, passed without a hint that something was wrong. He was always quick with a joke and as Matthew Miller noted was an enthusiastic blogger.
To lose two people in the ZDNet family in just a few months is shocking. In fact, Russell, who just turned 60 in November, was on his way to cover the Emerging Technologies Conference and VON. The last note I got from him was this.

In san jose hotel. After three planes, from alabama have come down with something.
Resting now posts to resume later today or tomorrow
Russ
Sent via BlackBerry by AT&T

It sounded like the same bug we’ve all had for the last week. And then last night about 6:45 p.m. EDT, I got an email from Russell’s girlfriend saying he passed away. He never made it to VON. She’s trying to contact people at VON and the other show he was going to attend. His funeral will be held in Florida.

For us who looked forward to his coverage, we will certainly miss him. Rest in peace, Russell Shaw.