The US Treasury has scrapped a 3 percent federal excise tax on long-distance calls and promised taxpayer refunds covering the past three years. The move follows a series of federal appeals court rulings against the government, which had tried repeatedly to preserve the US$6 billion generated annually by the tax.

“The Federal Appeals courts have spoken across the board. It’s time to ‘disconnect’ this tax and put it on the permanent ‘do not call’ list,” quipped Treasury Secretary John Snow. The tax was in force for over 100 years after the end of the Spanish-American War it was enacted to fund.
Snow said he hoped excise taxes on local calls would be next to go. “It’s not often you get to kill a tax, particularly one that goes back so far in history,” he said, claiming that government coffers widely considered to be overburdened “can easily absorb” some $13 billion in expected tax refunds.
Snow declined to forecast how refunds would shake out among businesses and consumers, who pay roughly $1.50 in excise taxes per $50 spent on long-distance calls. A report in the Wall Street Journal pegged long-distance excise tax refunds and lost revenue at $60 billion through 2011.
Long-distance carriers including BellSouth praised the move. “The government’s announcement on the significant curbing of the Federal Excise Tax on talking is wonderful news for consumers,” said vice president of governmental affairs Herschel Abbott. “Customers should see a noticeable difference in their phone bills within the next few months. We hope this decision is a harbinger of removal of other discriminatory taxes on communications customers.”
Meanwhile, the US House Judiciary Committee yesterday voted to ban the $12 billion Internet gambling industry. The proposed law would prohibit interstate gambling in the US as well as paying gambling operations via checks, wires, credit cards or Internet transfers. The measure affects more than 2,300 Internet sites – including overseas businesses – and requires banks to block electronic payment to such operations by consumers. “The legislation is badly needed because … the amount of money going to these illegal unregulated offshore enterprises has quadrupled,” said bill author Rep. Bob Goodlatte.
“In the United States, gambling is essentially illegal unless regulated by the states,” he added. “This is a measure to work through that to make sure that the states are indeed protected in their right to continue to regulate gambling.”

EU Information Society Commissioner Viviane Reding has accused continental governments of lagging on telecom advancements that could be used to fuel European economies. “It is worrying that in ICT research, Europe continues to lag behind its competitors, investing about half as much as the US,” she said in a presentation, urging governments “not to shy away from cross-border competition in the telecom sector.”

Reding said that the impact of ICT on European productivity growth has fallen over the past decade and lashed out at economic reform programs that “fail to give a new impetus to information society policies or to cover drivers of growth such as the convergence of digital networks, content and devices.”
Said Reding, “Only through stronger investment in ICT research and effective cross-border competition will we ensure that the great potential of ICT is used to lift our competitive performance across the economy.”

The GSM Association recently announced that its Emerging Markets Handset program is exceeding expectations: mobile operators in Bangladesh, China, India, and Russia have already purchased 12 million of its Ultra Low Cost Handsets (ULCH). But will the initiative reach the rest of the three billion unconnected peoples in emerging markets? Under current cost models that is unlikely.

The problem is that even at US$30 the ULCH’s price is too high for at least a billion of this population.

The annual gross per capita income in sub-Saharan Africa is just US$371. It is unrealistic to expect people there to spend 10% of their annual income on a mobile phone. So semiconductor vendors, such as Texas Instruments, Freescale, Philips, and Infineon are continuing to reduce the Bill-of-Materials for ULCH even further, heading towards US$20 and US$15 in the next few years.

But will ULCH markets stall before a low enough price is reached? Alan Varghese, Principal Analyst, Wireless, at ABI Research doesn’t think so. “We may see trends similar to those for the conventional handset in the developed world. In the early years, it was purchased primarily to transact business; it was only when prices had dropped that handsets penetrated the mass market.”

Something similar is starting to happen in the developing world. In South Africa, software vendor Sharedphone enables the use of the ULCH as a mobile payphone. Local entrepreneurs buy this phone and sell airtime at the roadside. For such a “service provider,” the $30 price is not prohibitive; it is far cheaper than setting up a conventional payphone.

Because per-minute call charges are high, most calls are short and businesslike: Where can I get the best price? Is my order ready? Meet me tomorrow. The “mobile payphone” is facilitating commerce even in regions otherwise lacking in high technology.

What does this mean to handset vendors such as Nokia, Motorola, Sony-Ericsson, Samsung, and LG Electronics?

Varghese says, “They have to think about how they can further enable varied uses such as the ‘mobile payphone.’ They could add value, for example, with software to manage the whole transaction: making the call, presenting the consumer with a summary of call-times and charges, and keeping track of repeat customers in order to offer discounts.”