California’s never-ending war on tech and telecommunications may have hit a road bump—the FCC.
At the end of 2018, reports floated that the California Public Utilities Commission was considering a plan to charge a tax for text messaging of about 70 cents for every $10 of text revenues. Some estimate that the tax would cost texters $44.5 million per year. To make matters worse, the state sought to retroactively apply the proposal, taxing texts as far back as five years ago and costing California texters more than $220 million.
Many Californians were rightfully outraged. Some worried that the tax would have unintended consequences like disincentivizing low-income users from texting. The proposal also would have taxed traditional SMS, while other messaging services such as iMessage, Whatsapp would remain untaxed, further complicating the user experience.
But just in the nick of time, one of the FCC’s last acts of 2018, an item on robotexts, prevented California from even taking up this ridiculous proposal.
In response to a petition from mass texting service Twilio, the FCC formally reaffirmed the regulatory definition of mobile messaging by classifying messaging as an information service, not a telecommunications service.
The Telecommunications Act of 1996 limits state authority of information services. Since texting is an information service, California could not tax text messaging.
Instead of fighting to maintain the text tax proposal, California responded nearly immediately by pulling the proposal from consideration—a huge win for American taxpayers.
The FCC’s ruling initially focused on ensuring that consumers do not see an influx of spam text messages but it is clear that the decision to reaffirm texting as an information service is multifaceted.
Historically, SMS has a much lower spam rate than other services, such as email. This is not a coincidence. Carriers are able to filter out spam messages because of the regulatory definitions in place. By maintaining the regulatory definition of SMS the FCC ensured that carriers could still filter out phishing and unwanted messages.
If the FCC changed the regulatory definition of texting to a telecommunications service, it also would have meant that different messaging services like iMessage would have received different regulations than SMS. Simply put blue and green text messages should not be subject to different regulations.
Revenue from the text tax would have gone towards a program that subsidizes phone service. The CPUC currently imposes a surcharge on telecommunications services. Since 2011, revenues in the telecommunications tax have declined from $16 billion to $11.2 billion last year. The CPUC sought to close the gap in revenue by taxing text messages.