South Carolina cell phone users could still see a new tax on their bills even though lawmakers failed to reach agreement on the issue earlier this year.
Landline telephone companies are asking the Public Service Commission to make a ruling that would create the tax.
The companies want the PSC to rule that wireless service providers are in competition with local telephone exchanges, and they hope such a ruling would trigger a provision in the law for those providers to contribute to the state Universal Service Fund.
Landline users have for years been paying into the fund, which helps cover the cost of phone service for hard-to-reach areas and for low-income residents.
A bill to require the contribution of cell users passed the Senate this year but stalled in the House. Legislation still pending would make wireless customers pay a percentage of their bill — between 1.1 and 1.3 percent — for the service fund and cap the fund at the current amount, $42 million.
Landline phone users have long paid into the fund through a tax on their monthly bills and currently pay 2.65 percent. Cell users already pay a federal tax for the fund. But as fewer people have chosen landlines and more have chosen cell service, revenue in the South Carolina fund has dropped.
Expanding the number of people who pay into the fund would drop the tax rate for landline customers, who number about 1.1 million in the state compared to more than 4 million wireless users.
Wireless company executives have said the legislation does not hold carriers who use the fund accountable, offers a permanent subsidy for older technology and creates a new tax without providing a new benefit.
The PSC will hold a hearing on the matter on Nov. 3, though a ruling could come later.
The National Taxpayers Union is mobilizing opposition to the petition before the PSC.
“These companies think that they’ve got the political muscle to force wireless consumers to pay a new tax,” the union states in an email. “If the companies are successful, almost every individual and family that uses wireless service will be required to pay a new tax on their monthly bill, and the PSC will give all the money to the landline phone companies. Your help is needed again to stop the creation of a taxpayer-funded handout for these companies.”
The South Carolina Telephone Coalition, representing landline companies, said in a filing before the PSC that a ruling on the issue is “long overdue.”
“Wireless carriers are providing services in South Carolina that compete with local landline services,” the group argued. “As such, they are required to contribute to state USF to keep service affordable for all South Carolina citizens, just as all other telecommunication carriers do, and as required by South Carolina law. Every day that goes by is a day that wireless carriers should be contributing to the state USF and do not.”
Don Price, a consultant representing the Wireless Association, said in testimony before the PSC that making cell phone users pay into the fund is “bad public policy.”
“Imagine how transportation would have developed in the early part of the 20th Century if buggy whip manufacturers had been subsidized by imposing taxes on automobile manufacturers,” he said.
Wireless providers already contribute billions to the federal service fund, he testified, and pay millions of dollars to South Carolina landline providers to carry wireless traffic from cell towers to switches.
The wireless companies have asked the petition be dismissed and if not dismissed that the PSC expand the scope of the issue by conducting a comprehensive evaluation of the state service fund.
The PSC this week denied the motion to do an evaluation of the state’s fund, but it did not rule on the motion to dismiss the petition.
The fund was mandated by the federal government in 1997 to help provide equal, affordable access to telecommunication services.
While the matter before the PSC does not include computer telecommunications or a cap on the fund, if the PSC rules wireless companies are in competition with landline companies, the charges on cell users’ bills will be close to what was discussed in the proposed legislation, said Dukes Scott, executive director of the Office of Regulatory Staff, which represents consumers in utility matters.
The state version of the fund pays subsidies to companies that provide service to high-cost, hard-to-reach rural areas. It also provides discounts to low-income residents for basic phone service. Carriers, known officially as “carriers of last resort,” must agree to charge no more to provide service to landline users in hard-to-reach areas than they do for urban phone users.