California Scraps Plan To Tax Text Messages After FCC Ruling

Woman texts using her cell phone
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California has backed away from plans to tax text messages after a new ruling from the FCC prevented the state from levying the tax.

The California Public Utilities Commission announced that they were backing away from previous plans to tax the text plans, CNN reported. The state had announced plans to add new monthly fees onto wireless bills, with the revenue going toward bringing connectivity to underserved areas of the state.

But the FCC ruled this week that text messages are an “information service” rather than a “telecommunications service,” meaning they would be classified the same as email or websites and that the state could not institute taxes on them. The proposal had already drawn opposition from industry trade groups, including one that represents telecommunications giants Sprint and T-Mobile. The proposal also faced a legal challenge from an advocacy group that claimed it would create inequity between apps and cell phone providers, calling the plan “illogical, anticompetitive, and harmful to consumers.”

As Engadget had reported, the proposal was an outgrowth of landline-era legislation that charged phone users a surcharge to help extend coverage to underserved areas. With the rise of the internet, the FCC created an exemption for things like email, but text messages remained in a gray area before the FCC’s ruling this week.

“It all harks back to the so-called landline era of the 90s, when the U.S. federal government and states established Public Purpose Programs (PPP), which charged all phone users a surcharge that supported programs for low earners (the same deal applies to other utilities, such as electricity.) As the internet took off, though, the industry managed to get an exemption for what it dubbed ‘information services,’ such as email and web-browsing. On Wednesday, the FCC approved a new rule that clarifies that text messages fall under this term.”

There were still some questions had the proposal gone forward, the report noted. The commission would have had to narrow the definition of text messaging, deciding how apps like iMessage and WhatsApp would fit into the proposal. These apps have taken over the majority of all text messaging, the report noted. If these apps were not included, the new tax could have simply pushed people away from using SMS services on cell phones and toward other apps that would not cost extra.

Regulators in California had been scheduled to vote on the proposed text message tax on January 10, 2019.