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California Considers Taxing Text Messages to Fund Cell Service for the Poor

(Robert Galbraith/Reuters )

California regulators have devised a plan to fund cell-phone service for the state’s poor by taxing text messages.

The plan, which was first reported by the Mercury News, will be voted on next month by the California Public Utilities Commission.

Business groups, including the Bay Area Council, the California Chamber of Commerce, and the Silicon Valley Leadership Group, have pushed back against the proposal, which they estimate will cost wireless consumers $44.5 million in additional fees each year.

“It’s a dumb idea,” said Jim Wunderman, president of the Bay Area Council. “This is how conversations take place in this day and age, and it’s almost like saying there should be a tax on the conversations we have.”

The California Public Utilities Commission released a report in November that argued the new fee was necessary to offset the growing disparity between the ballooning budget of the Public Purpose Program, which provides cell service for the poor, and the telecommunications-industry revenue that funds the program.

It remains unclear exactly how much the new text-message tax would cost each consumer, but regulators have suggested it would be applied as a flat fee, rather than a per-message charge.

“From a consumer’s point of view, surcharges may be a wash, because if more surcharge revenues come from texting services, less would be needed from voice services,” said CPUC spokeswoman Constance Gordon in a statement. “Generally, those consumers who create greater texting revenues may pay a bit more, whereas consumers using more voice services may pay less.”

CTIA, a trade association that represents the major wireless-service providers, has filed a legal challenge to the proposal with the Federal Trade Commission arguing that text messaging, like email, is an information service, not a telecommunications service, and thus the commission “has no authority to impose surcharges on text messaging.”

Legality aside, wireless-service providers have also pointed out that if the tax goes into effect, consumers could just switch to using wireless-messaging applications such as WhatsApp and Facebook Messenger.

“Subjecting wireless carriers’ text messaging traffic to surcharges that cannot be applied to the lion’s share of messaging traffic and messaging providers is illogical, anticompetitive, and harmful to consumers,” the CTIA said in its FTC filing.

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