FCC decision deals blow to California text-tax plan

A federal regulatory ruling Wednesday aimed at protecting consumers from text-messaging spam also may help California mobile phone users avoid a proposed state texting tax.

The California Public Utilities Commission has proposed a surcharge on text messaging to help cover its growing budget for programs that help make phone service accessible to the poor, with a vote scheduled for Jan. 10. But the proposal — first reported Tuesday by this news organization — has drawn fast and fierce criticism from opponents.

The wireless industry, business groups and other critics argued that California can’t tax text messages unless federal regulators allow state regulators to treat text messaging as a telecommunications service.

Wednesday, the Federal Communications Commission in a 3-1 decision declared that wireless Short Message Service (SMS) and Multimedia Messaging Service ( MMS) are “information services” similar to email under the Communications Act, and not a telecommunications service.

The decision denied requests from mass-texting companies that have complained wireless providers are thwarting their ability to reach consumers via texts. Chairman Ajit Pai and commissioners Michael O’Rielly and Brendan Carr were in favor, with Commissioner Jessica Rosenworcel opposed.

“We commend Chairman Pai and the FCC for protecting consumers from an avalanche of messaging spam and allowing them to continue to benefit from a flourishing and competitive messaging ecosystem,” said Scott Bergmann, CTIA’s senior vice president for regulatory affairs.

The vote could have an impact on California’s proposal to tax text messages. The Public Utilities Commission had no immediate response Wednesday, but text tax critics considered the FCC decision a victory.

“We hope that the CPUC recognizes that taxing text messages is bad for consumers,” said Jamie Hastings, senior vice president of external and state affairs for CTIA, which represents the U.S. wireless communications industry, including AT& T Mobility, Sprint, TMobile, and Verizon. “Consumers exchanged 1.77 trillion messages in 2017, making text messages one of the most common and effective means of communication for Americans. Taxing this service would burden those who rely on and use this service each and ev- ery day.”

Supporters of the surcharge, including the Oakland-based Greenlining Institute, a think-tank that promotes social equity for communities of color, agreed the FCC ruling is a setback, but not necessarily fatal.

“I’d agree the FCC decision complicates things,” said Paul Goodman, the institute’s director of telecommunications and technology policy. “But I don’t think it eliminates the PUC’s ability to impose that.”

Critics, including business groups such as the Bay Area Council and Silicon Valley Leadership Group, said in a Dec. 5 letter to the commission that it could not impose the text tax “without an explicit federal classification of text messaging as a telecommunications service.”

But supporters of the texting surcharge said the commission proposal makes several other arguments for its authority to impose it.

“Nothing the FCC has done prevents leadership in this area,” said Mindy Spatt, spokeswoman for The Utility Reform Network, a consumer group in favor of the texting surcharge.

Supporters argued that as traditional telephone service gives way to new technologies such as texting, revenues for promoting “universal service” aren’t keeping up and need to branch out into those areas. They said wireless providers don’t need to pass the charges on to their customers. The proposed surcharge would be part of the Universal Service Charge at the bottom of consumers’ mobile phone bills, which pays for programs that help poor people afford telephone service and subsidize service in rural areas schools and hospitals.

Critics countered that charging for texting would put them at a disadvantage with other messaging services such as WhatsApp or Facebook Messenger that are rapidly gaining popularity and would not be required to pay the surcharge.

I’d agree the FCC decision complicates things, but I don’t think it eliminates the PUC’s ability to impose that.” — Paul Goodman, Greenlining Institute director of telecommunications and technology policy