1. The Wireless Snapshot FACTS & TAX
Senate Briefing
March 20, 2006

2. Wireless: Proof that Competition Works
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Wireless: Proof that Competition Works
The wireless industry kicked off service on October 13, 1983
By the start of 1994, we’d grown to 17 million customers – 17 times the total number originally expected by the year 2000
Twelve years later, we’d grown to more than 200 million – more than 200 times the total number that had been expected by 2000
Last year, customers used more than 1 trillion minutes – adding more minutes than used in all of 2000

3. Competition Works for the Consumer8
105
194
2 carriers 44
249 77
197 30
118 51 34 28 31 17 23
Source: CTIA

4. Competition Works for the U.S. Economy
1993
Contribution to the economy
$12.75 billion cumulative capital investment
Revenues of $8 billion annually
31,000 employees
Service on local/regional analog networks
11 billion minutes of use
Data Rates of 4.8 kbps
Limited internet access
2004
Contribution to the economy
$173.9 billion cumulative capital investment
Revenues of $102 billion annually
226,340 employees
Almost all service on digital nationwide networks
Over one trillion minutes of use
Data Rates up to 500 kbps
Full Internet Access
Wireless carriers have made real contributions to the economy – generating billions in revenues and making billions more in capital investment, while creating hundreds of thousands of jobs.
Source: CTIA Semi-Annual Wireless Survey, CTIA Research

5. Competition Works for the U.S. Economy
2005 Ovum / Indepen report has calculated broader contributions of the wireless industry to the U.S. economy:
3.6 million jobs were directly and indirectly dependent on the US wireless telecommunications industry in 2004
In total, the US wireless industry generated $118 billion in revenues and contributed $92 billion to the US Gross Domestic Product in 2004
If the average wireless consumer in America spends $54 per month on wireless voice and data services, that same consumer would pay approximately $125 US for the same services in the European Union
Ovum predicts that over the next 10 years, the US wireless telecom industry will create an additional 2-3 million new jobs, adding a cumulative additional $450 billion in GDP. This figure is based on the conservative assumption that no services are added beyond what are available today.

6. Wireless is Bridging the Digital Divide
By year-end 2005, 182 wireless companies served 195 million customers nationwide – 65% of all Americans.
The FCC has found that 97% of Americans live in counties in which three or more wireless service providers offer services, and 87% in counties where five or more wireless providers offer service.
We’re serving people’s needs across the country – in the office, on the farm, in the city, and on the road.
By the way, she’s parked in her car, up in Idaho.
More than 50% of rural households use wireless service compared with 53% of urban households.
Sources: CTIA Semi-Annual Wireless Survey, FCC 10th CMRS Report and BLS data

7. Where Does the U. S. Range in Global Broadband Penetration
Where Does the U.S. Range in Global Broadband Penetration? Not at the Top
Source: International Telecommunications Union

8. The Wireless Renaissance: Wireless Broadband
Verizon Wireless has launched broadband service in 171 markets that are home to more than 140 million people
Sprint Nextel offers its wireless broadband service in 208 markets
Cingular Wireless launched its HSDPA-based BroadbandConnect service in December 2005
Alltel’s AxcessSM Mobilink service is available in markets in 31 states and Alltel’s AxcessSM Broadband service is offered in 11 markets
T-Mobile USA offers mobile Internet access through GPRS, and offers an extensive network of wireless hotspots in the U.S. (7,428 as of Feb. 27, 2005)

9. The Wireless Renaissance: Deployed by Carriers of All Sizes
Alaska Communications offers its ACS Mobile Broadband in Alaska
Alaska DigiTel offers wireless data service in Alaska
Cellular One of Amarillo offers Mobile Internet service in Texas
Cellular South offers CDMA-based wireless data service in the Southeastern U.S.
Dobson Cellular, operating in 16 states, introduced its Signalink™ data service in September 2005
GCI offers GSM-EDGE-based broadband service in Alaska
First Cellular of Southern Illinois offers "WOW Network" web access in Illinois
Midwest Wireless offers Mobile Wireless Internet service in the Upper Midwest
U.S. Cellular offers its Brew™–based easyedge™ Enhanced Wireless Service in all of its markets

10. The Wireless Renaissance: A Peek at the Future
Mobile commerce - proximity payments
Mobile monitoring systems - flow of people, traffic and agricultural applications
Remote analysis - mobile medical examination, wireless medical monitoring devices
Biometrics: facial recognition, retina scanners
Real time video, image transmission from databases
Facial Recognition
Image Transmission from Crime Databases
Iris Recognition

11. What Can Jeopardize this Story of Wireless Investment, Growth and Innovation?

12. Risks to Growth and Innovation
Balkanized state-by-state regulation threatens to disrupt the competitive forces which drive rates down across the country, and drive new services into markets nationwide.
Legislation which creates uncertainty has a direct, adverse impact on investment in the wireless industry: this ultimately disserves consumers.
Taxes and fees which fall heavily on wireless consumers and providers alike, discourage the adoption of innovative technologies and services.
Federal Excise Tax
Wireless equipment federal depreciation lives
Excessive State and local taxation

13. Why Are Wireless Consumers Still Paying the Spanish American War Tax?

14. Why are these assets subject to the
same federal tax depreciable lives?

15. What Have We Heard?
Good News: From through 2004, wireless growth has had a tremendous impact on the economy:
Wireless capital investment increased by nearly fourteen times
The number of wireless employees grew by nearly eight times
Revenues grew by nearly thirteen times
Cost of wireless service to consumers has dropped substantially

16. The State of the States
Source: Scott Mackey, Kimball Sherman & Ellis

17. Convergence: Taxation of Consumer Services in a Wireless WorldII
Convergence: Taxation of Consumer Services in a Wireless World
Type of Service Effective Rate
Telecommunications Services – 34%
Cable Services – 11%
Information Services – 6%
Digital Services (games, music, etc.) – 6%
General Business %
[Effective Rate includes Federal, State and Local Taxes, Fees and Surcharges]
With convergence in the industry, industries that were subject to different regulation are now competing in the marketplace
Competing with “functionally equivalent” services AND
Competing for consumer $’s with other high tech providers
How are these different services taxes
Telecom 7-34%
Cable 5-11%
Information services (classification of some of the VOIP) 0-6%
Digital Services 0-6%
Internet access 0-6%
So, classification of telecom services used to provide Internet access as Internet access and NOT telecom service has huge $ impact
The taxation involves a morass of sales taxes, gross receipts taxes (on providers), privilege taxes, ROW/franchise taxes, USF, 911, and other regulatory taxes and fees.
Competitive advantage if not subject to the same taxes
Impact of demand for services

18. *Tax applied in selected cities and regions
A New York wireless bill reflects how the consumer sees the current state and local taxation of wireless services
State Sales Tax 4.25%
Local Sales Taxes 4.00%*
MCTD Sales Tax 0.13%*
State Excise Tax 2.50%
MCTD Excise/Surcharge 0.30%*
Local Utility Gross Receipts Tax 1.51%*
State Wireless %
Local Wireless %*
MCTD Surcharge 0.07%*
NY Franchise Tax 0.38%
Federal Excise Tax 3.00%
Federal USF 3.05%
Total 22.29%
INVOICE
*Tax applied in selected cities and regions
2/28/2019

19. Impact of Wireless Services Sold through National Pricing Plans
State and local boundaries are immaterial:
Federal impact – “all distance service” and the FET
State impact – NASUCA petition and the FCC Truth in Billing Order
Uniform national pricing results in service sold in rural Vermont being the same price as service sold in NYC
National plans highlight the need to simplify and centralize taxes on wireless services:
Inconsistent rules and locally administered taxes result in consumer confusion and potential double taxation
Wireless Industry supports the Sales Tax Fairness and Simplification Act which simplifies taxes and fees imposed by state and local governments on communications services – Currently, 344 telecom different taxes require filing of approximately 48,000 returns annually
2/28/2019

20. Rights-of-Way/Franchise Fees are frequently confused with being taxes
Wireless providers do not use the public rights of way and are not required to be franchised with a local authority to operate
Wireless companies have paid more than $24 billion to the U.S. government for the spectrum to deliver wireless service to consumers – their operating right / “franchise”
Wireless companies pay fair rent to landowners for all facility placements – their “rights of way”
However, states continue to attempt to shift rights-of-way/ franchise fees on wireless consumers as “taxes,” confusing operating rights and benefits with principles of taxation
Texas
Louisiana
Oregon

21. What is the Economic Impact of High Wireless Taxes?
Wireless Taxes are Regressive: Historically telecom taxes were hidden in rates for utility telecom service – this system of taxing telecom services was very regressive with the largest impact on lower- income consumers.
High Wireless Taxes Impact Overall Economic Growth: Economist Gregory Sidak estimates that a one-percent decrease in wireless prices would "increase U.S. GDP by between $6.8 billion and $7.8 billion within two years of the tax reduction."
High Taxes Stifle Industry Growth: Each 1% increase in the price of service reduces demand by an estimated 1.12% to 1.29% – So, cutting the FL or NY combined wireless tax rate in half would result in a 10% increase in consumer demand for wireless services.
2/28/2019

22. How Can We Reverse this Trend?
Eliminate excessive and discriminatory federal, state and local taxation of wireless services
Ensure equitable taxation of wireless capital investments to encourage deployment of the most advanced networks
Ensure fair taxation of wireless to stimulate increased innovation and affordability of the newest services
Ensure simplification of existing tax system applicable to telecommunications services