“The Santa Ana City Council Tuesday night approved a November ballot measure that calls for adding prepaid cellphones to the utility users tax rolls and reducing the overall rate by 0.5 percent.

“If voters approve the measure, the tax will be levied on all prepaid cellphone customers, which represent 40 percent of the city’s population, according to a city staff report. Voice Over IP users, a phone technology that uses the Internet instead of traditional lines, would also be taxed.”

Skype is the king of VOIP services. Google Voice, which I use, is also hugely popular. Hundreds of millions of people make billions of calls a day. Some premium VOIP services charge $5 to $25 a month and are subject to a 3 percent federal excise tax.

But by and large, the most popular VOIP services are free — of fees and taxes.

Here’s a bit of background on VOIP from a CNET story:

“VoIP refers to voice calls that are routed over online networks using the Internet Protocol — the IP that serves as the backbone of the Internet and is used to ferry e-mails, instant messages and Web pages to millions of PCs or cell phones.

“VoIP calls are just another application riding over the Internet. And these calls are unregulated. So at their core, they are no different from e-mails, instant messages or Web pages, which all can be distributed for free between Internet-connected machines. Those include computers and wireless devices, such as cell phones and handhelds, that are set up to receive online information.”

So, yes, the Santa Ana City Council wants to tax an Internet app that people have long used for free. I read the 32-page staff report available here on the proposed utility tax, and it shows not the slightest bit of understanding as to what VOIP is and how it works.

If anyone did have a clue, then of course the question of how would it be possible to enforce a tax on a particular use of the Internet might have come to mind.

Instead, members of the Santa Ana City Council just followed their first instinct: If it moves, tax it!

Ronald Reagan saw this coming long ago.

By Joseph Perkins

The California Public Utilities Commission is displeased. In a meeting April 17 in San Francisco, four of its five members sharply criticized a state Senate bill which, they claimed, would strip the commission of its power to regulate basic phone service.

What surprises is that the measure, SB 1161, was introduced not by a free-market Republican but by Los Angeles Democrat Alex Padilla, chairman of the Senate Energy, Utilities and Telecommunications Committee.

Padilla’s bill would prohibit the PUC from regulating Internet-based phone service, known as Voice over Internet Protocol. It passed his committee this week by an 11-0 vote, a rare instance in the state capital in which legislation has garnered unanimous support on both sides of the aisle.

PUC Commissioner Michael Florio insisted yesterday that SB 1161 is unnecessary, that he and his colleagues have exercised a “light touch” in regulating VoIP. “Nobody is talking about regulating the Internet,” he said. “It’s just a political slogan that has no basis in reality.”

Well, the PUC has restrained itself — so far — from heavy-handed regulation of VoIP. But that hardly means the commission will maintain such a light touch going forward, as consumers increasingly rely on VoIP to make and receive phone calls.

Indeed, VoIP is a “disruptive” technology. It uses high-speed broadband Internet service to connect callers at minimal cost, while also offered advanced features — think Skype — unavailable on standard phone systems.

Currently, nearly one in three residential phone subscribers relies on VoIP connections. At the rate VoIP usage is growing, it will not be very long before old-school copper-wire land lines are rendered obsolete.

Special interests

That concerns special interest groups that want the PUC to regulate the growing Internet-based voice industry; that are peeved at Padilla and his Senate colleagues for its preemptive strike against Florio and his fellow regulators.

“SB 1161 is a wolf in sheep’s clothing,” said Mark Toney, executive director of The Utility Reform Network, an activist consumer group. It not only would prevent the regulation of VoIP, he warned, but also “would mean the end of regulatory oversight over large monopoly phone companies.”

Toney’s alarmist pronouncement was echoed by Val Afarasiev, a spokeswoman for the Communications Workers of America. She predicted that avaricious phone companies “are going to inform the consumers of California that no longer will they provide touch-tone type of wire-line services because they are going to move to VoIP services.”

These are the same old arguments that previously have been made mustered against the deregulation of telecommunications; the same dire warnings that have previously proven unfounded.

In fact, deregulation of the phone business has been a tremendous boon to consumers. Competition among various service providers — including traditional providers of land lines, cable companies, wireless companies and VoIP companies — has meant lower-cost local and long-distance calling.

Padilla deserves much credit for defying the PUC; for ignoring TURN, CWA and other knee-jerk opponents of telecom deregulation. Yes, passage of SB 1161 will indeed benefit California phone companies. But it will much more benefit California businesses and residents.