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Willamette Week: “Dialing For Dollars – Growth of prepaid cell phones shorts Oregon’s 911 system”

March 20, 2011

This article is almost the same as the one I posted prior to this.  The key quote:  “20 percent of contract users plan to switch to prepaid phones this year alone.”  Red highlights are mine.

Dialing For Dollars
Growth of prepaid cell phones shorts Oregon’s 911 system. Is a sales tax the answer?

Prepaid mobile phones could threaten your safety.

No, not because prepaid phones are often the communications tool of choice for criminals.

But because consumers are dumping traditional cell service in favor of prepaid phones.

And that rapid shift in consumer preferences threatens a vital source of funding for Oregon’s 911 system—the 75-cents-per-month-per-phone line that provides a major chunk of funding to ensure your emergency call gets a timely response.

Lawmakers will hold a work session on the relevant measure, House Bill 2075, on March 14.

But in recent testimony before the House Revenue Committee, Laura Wolfe, a senior management analyst with the City of Portland’s Bureau of Emergency Communications, told lawmakers that about one in five cell calls comes from a prepaid line. Some surveys show that 20 percent of contract users plan to switch to prepaid phones this year alone.

The problem arises, Wolfe and others testified, because there’s currently no mechanism for the state to collect the monthly 75 cents from either prepaid phones or Voice-over-Internet Protocol (Skype, for example).

“This lack of support by the prepaid wireless phone industry has deprived the Oregon 911 program of an estimated $6.8 million in 2009,” Wolfe testified.

Currently, the monthly fee generates about $40 million a year for the state’s 911 program.

Two groups—the Special Districts Association of Oregon, which represents fire departments and other public safety clients, and the Oregon Public Utility Commission—are pushing for prepaid and Internet callers to join in paying the tax.

Both groups say that change is only fair.

“If fixed interconnected [Voice-over-Internet] and prepaid telecommunications service are not required to contribute, the surcharge for their customers’ access to 911 emergency services will continue to be paid by landline and wireless ratepayers,” Oregon PUC program manager Jon Cray told lawmakers.

Adam Grzybicki, president of AT&T Oregon, testified, however, that the proposed solution of deducting the monthly fee from prepaid accounts is tricky and not done elsewhere.

“If folks know they’re going to be taxed,” he said, “of course…[they] want to avoid that tax.”

Just how the tax would be collected brings the otherwise obscure issue in contact with large and powerful corporations and the two words that are the third rail of Oregon politics: “sales tax.”

The big prepaid cell-phone providers do not want the hassle of collecting the 75 cents per month fee.

Those who use prepaid phones do not pay monthly bills, so administering their accounts is more complicated.

The telecom companies want the big retailers such as Walmart, Target and Costco, which sell most prepaid phones, to collect the tax when they sell the phones.

But advocates for the 911 system say setting up a point-of-sale system to collect the money would cost as much or more as it brings in.

And even if such a system were feasible, they say, collecting something from Oregon consumers that looks like a sales tax is political suicide.

“We aren’t like other states and we don’t look like other states when it comes to point of sale systems,” said Rep. Vicki Berger (R-Salem), co-chair of the House Revenue Committee.

Rep. Matt Wand (R-Troutdale) echoed that sentiment.

“This really strikes me as a sales tax,” Wand told the phone company reps. “I won’t vote for a sales tax.”

FACT: The 911 system is already undergoing a massive change—the shift from land lines to cell phones. In 2005, City of Portland figures show, 42 percent of the 1 million 911 calls city operators received came from cell phones. Now, about 67 percent of such calls come from cell phones.

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