Fitting a Square Peg into a Round Hole:
The Prepaid Wireless Industry and E-911 Fees
Presentation to
Conference of Western Attorneys General
2011 Annual Meeting
Kona, Hawaii
By
Richard Salzman – Executive Vice President & General Counsel
TracFone Wireless, Inc.
July 11, 2011
Postpaid Wireless: The
Traditional Model
 Users
use.
pay for minutes after
 Providers
send customers
monthly bills.
State Taxes, Fees And
Postpaid Wireless

States rely on monthly bills to
collect sales taxes and E-911 fees.

Benefits of this approach:
Customer pays tax or fee.
 Transparency
 Avoids potential illegal tax.

A New Twist On Wireless: The
Emergence Of The Prepaid Industry

Developed to serve the tens of millions of
customers who had no credit or low credit and
therefore could not qualify for a traditional
wireless service contract.

Prepaid wireless is purchased on a “pay-as-you
go” basis in retail stores (e.g., Wal-Mart, Target,
Best Buy).

Service is purchased in advance and there are no
required long-term service contracts and thus no
monthly bills.
Who Provides Prepaid Wireless Service?

All major national carriers (AT&T Mobility, Verizon
Wireless, T-Mobile and Sprint), among others,
offer prepaid wireless service.

TracFone Wireless, Inc. is the largest prepaid
provider with over 18 million prepaid customers.

There are now over 64 million prepaid wireless
customers in the United States.
TracFone Handsets and Airtime Cards
Retail Prepaid Wireless Display
So, What Is The Issue?

States are trying to shoehorn prepaid wireless
into tax and E-911 fee statutes that were
established and intended for postpaid wireless.

Those schemes, however, do not work because
prepaid carriers do not use monthly bills.

Even more recent statutes don’t always
adequately address the prepaid business model.
What Are The Legal & Policy Issues
With The Existing Schemes?

Burden of E-911 fee shifted to some but
not all prepaid wireless providers.

Lack of transparency.

Potential for illegal sales tax on E-911 fee.
So, What Is The Solution?

The solution is to have the E911 fees “billed” or
charged at the time of sale by any retailer selling
the prepaid wireless service in the state.

After being recommended by the National
Conference of State Legislatures in 2009, this
“Point-of-Sale” solution is now the law in 20
states:

Colorado, District of Columbia, Georgia, Illinois (awaiting
governor’s signature), Indiana, Kansas, Louisiana, Maine,
Mississippi, North Carolina, Oklahoma, Pennsylvania, Rhode
Island, South Carolina, Tennessee, Texas, Utah, Virginia,
West Virginia and Wisconsin.