Sen. Lamar Alexander has jumped on the technology bandwagon—not to promote it, but to ensure it is adequately taxed in the future. For his efforts, Tennessee’s junior senator has been pilloried as a Neanderthal who is stalling the adoption of revolutionary information technology.

A self-defined political maverick, Alexander is more in touch with his ex-governor side lately, having inserted himself promptly into the debate of whether or not to tax the Internet. With a group of fellow lawmakers, the first-term Republican is sponsoring legislation in the U.S. Senate that, if passed, would set a two-year limit to the proposed Internet Tax Nondiscrimination Act and Internet Access Nondiscrimination Act currently pending in the House and Senate, respectively. Those acts aim to permanently exempt Interned-based services from taxes, which Alexander says amounts to an “unfunded mandate” by the federal government. He calls such exemptions “the most obnoxious form of federal action possible.”

At the heart of the debate is the so-called voice over Internet protocol technology, or VoIP, which potentially could allow broadband Internet users to drop $30 to $40 in monthly charges from traditional phone companies once they download a program enabling phone conversations via the Internet. While to some, calling up Mom on the computer via broadband fiber lines might seem like the stuff of the distant future, others (including Alexander) have concluded that in a few years most phone conversations will indeed be routed this way, thus phasing out old circuit-switched phone systems. Young startups such as Skype and Vonage are still tweaking their VoIP offerings, but once the service gains momentum, Alexander and fellow lawmakers predict that state and federal governments may lose roughly $20 billion a year in taxes if Internet access is not taxed or if VoIP is deemed “information service” by law.

But in the words of The Wall Street Journal, Alexander’s “unfunded mandate” logic is tortured, and his narrow focus on protecting state and local governments’ revenue streams threatens to undermine the development of new high-tech business. His behavior, according to the November 2003 editorial, is widening the “digital divide.”

When asked by Business Tennessee, Alexander defends his stance. “I favor light regulation, not over-regulation,” he says. “It may be that there should be government subsidy to high-speed Internet technology, but Congress should pay for it instead of state and local governments.”

Alexander says nothing made him madder as Tennessee’s governor than when some congressman in Washington enacted a law that forced him “to scramble to fire teachers, raise tuition or close a state park.” His efforts to shorten the Internet tax breaks started at the end of last year when Gov. Phil Bredesen picked up the phone and placed a call (presumably through a traditional circuit-switched network of copper wires) to Alexander, followed by a letter that cautioned against “large negative financial implications for Tennessee” if the Internet remained untaxed indefinitely.

Opposing Federal Communications Commission Chairman Michael Powell on the issue of Internet taxation, Alexander likens VoIP technology to a speeding freight train, with state and local governments tied to the railroad tracks before it. With Federalist sympathies, he argues that Internet non-discrimination policies deny the federal government the mandate to block states and localities from tapping the potential tax stream. “A permanent ban would be totally unjustified.” Instead, the FCC and Congress should be addressing the likely migration of a growing number of services to the Internet, Alexander says.

Not so, says ISDN-Net general manager, David Wise. Thanks, in part, to the Internet tax exemption, ISDN-Net was the first company to roll out its VoIP service for Tennessee businesses in early 2004, just beating BellSouth’s plan to start VoIP in the fourth quarter of this year. “Any time a tax is levied on new technology, it affects the likelihood of people signing up for it,” Wise says. He urges state and local governments to support building fiber networks tax-free because they could rent them out to companies for a fee, thereby regaining the lost tax dollars. That, in his view, would constitute progress, not the efforts to tax VoIP calls, which today are impossible to track and time.

Whether the view of Alexander or Wise holds sway in the short run, Internet commerce is likely to continue its robust growth. Nielsen Net Ratings’ February survey found 204.3 million people online in the United States, or 74.9% of America’s population of 272.8 million. Armed with such figures, Alexander is unlikely to give up his convictions of taxing the Internet, especially since he was one of the first politicians to recognize that people are going to increasingly demand bundled services that include phone, Internet and television, via their broadband connections.

Calling for a two-year limit to the Internet non-discrimination moratorium, Alexander is hoping to buy time to find a technological middle ground between the two staples of conservatism—lower taxes and federalism. Failing some meeting of the minds, expect Internet phone calls to Mom to carry an ample Tennessee tariff starting in 2006.