Is it time for a network tax cut?


It is truly remarkable to what extent corporate and personal behavior is dictated by tax policy. Much of the discussion in our nation’s capital in regard to tax reform has been about competitiveness as a rational to lower corporate tax rates. It appears as though the United States charges a 20 percent higher tax rate than much of the rest of the world, forcing corporations to shift some operations and assets into lower tax rate jurisdictions. It’s safe to say that tax policy impacts behavior in measurable ways.

Just yesterday I was speaking with a communications service provider analyst. We discussed the overhead of SD-WAN tunnels. I showed the math of how it can tax various protocols. The tax for various protocols was:

Patrick Melampy

The analyst even agreed that based on an average mix of traffic (iMix), that the weighted average across all protocols might be as high as 30 percent for many organizations.

What was shocking is his response that “Nobody cares about tunnel overhead.” I have heard this from many in our industry. In fact, it’s generally taken as fact – tunnel overhead is negligible. While it may be true, on a single site, single WAN connection, 30 percent extra bandwidth may not move the needle, if you have 2,000 sites, and you are using/building/paying for connectivity, over the long haul you will spend 30 percent more. The fact that everyone in our industry dismisses this as “noise” is shocking, especially since most believe bandwidth rates will double yet again.

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