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FCC to tax broadband Internet

Photo of Betsi Fores
Betsi Fores
The Daily Caller News Foundation

The Federal Communications Commission has made universal Internet access a top priority — even, critics say, if it comes at the expense of other customers.

Under the Connect America Fund, the FCC will reconfigure the preexisting Universal Service Fund (USF) to create subsidies for companies to develop the infrastructure to get people online in rural areas where it is more expensive to provide broadband.

The FCC  remarked in a blog post Friday, “Ultimately, the consumers who pay for universal service, consumers who directly benefit from expanded rural networks, and all who value a vibrant, ubiquitous broadband network are the winners in the changes we’re implementing today.”

Under the Telecommunications Act of 1996, the USF was created with the goal promoting “the availability of quality services at just, reasonable and affordable [telecommunication] rates for all consumers.”

The USF charges higher rates in urban areas in order to provide affordable rates to rural consumers.  While it is considered an assessment or fee, the FCC essentially taxes urban residents on their phone bills for the benefit of more rural communities.

“The tax is on consumers,” Brookings Institute vice president Joe West  told The Daily Caller News Foundation. “But the tax revenue goes to the businesses to subsidize their coverage.”

“Right now, the money goes to mainly rural phone providers on the idea that their costs are very expensive to have to wire remote geographic areas therefore they need subsidies to now defer their costs,” West continued. “The change is basically moving that model to broadband and the revenue would go to broadband companies to help them to provide the service to rural areas.”

The fee may seem small on an individual basis, but according to the Leichtman Research Group, there are more than 80 million total broadband subscribers. Even a minimal fee for individual consumers would create a multi-billion dollar government fund to pass out money to other companies.

When asked if the USF runs a deficit, West simply explained that the costs for the USF have been high because they’ve had to extend the infrastructure into rural areas.

Other sources indicate that the cost of supplying telecommunication to rural areas has surpassed the initial  projects and now, looking for another revenue source, the commission is taxing internet broadband to fill the gap.

Google strongly supports the FCC’s expansion of broadband. As they express in their FCC comments, “The record strongly supports expanding the USF contribution base to include broadband Internet access services.” Other companies to support the changing regulation include AT&T and Sprint.

 

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