FCC's net neutrality rules open door to new fee (Tax) on Internet service
FCC's net neutrality rules open door to new fee on
Internet service
Phone bill fee could start appearing on broadband bills
in an expansion of the Universal Service Fund program
FCC net neutrality rules put broadband in same regulatory
category as phone service, opening door for USF fee
By Jim Puzzanghera April 9, 2015, 3:00 AM Reporting from
WASHINGTON
Recently adopted net neutrality regulations soon could
make your monthly Internet bill more complicated — and potentially more
expensive..
Every month, consumers pay a small fee on their phone
bills for a federal program that uses the money — a total of $8.8 billion
raised nationwide last year — to provide affordable access to
telecommunications services in rural areas, underserved inner cities and
schools.
Now the fee could start appearing on broadband bills too,
in a major expansion of the nearly two-decade-old Universal Service Fund program.
It's not clear yet, however, if most consumers would end
up paying more in total USF fees than they do now.
In approving the tough rules for online traffic in
February, the Federal Communications Commission put broadband in the same
regulatory category as phone service, opening the door for the charges.
For phone service, telecom firms pass the fees directly
to their customers, with the average household paying about $3 a month.
Those who opposed the net neutrality rules foresee the
fees rising.
"The federal government is sure to tap this new
revenue stream soon to spend more of consumers' hard-earned dollars,"
warned Ajit Pai, a Republican on the FCC. "So when it comes to broadband,
read my lips: More new taxes are coming. It's just a matter of when."
Higher fees on Internet bills could make the service
unaffordable for some people, reducing broadband adoption instead of expanding
it, critics said.
The FCC held off on adding the assessment until a special
federal and state board that has been weighing whether broadband providers
should contribute to the fund makes a decision in the coming weeks.
FCC Chairman Tom Wheeler, a Democrat, argued that even if
broadband firms are required to contribute, there are no plans to increase the
annual size of the fund. That means the cost simply would be spread among more
customers, and in many cases a new broadband fee would be offset by a lower fee
on a consumer's phone bill.
"I think it is incorrect ... to say anything in what
we have done will lead to an increase in [USF] fee contributions," Wheeler
told House lawmakers at a recent hearing.
"You would have a reduction in one area that may be
accompanied by an increase in another that should end up washing out because
the gross number is the same," he said.
So, for instance, under his view, a customer with both
phone and Internet service from the same carrier might still pay about $3 a
month, but it could be split between the two services instead of allocated all
to phone service.
But when pressed on the issue at a House hearing last
month, Wheeler would not guarantee that consumers will not end up contributing
more to the fund.
Critics pointed out that his reckoning assumes that the
total amount of the fund wouldn't be increased by the agency.
The FCC sets the size of the fund, and the size has been
increasing almost every year as the focus has shifted from providing phone
service to providing Internet access to those without it. The fund has grown
about 47% since 2004.
In December, the agency approved a $1.5-billion annual
increase in the amount the fund can spend to help boost high-speed online
services for schools and libraries under the E-rate program.
E-rate is one of four programs funded by the USF, which
was created as part of the 1996 overhaul of telecommunications laws. The other
programs provide assistance for low-income consumers, help rural residents
connect with healthcare providers and help customers in isolated areas pay the
higher costs of reaching them.
Rep. Greg Walden (R-Ore.), who heads a House subcommittee
that oversees the FCC, proposed last month that Congress cap the fund at $9
billion a year to stop its "runaway growth."
One of the problems with assessing USF fees is that
they're based on what has quickly become a less popular way of communicating.
Fees are collected on a percentage of carriers' revenue from long-distance
calls. Intrastate calls are subject to fees for similar programs run by
individual states, including California.
Revenue from long-distance calls, however, has been
declining as conventional voice calling has been replaced by email, text
messaging and Internet video calling services such as Skype.
So to raise the amounted needed for the USF every year,
the FCC has had to increase the percentage of long-distance revenue subject to
the fee. It has risen to 16.1% in December from 8.9% at the end of 2004.
Last summer, the FCC asked the joint federal-state board
that helps implement the program to make recommendations about how to expand
the contribution base, including whether broadband service should be assessed.
Public interest groups have argued that because the fund
increasingly is being used to pay for Internet access, companies that provide
such services should be contributing.
"We're funding broadband deployment with USF, but
we're not bringing broadband into the contribution base," said Matt Wood,
policy director at Free Press. "That's just not sustainable long
term."
The Office of Ratepayer Advocates at the California
Public Utilities Commission supported the FCC's net neutrality regulations, in
part, because they would give federal and state officials more ability to
expand broadband access.
The rules would "ensure that broadband users share
in the financial burdens" of providing the service, the office said. They
also expose broadband providers to additional state fees.
But the FCC has prohibited assessing fees on broadband
while it awaits the joint board's recommendation on the issue.
If broadband is subject to new federal and state
telecommunications fees, consumers could end up paying a total of as much as
$11 billion a year more, said Hal Singer, a senior fellow at the Progressive
Policy Institute, a centrist Washington think tank.
"As soon as the joint federal-state board moves
forward, states are free to do what they want," said Singer, who studied
the potential effect along with Robert Litan, a senior fellow at the Brookings
Institution.
Wood of Free Press said Singer's estimate vastly
overstates the potential effect because states would need to take steps to
adapt their various fees. In addition, the Internet Tax Freedom Act prohibits
any new taxes on Internet service that weren't in place when the law was passed
in 1998, although it's unclear if the restriction applies to new fees.
The National Cable and Telecommunications Assn. trade
group is worried about USF fees being applied to the service provided by its
members, such as Comcast Corp. and Time Warner Cable Inc.
As the FCC was considering the net neutrality rules, the
group urged it to permanently prohibit assessing the fees on broadband because
they would "undermine the efforts being made by cable operators and the
commission to promote broadband adoption."
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