FCC eyes tax on Internet service

The Hill ^

[Sub-Driver]

FCC eyes tax on Internet service By Brendan Sasso - 08/26/12 06:00 AM ET

The Federal Communications Commission is eyeing a proposal to tax broadband Internet service.

The move would funnel money to the Connect America Fund, a subsidy the agency created last year to expand Internet access.

The FCC issued a request for comments on the proposal in April. Dozens of companies and trade associations have weighed in, but the issue has largely flown under the public's radar.

"If members of Congress understood that the FCC is contemplating a broadband tax, they'd sit up and take notice," said Derek Turner, research director for Free Press, a consumer advocacy group that opposes the tax.

Numerous companies, including AT&T, Sprint and even Google have expressed support for the idea.

Consumers already pay a fee on their landline and cellular phone bills to support the FCC's Universal Service Fund. The fund was created to ensure that everyone in the country has access to telephone service, even if they live in remote areas.

Last year, the FCC overhauled a $4.5 billion portion of the Universal Service Fund and converted it into a broadband Internet subsidy, called the Connect America Fund. The new fund aims to subsidize the construction of high-speed Internet networks to the estimated 19 million Americans who currently lack access.

Julius Genachowski, the FCC's chairman, has made expanding broadband access his top priority. He argues that a high-speed Internet connection is critical for succeeding in the 21st century economy and that expanding Internet access is the country's next great infrastructure challenge.

But the money for the new Internet subsidy is still coming from the fees on phone bills.

And in recent years, with more people sending emails instead of making long-distance phone calls, the money flowing into the program has begun to dry up. The Universal Service fee has had to grow to a larger and larger portion of phone bills to compensate.

The FCC floated a number of ideas for reforming the fund's contribution system. In addition to the broadband fee, the commission also sought comments on taxing text messages, as well as levying a flat fee on each phone line, instead of the current system, which is based on a portion of the revenue from interstate phone calls.

The commission only sought input on the ideas and did not indicate whether it planned to move ahead with any of them, including the broadband fee.

When the FCC released its proposal, Genachowski issued a statement saying the current contribution system is outdated and full of loopholes.

"Today we propose three goals for contribution reform: efficiency, fairness, and sustainability," Genachowski said. "And we underscore that any reforms to the contribution system must safeguard core Commission objectives, including the promotion of broadband innovation, investment, and adoption."

In its filing, Google argued that the evidence "strongly supports expanding the [Universal Service Fund] contribution base to include broadband Internet access services."

According to Google, taxing broadband service is preferable to taxing the kinds of online services it offers, like email or Google Voice.

"Saddling these offerings with new, direct USF contribution obligations is likely to restrict innovative options for all communications consumers and cause immediate and lasting harm to the users, pioneers, and innovators of Internet-based services," Google argued.

But Turner argued that imposing a fee on broadband access, even if it is only a dollar or two, would discourage many people from buying the service—the exact opposite outcome of what the FCC is trying to achieve.

"For folks who are thinking about adopting broadband, who have much lower incomes or don't value broadband as much—that extra dollar on the margins will cause millions of people... to not adopt," Turner said.

The FCC could run into legal problems with the Internet Tax Freedom Act, a 1998 law that bans the government from taxing Internet access. But the FCC has long argued that Universal Service is a fee that the providers choose to pass on to consumers and not a tax.

Turner said it is unlikely that the FCC will make any controversial moves before November's election.

"I don't anticipate that the chairman would move to adopt a drastic overhaul ahead of the election," he said.

[Sub-Driver]

Knew this was coming........

[EGPWS]

The #1 agenda of Washington DC.....apply taxes and collect revenue.
All else is just there to give reason to tax more.

[svcw]

I already pay taxes on my internet service, now more.

[Carry_Okie]

Corporations as tax collectors.

It's been happening in California for decades now. They can initiate enforcement in a heartbeat without cause. They even get to make money on the float.

For those FReepers fond of NRST, please take note.

[41Thunder]

The FCC has no taxing authority. They can impose a fee like they do on telecomm but it can’t be legally considered a tax. It’s time to tell the FCC to BUTT OUT and leave the internet alone.

[Jacquerie]

If every Freeper pinged his Rep and Senator each and every time the fourth branch, the unelected administrative branch, violated Article I Section 1 of the Constitution, we could turn this nation around.

In Florida, the Tea Party legislature and governor that assumed office early last year, passed a bill that required administrative agencies to get legislative approval for all regs that could cost society one million or more dollars over five years.

The enviros are still pulling out their hair, but the law moved legislative responsibility back to where it belongs. Without such fundamental reform at the national level, what remains of our republic is finished.

[SoFloFreeper]

Numerous companies, including AT&T, Sprint and even Google have expressed support for the idea.

Uh, I thought only Congress could institute a tax... and who CARES what these big companies think? They can absorb an increased tax--smaller ISPs will go under. The FCC can cram it hard and turn it left.

[soycd]

More taxes to go to the urban trash so they can organize more flash mobs to get more free stuff.

[jeffc]

I am very dissatisfied with the BW I get out here in rural Ocala, FL, where people only a few miles away can get nearly double what I get for only a few dollars more a month (different ISP), but I sure don’t see a need for a tax to help others (wherever they may be) get access, especially when anyone can get a satellite service! The gub’mint just wants the money so they can spend it.

[Sherman Logan]

They can absorb an increased tax--smaller ISPs will go under.

Not the way it works. ISPs won't pay the tax, it will be passed on to consumers.

If all suppliers of a service have the same taxes or fees imposed on them, it's a competitive wash. Price to the consumer goes up, but the competitive position of the suppliers is unchanged.

Same as with sales tax, which is theoretically charged to the vendor.

[dfwgator]

They can impose a fee like they do on telecomm but it can’t be legally considered a tax.

"If it walks like a duck..."

[Biggirl]

You have to be kidding! This is a way to control the internet!

[Repeal 16-17]

The FCC could run into legal problems with the Internet Tax Freedom Act, a 1998 law that bans the government from taxing Internet access. But the FCC has long argued that Universal Service is a fee that the providers choose to pass on to consumers and not a tax.

Oh, it's a FEE not a TAX. Meanwhile, the PENALTY in ObamaCare was actually a TAX.

Washington, D.C.: Where the English language goes to die.

[Focault's Pendulum]

But the FCC has long argued that Universal Service is a fee that the providers choose to pass on to consumers and not a tax.

Bullshit!

[Fresh Wind]

And if you turn off your Internet service, you will still have to pay a penalty tax for not having the service, according to recent rulings by the USSC.

[fella]

I could have sworn that I read somewhere on an old yellow piece of paper that only the Congress could levy a new tax. But then I guess that is just so yesterday.

[FrankR]

Awww shucks...don’t worry...Justice Roberts will probably rule that it’s a “penalty”, not a “tax”.

[1_Rain_Drop]

"Last year, the FCC overhauled a $4.5 billion portion of the Universal Service Fund and converted it into a broadband Internet subsidy, called the Connect America Fund. The new fund aims to subsidize the construction of high-speed Internet networks to the estimated 19 million Americans who currently lack access. "

They should hold off the tax. There's still no broadband in my area. Obama promised that all would have broadband. He still has 147 days 23 minutes to do this.

[catnipman]

“1998 law that bans the government from taxing Internet access. But
the FCC has long argued that Universal Service is a fee that the
providers choose to pass on to consumers and not a tax.Turner said it is unlikely that the FCC will make any controversial moves before November’s election.
“I don’t anticipate that the chairman would move to adopt a drastic overhaul ahead of the election,” he said.”

Simply a taste of things to come if Obama gets re-elected and is no longer accountable to the voters. As he told Putin when contemplating selling out U.S. security to the Russians, give him some breathing room as he’ll have more “flexibility” after he’s re-elected. No more pandering to pesky voters will be necessary by the Great Destroyer.

[daniel1212]

Then what is next (paid for by the Universal Service Fee on your phone bill):

The Obama Phone Program

What exactly is the free Obama phone? The free Obama phone is a program that is meant to help the financially unstable who cannot afford access to a cell phone. Communication should not be limited to people in relation to what they are able to afford. The Lifeline program was actually created decades ago to help low income families have access to land lines. Over the years the cost of cell phones and cellular service has decreased and the program has been extended to cover cell phones.