New tax for broadband customers?

Legislators say broadband companies should contribute to fund for rural areas. Customers would bear load.

Many broadband customers will pay new universal service taxes akin to those on their telephone bills if Congress bows to suggestions from rural legislators.

The suggestions came as lawmakers started debating changes to the Telecommunications Act of 1996, which created the framework for the Universal Service Fund, overseen by the Federal Communications Commission.

The USF currently collects a fixed percentage of revenues from long-distance, wireless, pay phone and telephone companies so that it can pass on subsidies to low-income customers, high-cost areas, and rural health care providers, schools and libraries. Most companies come up with their share, set for this quarter at 10.2 percent, by charging their customers a fee.

The USF should continue to be "industry funded," but the base of contributors should be expanded to "all providers of two-way communications, regardless of technology used, to ensure competitive neutrality," a bipartisan coalition of rural legislators said in a June 28 letter to the U.S. House of Representatives Energy and Commerce Committee, which will be drafting the rewrites. That means companies providing broadband services such as VoIP over telephone wires would also have to pay into the fund.

"We need to ensure government policies protect the infrastructure that makes advanced services, including broadband, possible and available to everyone in the United States," said the letter, signed by 62 House members.

"If our residents are to be competitive in today's fast-paced, technology-driven global marketplace, our communities will require affordable high-speed, high-capacity access to data and information over the Internet," Rep. John Peterson, R-Penn., co-chairman of the Congressional Rural Caucus, said at a press conference held the day the letter was released. "If the private sector is either unwilling or unable to provide that service at an affordable price, we'll find a way to provide it for ourselves."

The wireless industry applauded the proposed change "since wireless consumers are significant and disproportionate payers into the universal service and intercarrier compensation systems," Steve Largent, CEO of CTIA - The Wireless Association, said in a statement.

But Randolph May, a senior fellow at the Progress and Freedom Foundation, a market-oriented think tank, said policy-makers should be cautious before making any changes. Broadband access, he said, is getting cheaper and more widely available.

"It's not clear that any subsidies are needed," May said. "But if policy-makers want to provide some subsidies, they should be, in my view, carefully targeted to low-income people that really need them."

The Universal Service Fund in recent years has faced allegations of waste, fraud and abuse. The FCC announced in June a formal inquiry into its management.

Featured Video
This content is rated TV-MA, and is for viewers 18 years or older. Are you of age?
Sorry, you are not old enough to view this content.

Is 'Chipgate' the new iPhone controversy?

We survived "Bendgate" with the iPhone 6 -- is it "Chipgate" for the iPhone 6S? Plus, you can expect the new iPad Pro and Apple TV by early November.

by Brian Tong