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Senators back new broadband taxes

Politicians from rural states want to extend controversial tax to subsidize broadband access in far-flung areas.

WASHINGTON--New broadband taxes may be on the horizon, if an influential senator and his like-minded colleagues get their way.

At a Tuesday hearing convened by the Senate Commerce Committee, several senators from largely rural states called for expansion of the Universal Service Fund (USF), a multibillion-dollar pool of money that's currently used to subsidize telecommunications services in rural and other high-cost areas, schools and libraries.

Committee Chairman Ted Stevens, an Alaska Republican who counts himself among the fund's staunch supporters, said Tuesday that "without Universal Service, just having a dial tone would average about $200 per month" for many residents in his home state.

Right now, long-distance, wireless, pay-phone and wireline telephone services are required to contribute a fixed percentage of their revenues to the fund, which they typically do by tacking an additional fee onto their customers' bills.

But supporters of the fund, which gives out on average more than $5 billion each year, say it has dwindled because traditional services, such as long-distance, are taking in less money, while unanticipated voice technologies, such as voice over Internet protocol (VoIP), are not expressly required to pay up. (A number of the larger voice over Internet protocol providers, including Vonage, have said they already pay into the fund, but there doesn't appear to be a formal regulation requiring them to do so.)

Several senators said they want to change that by making USF contributions "technology neutral," which for many means scooping up broadband services both as contributors to--and benefactors of--the fund. The debate reflects Congress's broader attempt this year to update the 1996 Telecommunications Act, which critics have deemed outdated because it fails to account for the explosion of the Internet.

Stevens, for one, said he thinks all "communications" services, which he defined for reporters after the hearing as "transmitting knowledge from one person to another," should be forced to pay into the USF. "I believe fax is a communication, I think e-mail is a communication, and I do believe they all should contribute," he said.

He isn't the only one. Sen. Conrad Burns, a Montana Republican on the Commerce Committee, introduced a bill earlier this month that would require contributions from "every provider of "telecommunications, broadband service or broadband voice service," including all cable, DSL, spectrum, and other broadband providers.

His bill, however, appears to word its contribution mandate for "broadband voice" services broadly enough to include not only voice over Internet protocol providers but also free, voice-based instant messaging services. Derek Hunter, a spokesman for Burns, told CNET News.com recently that his boss's bill isn't intended to sweep up the latter breed of services.

Politicos in the U.S. House of Representatives designed to restructure the subsidies in a similar way, so that they can be used toward deployment of broadband as well as traditional telephone service.

Who pays?
At Tuesday's hearing, debate also centered on the appropriate methodology for the Federal Communications Commission to use to determine payments to the fund. Representatives from smaller cable and telecommunications companies urged the senators at Tuesday's hearing to leave federal regulators the flexibility to settle on any tactics they please.

FCC Chairman Kevin Martin has indicated he is leaning toward a "numbers-based" approach, in which anyone with a phone number would pay into the fund. The National Cable and Telecommunications Association, and the VON Coalition, which represents VoIP interests, also support that approach.

"Simply to say that broadband as broadband, whatever that might be, has to pay into USF would be an error, but the telephone service portion of that certainly should pay into USF," Tom Simmons, vice president of public policy for Midcontinent Communications, a small South Dakota-based cable company, told the senators.

Paul Garnett, assistant vice president of regulatory affairs for the Cellular Telecommunications Industry Association, countered that a numbers-based approach would be unfair. He said the cell phone industry, which already pays into the fund, thinks broadband providers should also have to pay a fee for each active connection--what it calls a "capacity-based" approach.

Though all the senators at Tuesday's hearing clearly agreed on the need for USF reform, their priorities differed. For instance, Jim DeMint, a South Carolina senator who has introduced a broadly deregulatory proposal advocated phasing out USF handouts entirely in certain areas where new broadband technology is actually less inexpensive to deploy than its telecommunications predecessors.

"As we look for fairer ways to spread the cost out," he said, "I think we need some ideas on how we can move areas away from subsidization and move into competition."