Why Big Tech should be on the hook for closing the digital divide
Commissioner Carr, thanks so much for joining us to talk about a proposal you published in Newsweek about reforming the Universal Service Fund.
But before we get started and really dig into the details of that, can you just explain what is the Universal Service Fund, and why do you think it needs to be fixed?
So the Universal Service Fund is the federal government's current initiative.
For bridging the digital divide, and it covers a range of programs from telehealth to low income programs, to building out internet infrastructure in rural communities where the private sector, sector business case simply isn't there.
Right now, it's roughly a $9 billion a year program.
So what we do is we impose what's effectively a tax Consumers monthly bills.
And right now that tax is 30%.
And that allows us to collect this pool of $9 billion that we then push out through those various programs that I mentioned.
Historically, the number was a lot lower when I started in the early 2000s.
Looking at this issue, it was in the five and 6% range But what's happened is the revenues associated with the telephone network have been declining sharply from a peak of around 80 billion.
The 2000s to now 30 billions was that base of revenues shrinks?
We've been increasing the percentage of that tax to make up the difference over the last two years alone.
It's gone from roughly 20% Over 30%.
So it's really stuck in this death spiral.
And therefore a lot of us are thinking what's a more sustainable way of replacing that model because, again, we're, we're looking at the telephone network revenues to support the build out of the internet, which in many cases, a different network and so I've described that as basically Taxing horseshoes to pay for highways.
And then when you look at the funding initiatives that Congress is looking at right now for infrastructure efforts, that's potential additional dollars out there.
And so I've been looking at ways to make a sustainable funding model.
And that's why I proposed this idea of looking to big tech Yeah, so tell me a little bit more about that.
Like, who is big tech to you?
I mean, who would you expect to be footing the bill for this?
Historically, you look back at the telecom network from the mobile era to the most recent past, we look at the businesses that benefit the most from a network to pay a fair share for supporting that network.
So for the traditional telephone network, We usually looked at regular businesses.
So we had relatively high local and long distance fees for businesses that resulted in relatively lower charges for consumers.
And that supported the build out.
Well flash forward to today.
The modern network is the internet and the businesses that are benefiting off that are big tech.
So you have Facebook, Amazon, Apple, Netflix, a lot of the streaming services that are out there.
And those are the entities that today are benefitting tremendously from the network.
But there's been a divergence from that historic precedent of having the businesses that benefit pay for the network and right now Big tech pays effectively nothing for the federal universal service efforts that we engage in.
And at least consumers footing the bill for billions and billions of dollars.
So I think it's time for big tech to pay its fair share.
But where would you draw the line in terms of who is big tech?
I mean, are we thinking companies like Etsy and Reddit Or, smaller streaming services that are just kind of like where do you draw the line.>>The model that I've put forward basically draws two lines, which is one, if you were having an offering that is sufficiently benefiting from America's worldleading networks.
Your revenues are above some threshold and we can have Congress or the FCC examine what that threshold should be, then your revenue should be contributing.
So for instance, Google's ad revenues, I think those are fair game for looking at a charge to support the network.
Same with Facebook.
Could it be that you look at the Apple App Store, maybe even the iPhone cloud services, certainly the streamers so if you look at some of the largest Video streaming services amazon prime Microsoft x box Netflix, those services account for something like 75% of all downstream traffic particularly for rural broadband networks, and an even higher percentage of the cost of maintaining those networks upwards of 90% of the cost.
So, those are the biggest beneficiaries from these networks.
They also happen to be the biggest cost causers.
So I think in the main, those are the entities we should look at.
I don't drill down in particular, beyond that I think Congress can work on that.
But I do think this is something that would require legislative action.
We also have an organization here called the joint board that I'm on that works with our state commission counterparts that can also be situated to really drill down and identify the particular revenues.
If we go forward with this type of proposal.
So what about the broadband companies, though?
I mean, why why shouldn't you know right now from what I understand, USF is, is the funding comes from the telecom portion of their business, but what about just, you know, making them kick in on the broadband side?
Yeah, I'm not opposed to having the traditional telephone companies.
Continue to pay in, appropriate percentage.
I do think that the lion's share should be shifted over again under this principle of what are the businesses that are generating the most revenue in benefit off these networks.
That's historically where we were again with.
Local and long distance charges 100 charges.
That's how we built the telephone network.
But where we are right now is basically 100% of this is coming out of the pockets of everyday Americans.
So you have a prototypical grandma with a copper line telephone service.
She's paying 30% Into this universal service fund that is in the main supporting broadband networks that either he may not be using but certainly be the big tech companies are the ones that are really benefiting.
So I have no problem keeping a portion of it on the traditional telephone network.
But I think the main we should shift to big tech.
I also have not put forward the idea.
Taxing internet service itself.
So when you look at your monthly bill, there's a portion that goes for traditional voice, the telephone network and a portion that goes to internet service, and idea is not to switch the tax over to the internet service portion But to eliminate it from the bill entirely from the consumers perspective, and put it on those businesses.
And so rather than having 100% pass through today to the end user, we'll have something less than that under this proposal.
But you don't think it'll get passed on to the consumer in some other way?
From the companies?
Right now we have 100% pass through.
And so I think we can only improve off of that.
And if you apply it to things like Google's ad revenue or Facebook's ad revenue, which are services that are effectively free for the consumer, that's a lot more difficult to pass through to the end user consumer than where we are.
Now, at the end of the day, money comes from very few places in this country which ends up being everyday Americans.
What do we put on the National Credit card and pass it to our grandkids.
But again right now the situation is 100% of this 30% charge ��Goes right in the pocketbooks of everyday Americans, and my proposal would certainly be significant progress over that.
��So what are you hearing from from Big Tech?
I mean, they can't be happy about this.
Do you think that they have they reached out to you and, and said, Hey Commissioner car, keep it down over there.
Yeah, I've not seen big tech of a bear hug to this proposal just yet.
They've said relatively little, I think the internet Alliance, one of the trade associations said that they didn't think that we should look to take punitive action against the streaming companies that are offering innovative services to Americans and my response to that would be You asking big tech to live up to the same obligation that everyday Americans do when their monthly bills isn't a punitive action.
So I'd welcome a conversation about it but, we haven't gotten here by accident.
This divergence between The businesses that benefit and the ones that pay is part of a decades long lobbying campaign by tech company to make sure that they aren't taking into universal service.
So I do think it's time that we look to big tech to pay an equitable share whether the FCC or in Congress, as they're looking to pay for some of these Infrastructure investments.
In fact, there's a new, organization in DC called the chamber of progress that represents some of these tech company interests.
And they've said that they have no problem with raising the corporate tax rate, to pay for some of this infrastructure investment.
And I would say, well, rather than raising the corporate tax rate on every business, why doesn't big tech just kick in more of its First year for the infrastructure of the internet, that it benefits from so much.
But some people would argue, though, that this is this is a proposal that that the ISP have supported for a while, right.
I mean, they've they've kind of been proposing this idea for a while.
I mean, what would you say to that is this more of lobbying from The big telcos and just mad at a big tech for making a whole lot of money.
I don't think so, you know, part of the challenge is again, from the ISP perspective, there's certainly been a number of particularly smaller rural ISP that that have come out in support.
This idea, but I think part of the challenge is those everyday consumers.
They're actually the ones that are seeing that 30% charge on their bill.
But it's not been transparent.
It's transparent in the sense that it's a line item on the bill.
But I think if you ask people on the street, hey, do you know that there's this $9 billion program that the FCC has and it's funded by a 30% tax on your bill?
I don't think they know about that.
And if they did, and then we said, but there's another way to do this, I think you'd get a lot more support from this idea from everyday Americans because again, from an ISP perspective, it's a pass through at this point.
So I think it's really an effort to try to shift the tax burden on to the appropriate place.
Long term, we made your drive down USF costs.
We've got this new generation Low Earth orbit.
Satellites that are going up that can help particularly around some of the costs around rural network builds.
But it's a long ways off that we're gonna drive the $9 billion down to zero if ever, plus, the numbers that Congress is throwing around right now, 60 billion to $ 100 billion.
We got to come up with a funding somewhere and I think this is the equitable place to look.
So what's next?
Where does this proposal go from here?
Well, there's a chance that the FCC has some existing authority to look at this.
And so I've included as an idea is that the FCC should launch a proceeding, the entire range of potential revenues that I'm talking about.
There's not a great argument that the FCC has authority to go after that entire range, or authority to assess for purposes of USF, for instance, is generally limited to telecom services.
There's probably a subset of big tech offerings like cloud-based transport, maybe the voice component of Microsoft Xbox.
That there's a good argument falls within our authority today.
So we should explore that, but in the May it'll take congressional action in order to give the FCC authority to look at really the full revenue base that it should be looked at.
But I also think as Congress goes through its current debates about internet infrastructure spending.
This could be added as a portion of that, but I would obviously defer to Congress there.
Well, thanks a lot for joining us.
I appreciate it.
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