Fewer landlines undermine U.S. broadband support
As more Americans cut the cord on traditional landlines, a government program that subsidizes internet service to poor communities is at risk of collapse because it relies on taxes from falling long-distance calling charges .
This provides an incentive to support the more than 20-year-old Universal Service Fund by tapping into tech companies like Amazon and Netflix that are profiting from the growing use of broadband.
“We tax the telephone networks to pay for the broadband network,” said Brendan Carr, Republican member of the Federal Communications Commission. “It’s like taxing horseshoes to pay for highways.”
The fund, which distributed $ 8.3 billion last year, helps connect schools, libraries and rural health facilities. It also provides a connection subsidy for around 7 million poor households.
But over the past two decades, use of old-fashioned phone service has plunged, and revenues on which the tax could be charged have fallen to $ 30 billion, from around $ 80 billion, according to Carr. This led to an increase in the rate of the tax, which climbed to over 30% from 5.7% in 2000 and is generally passed on to the increasingly small group of fixed line users.
The pandemic has highlighted the need for fast internet connections for school, work and healthcare and has become an area of agreement as President Joe Biden and lawmakers on both sides seek ways to support more broadband.
Carr, in an interview, said one way to do this is to charge companies such as Amazon, Google and Netflix. He cited “companies that benefit from the modern network and pay next to nothing”.
The proposal adds to Big Tech’s struggles in Washington, where lawmakers and regulators threaten to break down social media providers and deprive them of key legal protections. Now Carr, who once called on the FCC to “do our part to subdue Big Tech,” offers to deepen the pain.
Congress voted $ 3.2 billion in December for an emergency broadband program that offers $ 50 in monthly grants. The program has attracted more than 2.3 million households. But once it runs out, maybe in a few months, the addiction reverts to the problematic grant put in place decades ago – which typically pays $ 9.25 per month per household.
Carr in a Newsweek editorial suggested lawmakers and regulators could set fees for web companies like Google, Facebook, Apple, and even Microsoft for Xbox games.
The call from Carr, a Republican, sparked interest.
“It’s an intriguing idea. And we’re going to need some ideas, ”FCC Interim President Jessica Rosenworcel, a Democrat, told Bloomberg TV on June 11.
“Keeping the Universal Service Fund strong is really important to ensure that broadband helps reach rural America, and also provides support for broadband and affordability in urban America,” he said. she declared.
USTelecom says it has “all the political options on the table,” said Jonathan Spalter, chairman of the business group, which includes major operators AT&T and Verizon Communications. Spalter called for “a conversation” that “the entire Internet ecosystem” shares responsibility.
AT&T, America’s largest telephone company by revenue, perked up when Carr outlined his plan in Newsweek.
“It’s hard to imagine a successful reform that does not include a version of this proposal,” Hank Hultquist, vice president of federal regulation for AT&T, said in a tweet. The company has argued for Congressional appropriations – an idea opposed by others who fear the grant could fall prey to annual fundraising struggles.
On June 10, AT&T CEO John Stankey called the system “significantly overtaxed.” If the credits are not passed, collecting royalties from “any industry that benefits from the Internet” could stabilize the subsidy, Stankey said in an interview with David Rubenstein at the Economic Club of Washington.
K. Dane Snowden, chairman of the Internet Association business group, in an emailed statement called on the FCC to “take a common sense approach and not punish innovative, high-quality streaming services.” . Members of the business group include Facebook, Amazon, Google, eBay, and other online companies.
Because the FCC does not have authority over Web companies, Congress should step in.
“It’s a time bomb that’s only getting worse. But I don’t see Congress moving quickly on this, ”said Doug Brake, director of broadband and spectrum policy at the Information Technology & Innovation Foundation, a nonprofit research organization. “Really, almost all of the proposed funding sources are going to be controversial.”
The Universal Service Fund was created in 1996 and is financed by a charge on interstate and international calls. Businesses pay the fees. They can – and do – pass the charges on to customers who find a universal service line on their monthly bills.
This is still the basic framework.
The rate has jumped by more than half in the past year, raising fears of further hikes soon. The victims would include “low-income consumers who are stuck with traditional phone services,” said John Windhausen Jr., executive director of the Schools, Health & Libraries Broadband Coalition.
“The need for reform is urgent,” said Windhausen, whose group works to bring broadband to community institutions. “Otherwise, there is a risk that the entire universal service system will collapse. “
You don’t have to go as far as Carr recommends, Windhausen said. The inclusion of broadband internet service providers would reduce the percentage charged to less than 5%, he said.
The NCTA, the Internet & Telephone Association, a trade group representing broadband providers such as Comcast and Charter Communications, has no comment on the matter, said Brian Dietz, spokesperson for the trade group, in a statement. E-mail.
Carr’s idea is “likely to get bogged down in vested interests with deep pockets that are fighting among themselves,” said Andrew Brown, a Washington lawyer who represents large companies in industries such as manufacturing and financial services. who buy bulk communications. “There’s nothing wrong with the concept, it’s just nothing the FCC can do. “
If the past is a prologue, getting bogged down can be a likely outcome.
The Congressional Research Service examined the Universal Service Fund and found “growing consensus” on the need for meaningful action.
This report was published in 2010.