By James Erwin
Last week, we wrote about the push by some Republicans require edge providers to contribute to the Universal Service Fund (USF) to help cover its shortfalls. Now that a bill has been introduced by Senators Markwayne Mullin (R-Okla.) and Mark Kelly (D-Ariz.), we realize that we were mistaken: the actual legislation is worse than we thought.
Not content merely to impose mandatory USF fees on tech companies, these senators would effectively tax broadband providers as well. As Senator Mullin’s press release puts it: “In Oklahoma, less than half of all rural residents have access to broadband Internet, a necessity most people across the country have enjoyed at a low cost for years.” Translation: we are upset that ISPs have not connected rural areas to broadband internet, so we’re going to tax them. That this might make it more difficult for those same providers to connect rural areas seems not to have crossed their minds.
As we wrote last week, taxing the edge providers that maintain our search engines and produce our streaming content:
Overlooks the fact that tech companies offer the services that people actually use the internet for. Charter might provide your internet service, but you only pay them so you can have access to Google, Netflix, Amazon, and thousands of other sites and apps that are actually useful. Without the services the tech companies offer, no one would pay for internet service for the government to subsidize in the first place. And again, the fees applied to tech companies will be passed on to you the consumer anyway in terms of either higher prices or more aggressive data monetization. Sadly, the “tax big tech” crowd, who are usually conservatives looking for spending reforms to balance the checkbook, are on a punitive expedition. Despite ample evidence that government jawboning at the behest of progressive NGOs was the real cause of the rise of censorship on social media, some conservatives remain stuck in 2020, blaming successful American companies for the security state’s overreach. Surely, we can both reign in government agencies engaged in censorship while imposing fiscal discipline on USF that won’t rase taxes on successful American companies?
Including broadband providers in this bill could be even more counterproductive. Senator Mullin’s own press release notes, “Video streaming services account for 75 percent of all traffic on rural broadband networks. However, unrecovered costs from streaming companies are often shifted and borne by small rural broadband providers.” These are the very small, rural providers who will see new fees added to their costs, likely to be passed on to consumers. Although the bill does exempt broadband providers whose contribution would be de minimis, there is no guarantee that many small, rural providers are not captured by it.
Furthermore, Congress has appropriated $42.5 billion in taxpayer dollars for the Broadband Equity, Access, and Deployment (BEAD) program. Oklahoma stands to receive more than $747 million from this program for rural broadband expansion and Arizona $993 million. These vast sums will go to many such small providers who, once connected to their new customers, would become liable for USF contributions. In cases where larger ISPs are expanding networks to unserved areas, the federal government would impose new taxes on them and possibly punish them for participating in the program. If the good senators desire more service in rural areas, they should not tax the providers who are best positioned to deliver it.
In closing, we will once again quote ourselves from last week:
Ideally, the federal government should get out of the broadband game entirely, but if it must be involved it should at least try to avoid raising taxes to pay for unwieldy programs that can’t meet their own obligations. Scaling back state involvement in the market will restore the original funding balance to USF; expanding it will only keep this spiral going while raising prices for consumers and punishing businesses for their success.