Title II Cheat Sheet

Title II and Universal Service Fund Fees

Reclassification of broadband as a Title II utility exposes wireline broadband consumers and wireless smart phone users to federal, state, and local Universal Service Fund fees.

• USF fees are already collected from traditional telephone infrastructure and the voice portion cellular phone costs

• In the fourth quarter of 2014 the USF contribution rate was 16.1% of all company revenues, which shows up as a line item on consumers bills

• The USF rate is expected to rise to 16.3% in 2015.

• Categorizing broadband as a Title II utility means the 16.1% USF fee will appear on Internet bills, which had not be subject to these fees.

•  The Progressive Policy Institute (PPI) estimated that these USF fees would total $11 billion annually.

Forbearance & ITFFA will not Stop USF Fees

While Chairman Wheeler speaks of forbearance,

• Brian Fung of the Washington Post reported that, “contrary to expectations, the draft rules would include parts of Title II allowing the FCC to extract funds from ISPs to be used as subsidies.”

• The FCC Chairman’s special council for external affairs, Gigi Sohn recently commented that the claims of Title II raising taxes are “just wrong.”  However, Sohn acknowledged that questions remain as to where Universal Service fees will be applied.

• Free Press said because of the one-year extension of the Internet Tax Moratorium, Americans’ tax rates would increase “exactly zero” under Title II reclassification

•  ITFFA doesn’t preclude federal, state or local fees, such as Universal Service Fund fees.

• USF surcharges don’t go into the U.S. Treasury and are not subject to congressional spending authority, but from a consumer standpoint they are a tax. Therefore, a federal agency has defacto-taxing power without accountability to taxpayers.

Title II is based off of an 1887 law regulating railroads

• Title II is almost a carbon copy of the Interstate Commerce Act of 1887 — a law regulating 19th century railroad companies.

• In the early 1900s language from the 1887 law was modified to apply to telegraphs and telephones.

• Title II rules would apply these telegraph and telephone laws from the early 1900s to the broadband infrastructure – wired and wireless – granting unprecedented government control over the digital economy.

International Repercussions

• Implementation of Title II may not only equate to taxes/fees on US Internet connections, it could also mean international taxes and regulations on data usage, video chats, emails, and video streaming.

• During the December 2012 United Nations World Conference on International Telecommunications (WCIT), America opposed a European proposal, known as sender-pay

• Sender-pays would amend existing telecommunications treaties to impose costs on popular Web sites and their network providers for the privilege of serving non-U.S. users

• Upon returning from the December 2012 WCIT, then FCC Commissioner Robert McDowell testified during a joint House Committee hearing that in addition to other threats to a free an open Internet, tax proposals included:

§  Allowing foreign phone companies to charge global content and application providers internationally mandated fees (ultimately to be paid by all Internet consumers) with the goal of generating revenue for foreign government treasuries

§  Imposing unprecedented economic regulations of rates, terms and conditions for currently unregulated Internet traffic swapping agreements known as “peering”