FCC Plans Stealth Internet Tax Increase

◼ American politicians of all stripes clearly see and oppose the abuses of the Internet abroad. But our government officials are not aware that the Federal Communications Commission, without statutory authority, is proposing to expand its taxation and regulation of the Internet. - Harold Furchtgott-Roth/FORBES

One set of proposals considered by the FCC would classify Internet services, or at least Internet access services, as “interstate telecommunications services” bringing the regulation of those services exclusively to the FCC.

The FCC imposes fees of 16.1% on interstate telecommunications services that will generate more than $8 billion in federal universal service funds in 2014. Additional FCC fees on interstate telecommunications services raise $1 billion for federal telecommunications relay services. Although Congress mandates the general nature of the federal universal service fund and telecommunications relay services, it is the FCC alone that sets the budget size of the funds and develops the fee structure to raise receipts for the funds.

Even with all of its power, the FCC does not have the money to fund all of the new programs it seeks. For example, just in the past year, the FCC announced an ambitious multi-billion program to connect schools and libraries with Wi-Fi. Other advocates seek expansion of the low-income program. But where can the FCC find funds for new social programs not required by statute?

The FCC’s network neutrality proceeding may easily provide the answer. By classifying broadband access services as “interstate telecommunications services,” those services would suddenly become required to pay FCC fees. At the current 16.1% fee structure, it would be perhaps the largest, one-time tax increase on the Internet. The FCC would have many billions of dollars of expanded revenue base to fund new programs without, according to the FCC, any need for congressional authorization.