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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

December 3, 2014 at 1:24 PM

Broadband taxes coming with Net neutrality reclassification?

The closer you look at the Net neutrality debate, the more complicated it becomes.

Consider a new report from the Progressive Policy Institute, pointing out the taxes expected to result if broadband is reclassified as an essential service. Re-classifying broadband seems logical.

Broadband is now as essential as wired phone service, which is considered an essential utility and regulated by Title II of the Communications Act of 1934.

Some Net neutrality advocates see Title II classification as a way to maintain a level playing field online and prevent broadband providers from charging for preferential service and discriminating against content or services. President Obama, citing concerns about stifling the open and innovative character of the Internet, also called for Title II classification when he jumped into the debate last month.

Whether regulatory oversight would help or hurt is an open question that will be debated for years to come.

But one thing’s clear, according to the PPI report: Treating broadband as a regulated utility would lead to all sorts of taxes and government fees, just like the ones that state, local and federal governments tack on to phone bills.

State and local fees on broadband service would average $67 per year for wired broadband subscribers and $72 per year for wireless broadband subscribers, according to the think tank, which was started in 1989 to generate ideas for President Clinton’s New Democrats.

People would be especially hard hit in states, like Washington, that have high taxes and fees on Title II utilities. The report estimates that Washington residents would see additional wired broadband costs ranging from $48 to $126.91. Wireless broadband increases would range from $52.39 to $137.30. The fee calculations are based average monthly broadband bills of $44.75 for wired service and $48.79 for wireless.

Then there would be additional federal fees averaging $17 per household.

Altogether fees generated by reclassification would generate $15 billion a year, according to the report by  PPI analysts Robert Litan and Bob Singer.

That’s on top of $1.5 billion that the FCC already plans to raise from a new $1.92 per year broadband fee to help fund Internet connections in schools, they noted.

Litan and Singer argue that instead of reclassification, the FCC should use authority it already has to prevent broadband providers from blocking access, throttling traffic or offering paid prioritization:

“This course gives federal regulators all the power they need to protect upstart websites and consumers — without subjecting the Internet to archaic telephone rules that would undermine investment, slow innovation and hit U.S. consumers with stiff new broadband fees.”

It’s important to know that reclassifying broadband would increase its cost, by enabling new government fees.

But I wonder if the prospect of “new taxes” associated with Net neutrality regulations will further polarize the debate and extend indefinitely the status quo — and hand-wringing about the power held by Comcast, AT&T, Verizon and other broadband giants.

Comments | Topics: broadband, FCC, net neutrality

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