November 17, 2005 3:10 PM PST

New taxes could run rural broadband

New legislation proposed by two U.S. congressmen on Thursday could use taxes on Internet telephony and broadband services to fund subsidies for rural broadband deployments.

On Thursday, House Energy and Commerce Committee members Reps. Lee Terry (R-Neb.) and Rick Boucher (D-Va.) released a draft of the Universal Service Reform Act of 2005, which calls for new taxes to be added to voice over Internet Protocol and broadband services to help pay for the Universal Service Fund. The draft also proposes expanding the fund to subsidize rural broadband deployments.

USF has traditionally been used to subsidize services in rural and high-cost areas. It also helps pay for programs such as E-rate, which subsidizes schools and libraries across the country that provide Internet services. USF is funded by telephone carriers that each contribute a fixed percentage of revenues from long-distance, wireless, pay phone and telephone services. The companies generally pass on those costs to their customers, often in the form of extra charges stuck onto the end of phone bills.

Perspective
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A movement to enshrine access to a broadband connection is fast gaining momentum.

But as technology like VoIP has evolved, and the line between long-distance and local calling has blurred, the Universal Service Fund is suffering from a lack of funding.

"The current state of USF is doomed," Terry said in a statement. "There are too few users paying into USF to meet the growing needs...We believe this draft provides fair remedies to the inequalities that currently exist."

Terry and Boucher suggest that contributions be broadened to include any provider that uses telephone numbers or IP addresses to provide a voice service to contribute to the fund. This would include independent VoIP providers like Vonage, as well as cable operators, like Time Warner and Comcast, which also offer VoIP services. The congressmen also suggest that any provider that charges a fee for providing a network connection also contribute to the fund. This would include all DSL and cable modem providers as well as anyone delivering subscription-based wireless Internet access.

The draft legislation also calls for the fund to be expanded to subsidize universal deployment of broadband in poor and rural areas.

In August, the Federal Communications Commission's federal-state joint board on universal service suggested that VoIP providers contribute to the fund. Changes to USF have been suggested as part of a broader overhaul of the 1996 Telecommunications Act. A draft of this legislation written by members of the U.S. House of Representatives Energy and Commerce committee includes provisions on broadband and VoIP services.

Any changes to USF are expected to increase prices of Internet telephony and broadband service for all customers, because carriers would likely pass on these expenses as line items tacked onto customers' monthly bills.

The public will be able to comment on the draft legislation through Dec. 23. The bill will not be considered in the committee before next year, according to Terry and Boucher.

31 comments

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Is this really necessary?
One doesn't need to read the entire article to understand what's being proposed. Additional taxation isn't necessary to fund rural broadband deployments. And how is it that the USF is possibly lacking funding, when there's only a few million (VoIP) lines compared to 130 million in total in the US? What IS necessary is for our government to become fiscally responsible (won't happen in our lifetimes). Thus, we could fund many initiatives from the existing tax base.

Ronald Lewis
Founder and Chief VoIP Architect
Riverscape
www.riverscapecorp.com
Posted by ronaldl79 (12 comments )
Reply Link Flag
Excuse me, but we must have words..
The fact you have a business is reason enough, sir.

The fact that Skype was just bought for a rather huge chunk of change ought to be enough to make people realize that tradtional phones are on the way out. More VoIP means less traditional tax revanue, and given how long it takes to pass laws, and the speed at which hot technologies emerge, it makes perfect sense.

And while it may feel bad when "the man" comes knocking on YOUR business door with his hand out, it should make you feel a little better knowing that hopefully that buck you just handed him is going to get broadband to people who need it, like myself.

Plenty of people on my road, a High School right here. Rural area, no broadband. Your taxes are going to help service my area since Sprint and Time Warner refuse to do it on their own. I for one appreciate it, because it's going to make my community a better place.

I do not appreciate you fighting it and keeping me on 56k for the rest of my life.
Posted by (28 comments )
Link Flag
USF reform Needed
Couldn't agree more Ronald. The USF needs to be reformed and
have better spending oversight. Not only do the carriers get
money from the govt to expand their networks, they add their
own fees to the USF "tax" that's on your statement. Most long
distance carriers, for example, charge a USF fee of 9-12%, when
in reality they are only required to charge (I think) 7.4%. The
carrier pockets the extra 1.6-4.6% for "administrative" costs.
What a crock.

I'm all for expanded access, but the current situation stinks for
everyone except the carriers (ma bells daughters).
Posted by zooloo55 (1 comment )
Link Flag
Why is this a gov't responsibility?
Why is this a gov't responsibility?

Like we can't figure out how to get our own satellite internet system?

It's crazy to (continue to) charge one group of people for another group's benefit.

$250M "Bridge to nowhere" in Alaska, for instance. This is different how?

BWilde
Posted by 203129769353146603573853850462 (97 comments )
Reply Link Flag
Satellite is not broadband.
You are under the common misconception that satellite is broadband, well it aint. DirecPC has barely 200,000 customers and are probably at max capacity as it is. You can't just lay more fiber when you need more bandwidth with a satellite, so you have to control usage, which is exactly what DirecPC does.

Sure, I can get 150-200K/s downloads, but after about 175MB you get throttled down to 1-4K/s for several hours. And mostly you don't even get that much, it just sits there not working.

It is governments responsibility to step it and make sure the people are treated well and not disadvantaged just because they don't live in the city.

I live in a rural area, but not in the woods and not in a shack. There are plenty of people on my road (nicely paved thank you very much) and there happens to be a High School on this road. Neither Sprint nor Time Warner will service this area, so we get nothing, and its time for the government to do its job and make things happen.
Posted by (28 comments )
Link Flag
Time to "Talkback"
Time to really start talking back. The 2 who released this draft are:

Rick Boucher - (202) 225-3861
Lee Terry - (202) 225-4155

Those phone numbers are straight from the House Of Representatives web site. Let's let them know how we really feel about more new taxes. Also, call your local reps and tell them to make sure this gets defeated.
Posted by cjm99 (2 comments )
Reply Link Flag
Don't be a jerk.
You may not live in a rural area, but I do. You may have broadband, but I don't. You may be able to juggle between DSL and Cable depending on whoever has the cheaper service whenever you feel like it, but I can't.

I need this fund. Neither Sprint nor Time Warner will spend a buck to bring service to my area, and guess what, I live on the same road as a HIGH SCHOOL. I'm not alone here, I'm not living in a shack. I have neighbors just like everyone else, but these telco's would rather spend money fighting to make you switch from one service to another rather than give it to people who need it, and don't have it.

Call the, and make sure this bill gets *passed*. There are people in this country that actually *need* it.
Posted by (28 comments )
Link Flag
Rural Broadband
From my own expenses this would seem to be a worthwhile investment of our tax dollars. While I live 100 miles from a major city, 25 miles from a city, and 5 miles from a village, here in Illinois, I enjoy some of the fastest internet service available to the average consumer, 1500/384 bps. This is made available, thanks to the efforts of our local telephone coop, Wabash Telephone Coop. In my front yard lays a state-of the-art fiber optic cable, across the road is a state of the art switching cabinet that supports phone, video, and internet. My phone, video, and internet is a brought to me by one service for a monthly fee of less than $150.00 a month. Each year I receive capital credits from my coop, which are then paid on a basis of 10 years after credit has been made. According to my last credit statement I recieved 42.75 cents back on each $1.00 spent. Which actually cuts my cost to less than $90.00 a month for video w/150 channels, telephone, and internet at nearly T1 speeds. Its a great deal considering where I live in the middle of the Illinois Prarie.

There are several other coops in the area who are moving in the same direction, but most have not yet completely covered their area with fiber optics, as Wabash has done. The history of Wabash Telephone Coop can be found here <a class="jive-link-external" href="http://www.wabashtelephone.coop/wtcihistory.html" target="_newWindow">http://www.wabashtelephone.coop/wtcihistory.html</a>.

Hopefully other rural areas can take the blueprint Wabash has laid down, and use similar strategies to benefit their areas.
Posted by Renegade.Rivers (720 comments )
Reply Link Flag
I like that
That is a very good blueprint.Something along these lines would be very effective.
Posted by Ronek (4 comments )
Link Flag
Taxing VOIP is like taxing HTML
These people are blithering idiots...

Are they going to inspect TCP/IP packets for the type of data and tax it accordingly? What if I talk using MSN Instant Messenger and a microphone.

Retards. I'm surrounded by retards...
Posted by gerhard_schroeder (311 comments )
Reply Link Flag
Oh My
I think the whole proposal is to add a universal service charge to your account. Guess what, since companies like Vonage have to complete calls, they have to know that you're making them. So it's not a problem at all to have the FCC/Congress say that every Vonage user has to pay $4.83 to the fund.

It's not hard at all.
Posted by sanenazok (3449 comments )
Link Flag
Why should I subsidize rural living...
Why should I be resonsible for where someone else chooses to live? If you use this same train of thought then why don't we pass a bill that will tax metro gas so that rural gas stations can sell it cheaper to those that have their mansions in the country and drive their Hummers to work every day?
This is just another way to poke the eyes out of the already tax-burdened middle class (what is left of it.)
Posted by fred dunn (793 comments )
Reply Link Flag
here, here
I couldn't agree more. seeing that it is the broadband companies that make the money, let them pay for it. I feel about this the same as I feel about taxpayers paying for sports stadiums. Let the people collecting the money pay for it. If I want to open a computer store, who is going to pay for it? Me.
Posted by (2 comments )
Link Flag
USF CAN be good!
Believe it or not, were it not for USF this country may not have made the strides that it made it in having affordable telecom service available to just about anyone. Think of countries like France, 25 - 35 years ago: when your child was born, that's when you applied for service with the hope that by the time he reached adulthood he would be on the short list for a phone.

Fast-forward to today - You would be surprised at how wasteful the gov't has been with USF; there is tons of fraud in the way the money is distributed and managed. Fix those problems and I would not be opposed to a REASONABLE USF. As a society, broadband needs to follow the path of how basic phone service evolved (available to all at a modest price) or we will only add to the problem of the "digital divide". Compared to other countries, our BB availability, speed, price etc., is on par with that of some 3rd world nations.

Whether it's USF, some other tax, or private investment, we better get with the program or we will continue to disadvantage a large segment of our society. Rural or Urban living should not be the deciding factor on who gets BB.
Posted by trudancor (14 comments )
Reply Link Flag
Universal Service Fund ... Tax?
I must say that I think it is terrible that my representatives can pass a fee on services I buy without the citizens voting on it. What other fees are comming in the future ... Seems like taxation without representation to me or something very close. Personally I am for smaller goverment and less regulation and more freedom.
Thanks Joe
Posted by Who Cares Too (1 comment )
Reply Link Flag
Life, Liberty, and the pursuit of Broadband?
Why must we subsidize broadband for the rural area?

Broadband is a luxury, not a right, not a necessity.
If you have access to the internet you are doing well compared to the rest of the world.

They are fighting for us to subsidize the speed of the internet connection to rural areas.
Not my concern, Not my problem.
We all waited for downloads in the old days. What speed will be enough? Where does it end?
OC3 connections to every farmer in North Dakota.

The USF is an outdated concept that has served its purpose and provided telecommunications services to the back woods of America.

Providing of service is one thing, fast service is another.
Posted by SimpleTruth (5 comments )
Reply Link Flag
Remember the telephone tax?
Just like the telephone tax of yore, this will turn out to be nothing but a way for the federal government to scam millions MORE of our hard earned money from working America. Even privately run non-profits use a large percentage of their revenue in operational costs. Can you imagine the ultra-inefficient government machine running this tax-for-rural-broadband scam? Even if all the money went there (which, if you really think it will, you need a federal budget refresher), 70% or more would be used up in bureaucratic red tape and salaries.
If you're a congressman, PLEASE don't support another tax boondoggle.
Posted by chrisw63 (26 comments )
Reply Link Flag
Here's an idea
If I subsidize this, will I get a check from Verizon/AT&#38;T/Comcast every month? We paid for it. Shouldn't we get a percentage of the profit? At least when we are forced to pay for stadiums we get tax dollars. (not that I support that nonsense either) What taxes are the bradband providers pay? Federal and State tax dollars only. Money we will never see again. What will they give back in return? A bill in the mail, thats what.
Posted by (2 comments )
Reply Link Flag
Just more taxes for Broadband phones
It's time these congressmen get another job. Something that pays less. Where else can you beg for your job. Once in office you increase your pay, benefits, help the rich and keep taking more from the Poor folks. I went to this phone because I didn't pay taxes on it. I understand the Federal tax on Phones were put on to pay for the Spanish/American War of 1800 and something. Well Congressmen I think we done did that. DA!!!
So you want more poeple so you can give it can pay for you tax breaks. Well I'm a retired Vet, Disable and never got one tax break. Why I don't make enough to get get one. But My Hone taxes went up, my car insurance went up, my medicare went up about 40%, If you don't want us to have a phone go tax it and I will be the first to do away with it. So far you had me stop my morning paper, I eat hamberger not steak, I don't travel anymore, I don't by new cars, my car is a 1994 p/u and looks like it should hold me for another 10 years. In the 90's you cut our CPI in half Mr Greenspan told you Congressmen we were in a new Age and the CPI is not working. WOW you guys are so smart. Now my Fuel Bill is up 40%, My Gas is up 100% but hey who am I to tell you how to tax the Poor as long as our Job and new economy is going to China and our kids are getting dumber. You guys keep taxing us back to the Future of 1929 or lets go to the 1700's where we had the King like King George the First of Iraq 300 billion worth of BLACK OIL and Double our debt here in the home land. We are we doing this? I thing so we can tell the baby boomers see we have no money to help you in poor, disable, Vet,and the just the plain old OLD PEOPLE. But hey We are in the new GREEDY ECONOMY FOR the RICH I forgot.
I'm the first to cancel my phone MR&gt; Congressmen people.
Posted by Jaxxxxx (1 comment )
Reply Link Flag
Wow. What the heck.
So let me get this straight: you want the government to provide highways and roads, but not broadband? Yes, by all means, drive everywhere. Drive to the library for a book. Drive to blockbuster for a DVD. Drive to homers for a CD. It's not like it's bad for the environment or anything. Drive to school each and every day. Drive back and forth to your office job, why don't you? Humans are idiots.

I say add broadband and information to our taxes. People should be encouraged to communicate and discouraged from being wasteful. Holland at least has an idea. And no, dial-up is NOT ok. It doesn't count. I used to have to use it, and I almost went insane. And for goodness sake, consolidate. Phones? Game consoles? Fax? Cable TV? Give me a friggin' break. People just need good PC's and broadband all around. But since when has capitalism been able to enact any kind of necessary change? Looks like we're just going to careen over the limits of our environment and all die out. Nothing can stop that but teledemocracy and centralized economy. But hey, don't listen to me- I think for myself. Isn't that illegal or something? Oh, fine. Only with downloading stuff and speed limits.

ethana2@gmail.com - flame away- or just talk, whatever.
Posted by ethana2 (348 comments )
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