April 25, 2006 9:04 AM PDT

Senator plans Net taxes but no Net neutrality

WASHINGTON--More Americans would be forced to pay taxes subsidizing broadband service in "unserved" locales, and cities would be free to go into the Wi-Fi business under an upcoming U.S. Senate bill.

Later this week, Sen. Gordon Smith, an Oregon Republican, plans to introduce a legislative package called the Broadband for America Act of 2006, he said Tuesday morning at a conference here hosted by the National Telecommunications CooperativeAssociation, which represents small and rural carriers.

Net taxes on the way?
Sen. Gordon Smith's proposal would force Americans to pay more to log in. Here's why:
Currently telephone companies are forced to cough up a percentage of their revenues to the so-called Universal Service Fund, which subsidizes school and library Net connections and has been plagued by fraud--$4.7 billion was distributed during the first nine months of 2005.

While some details remain unclear, Smith wants to levy this tax on broadband providers too--and they're expected to turn around and pass it on to their customers in one of those fine-print notices at the end of their monthly bills.

Because Universal Service taxes are diverted to pay for rural telecommunications access, Democrats and Republicans from rural states tend to see eye-to-eye. A Democratic proposal, for instance, would levy Universal Service taxes on Internet chat services as well.

Conspicuously absent from the bill, however, is any mention of Net neutrality, which refers to the idea of the federal government forcibly preventing broadband providers from favoring some Web sites or video streams' connection speeds over others. The concept has generated significant controversy in the House of Representatives' version of a telecommunications reform bill. The House Energy and Commerce Committee is scheduled to take up its own proposal again on Tuesday evening, with a vote expected later in the week.

A copy of the 41-page bill seen by CNET News.com is essentially a combination of existing proposals introduced by Smith and his colleagues on the Senate Commerce Committee. That committee's Republican chairman, Sen. Ted Stevens of Alaska, has also been readying what Smith called "an even more comprehensive bill" intended to overhaul the Telecommunications Act of 1996, which has been criticized as outdated for failing to account for the Internet's vast new influence.

Smith's bill is not intended to rival Stevens' proposal, he said, but he hopes that its "targeted" nature will allow it to pass more speedily through committee and to the Senate floor. "The bigger it is, the more comprehensive it is, the more likely it is to get bogged down," he said.

As network operators roll out more advanced broadband services, particularly video, they've argued that they should be able to finance those efforts by charging bandwidth-hogging content providers extra fees for the privilege of faster transmission or other preferential treatment. Net neutrality supporters say they're concerned such a practice would amount to unprecedented Internet "gatekeeping" that could raise consumer costs and inhibit innovation, and they've called on Congress to legislate against it.

Smith, for his part, told reporters after his speech that he'd rather "wait and see whether there's a problem before we legislate (on Net neutrality). I'm not convinced we're there yet." Senate Commerce Committee Chairman Stevens has also voiced reluctance to include Net neutrality in his broad telecommunications reform bill. A committee aide said Tuesday that Stevens is still wrestling with whether to include any such language.

Smith's bill instead focuses on four major areas. It would require the FCC to establish rules requiring that all companies "capable of supporting two-way voice communications" pay into the Universal Service Fund, a multibillion-dollar pool of money that's currently used to subsidize telecommunications services in rural and other high-cost areas, schools and libraries.

Right now, long-distance, wireless, pay-phone and wireline telephone services are required to pay a fixed percentage of their revenues to the fund, which they typically do by tacking an additional fee onto their customers' bills. A number of the larger voice over Internet protocol providers, including Vonage, have said they already pay into the fund, but there doesn't appear to be a formal regulation requiring them to do so.

Smith's bill also proposes allocating up to $500 million per year for supplying broadband service in areas where private investors are "reluctant" to set up networks. Certain users, such as low-income households, would be exempt from the fees under Smith's proposal.

A second portion of the bill, rooted in two earlier proposals, would give the Federal Communications Commission 180 days to establish rules for unlicensed use of so-called "white spaces" on the broadband airwaves--that is, empty, unused channels in the broadcast TV bands. Consumer advocates say using those slices of the radio spectrum would enable cheaper and easier setup of broadband networks, but the broadcasting lobby has voiced fears that such uses would muddle their stations' reception.

A third provision comes from the Community Broadband Act introduced last summer by Sen. John McCain of Arizona and Sen. Frank Lautenberg of New Jersey. That bill, aimed at preventing states from blocking public-sector entrants into the broadband business, appears to be targeting more than a dozen states that have already passed laws bearing such restrictions or prohibitions.

Another provision is designed to relieve new entrants to the video services market from negotiating franchise agreements with individual cities and towns--a matter that has sparked controversy among cable companies, which have historically had to negotiate such deals, and phone companies seeking relaxed regulations so that they can roll out their own video services more quickly.

See more CNET content tagged:
Net Neutrality, proposal, broadband service, tax, telecommunications


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Didn't we pay..
Didn't we pay for broadband already?
What about all those billions of dollars that went to the telco's to build this infrastructure?

<a class="jive-link-external" href="http://otherthingsnow.blogspot.com/" target="_newWindow">http://otherthingsnow.blogspot.com/</a>
Posted by SqlserverCode (165 comments )
Reply Link Flag
More Taxes?
More Taxes? How about less spending?
Posted by ejryder3 (39 comments )
Reply Link Flag
The Republicans are Liars
They've squandered the nations wealth and increased taxes. They have to be tossed out.
Posted by R. U. Sirius (745 comments )
Link Flag
More Taxes?
Dream on. They ONLY know how to spend money, especially ours. They have the tax-breaks and loopholes, we pay the price.
Posted by candygrugel (3 comments )
Link Flag
Senator's Greed Displayed
Why a new tax? Are they not still charging a tax to cover the cost of the 1812 war? I would think by this time the bill would have been paid by now. Why not use that money? I think if there is a tax bill the senator should pay the first years gross value.
Posted by TalkL8 (3 comments )
Reply Link Flag
Talk about killing inovation
This is going to do wonders for any new tech being developed. He wants to tax any technology capable of two way voice communication, doesn't matter if it never reaches the public phone system. So how are systems like AIM or iChat going to pay this tax? Take a wild guess.

It's becoming increasingly obvious the internet has been noticed by the politicians who will now no doubt regulate it to extinction, or worse, to the point only large corporations can afford to develop applications for the net.
Posted by User Information Private (27 comments )
Reply Link Flag
Rural Electrification
Isn't this like the Rural Electrification Act in the 1920's - seems like the benefits are immediate and long term. According to Metcalfe's Law, the value of the network goes up with every participant, right?
Posted by geoweb (2 comments )
Reply Link Flag
If ya want broadband then move to a city
First off, the chicken farmer out in the sticks already has the ability to be on the 'net as he has the ability for dial-up.

The value that chicken farmer would bring to the 'net by being connected via broadband would not be greater than the cost to run a line out to him.
Posted by KeyStroke (4 comments )
Link Flag
Republican taxes
This is partisan: it's Republican's raising taxes to loot revenue and make things harder for start-up's to protect their wealthy campaign contributors. At least they're not proposing, like they usually do, that we borrow and have our kids pay for this.
Posted by michaelo1966 (159 comments )
Reply Link Flag
unite against more taxes
Look past the parties. It doesn't matter whose to blame. What matters is whether we all UNITE against more taxes.

If 80% of all americans, republican or democrat stand up against this, do you think any senator or congressman will want to be quoted as being the one pushing for it?
Posted by BengalTigger (36 comments )
Link Flag
Not true
This doesn't make it harder for startups. My company is a startup telecom, and paying into USF is no burden at all.
Posted by jawaidbazyar (29 comments )
Link Flag
What's the deal with this fund for rural areas and schools?!
Seriously, why do we have to pay for a fund to help pay for free internet to rural places and public domain places, like libraries and schools?

It's ridiculous.

This country can afford to give other countries money in the guise of foreign aid but balks at the thought of rebuilding New Orleans and funding Public Television (PBS) - it even has problems funding the provisions of the "No Child Left Behind" Act.

Providing for any type of service to "needy" areas of the country is what the Federal goverment is for - this is where our tax money should be used for, not through some legislation that is a workaround to make us pay for something we do already through our monthly consumer service bills.

Seriously - Washington DC Sucks!
Posted by techned (200 comments )
Reply Link Flag
that is not the purpose of the federal government
Actually no  the purpose of the federal government is not to care for the needy. It, according to the constitution, it to provide for the common defense (military), enact treaties with foreign nations, to coin money, ect. For a complete list see:

<a class="jive-link-external" href="http://www.4dnet.com/~wongway/congress/powers.html" target="_newWindow">http://www.4dnet.com/~wongway/congress/powers.html</a>

I agree something needs to be done about your afore mentioned concerns however I would not recommend a government solution. They are incompetent at getting things done. A far better approach to social problems is to look for a free market solution. Government should certainly encourage these activities but they have proved themselves awful at administrating and running them.
Posted by p.shearer (60 comments )
Link Flag
We country folk don't need no broadband
I live in the country.
I don't have broadband.
I don't like dialup.
I don't want anyone charged a tax so I can have broadband.
So don't blame us in the country. Blame the politicians. NO MORE TAXES!
Posted by BengalTigger (36 comments )
Reply Link Flag
As usual...
Nice to see the average taxpayer getting it stuck to them again. Whatever happened to broadband over power lines for the people in rural areas?

Charles R. Whealton (Chuck)
Posted by chuck_whealton (521 comments )
Reply Link Flag
Re: Broadband over Powerlines
In trials BPL is proving to not provide the speeds and reliability as hoped and it is causing signinficant interference of radio communications. Right now it looks like the most practical way to expand rural boradband is through satellite and high altitude balloons as signal platforms
Posted by kaufmanmoore (42 comments )
Link Flag
Another tax
Enough! Same old story. Tax the haves and give to the have-nots. This country needs major changes, ASAP!! Time to vote out all the thieves in D.C., or as Zell Miller, "D.oesn't C.are!"
Posted by candygrugel (3 comments )
Reply Link Flag
Another Tax +
What do you mean candygrugel, "tax the haves and give to the have-nots." This is tax the haves and give to the wealthy! If your quoting Zell Miller you probably voted these Republicans in office in the first place and need to take some of the blame for these ridiculous ideas now being proposed.

Stop thinking that helping the needy is the problem in Washington cause the needy are not being helped by this type of legislation. The poor are getting poorer and the rich are getting richer in this country and that will be our downfall. We used to have a strong middle class but with all these proposals trying to regulate the internet and tax, tax, tax just makes in more difficult for the average Joe &#38; Jane to take advantage of the internet's potential. Then that money is plundered by way of ridiculous Iraq warmongering and kickbacks from wealthy corporations.

It is time that Republicans(and their collaborators) who are true conservatives and not those fake neo-conservatives to finally realize that their party( and a handful of Democrats) is selling our great country out with incompetence and corruption.
Posted by tetsuyo (50 comments )
Link Flag
net neturality
How come we tend to elect really stupid (or highly paid
prostitutes) to decide what's good (depending on how much
money they can get) for us.

If the morons who think for us (or are paid not to think beyond
what their corporate masters want them to think), then having
net neturality rules would never be a problem. As the corporate
guys who are always "good, fair and balanced" citizens, would
never want to charge different rates for different services, would
never want to play favorites (again depending on how much they
could squeeze others), would never think to abuse anyone
(unless of course they could make serious profits [think Exxon]
from us). They would just play nice.

So, if the corporations would never be bad etc., Why are they so
afraid of a rule that they would never break?
Posted by nerantzis (14 comments )
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