Opponents of Internet rules recklessly play the tax-grab card

What the FCC has done is reclassify the Internet as a telecommunications service, rather than its former designation as an information service. Above, network cables are plugged into a server room.
(Michael Bocchieri / Getty Images)

Nothing scares live-free-or-die Americans like the idea of higher taxes.

So, not surprisingly, the prospect of a tax increase was a prominent card played by conservatives opposed to net neutrality, the idea of equal treatment for all Internet content.

The Federal Communications Commission released its full net-neutrality rules Thursday. While there’s a possibility that consumers could pay a little more per month at some undetermined point in the future, nothing is set in stone.


Moreover, even if your monthly bill does rise a few pennies, the money would go toward expanding broadband service nationwide — and that’s a good thing, as just about every study of the economic and social benefits of broadband has shown.

The World Bank, for example, found that for every 10% increase in broadband access, a country’s economy can grow up to 1.4%. The Brookings Institution found that every 1% increase in U.S. broadband access can boost employment about 0.3%.

The collapse of reasoned discussion about net neutrality into partisan bickering is yet another example of why it’s so hard to get things done in this country. We no longer act out of national interest. We’re all about scoring political points.

A couple of weeks ago, the FCC approved along party lines new rules aimed at preventing phone and cable companies from selling preferential treatment to deep-pocketed content providers such as Netflix and Google.

The rules also prohibited phone and cable companies from slowing down anyone’s content — movies from a rival streaming service, say. The basic idea was that all wired and wireless content would be treated the same.

At the time, one of the two Republican members of the five-member commission, Ajit Pai, warned that the decision “explicitly opens the door to billions of dollars in new taxes on broadband.”

These new taxes, he said, “would make it easier to spend more without public oversight.”

And who wants that?

Now that 400 pages of details have been released, we can see that the FCC is focused primarily on not regulating the Internet, but has left its options open to ensure the growth and stability of the nation’s broadband infrastructure.

What the FCC has done is reclassify the Internet as a telecommunications service, rather than its former designation as an information service. That bureaucratic distinction gives the commission more authority to ensure that network operators such as Comcast and AT&T aren’t picking online winners and losers.

In reclassifying the Internet, however, the FCC said it would take a “light touch” to regulation.

And it has. More than 700 rules that had been drafted for phone service won’t be applied to the Internet. Most importantly for telecom companies, the new rules say the FCC won’t mess with the prices they charge.

As for taxes, the rules address what phone and cable customers might know from their bills as the universal connectivity fee or the Universal Service Fund.

The fee — conservatives are calling it a tax — was established in 1997 and raises billions of dollars annually to defray phone companies’ costs for running lines to far-flung areas. For most land-line phone customers, it amounts to less than $1 a month.

The net-neutrality rules released Thursday state that the FCC has no plans to impose this charge on broadband service.

The ticking time bomb for net-neutrality opponents is this line: “Our action today is not intended to prejudge or limit how the commission may proceed in the future.”

Pai and other critics interpret this as meaning that the FCC has reserved the right to reach into people’s pockets down the road.

“There could be tax increases, and that’s what we believe will happen,” Matthew Berry, Pai’s chief of staff, told me Thursday.

It’s unclear whether the universal service charge even would be permissible under the Internet Tax Freedom Act. The 1998 law bans new taxes — but not fees — on Internet service.

“This is essentially a massive tax increase on the middle class being passed in the dead of night without the American public really being made aware of what is going on,” Sen. Mike Lee (R-Utah) said after the FCC approved the new rules.

Nope. This is an attempt by federal authorities to protect Internet users from telecom giants that say you can trust them to do what’s right but have a mighty poor track record in that regard.

It’s not a tax hike. At worst, it’s a continuation of a decades-old policy to subsidize universal access to communications technology through modest monthly fees.

In the case of broadband, however, we all benefit from its expansion by improved commerce, education, healthcare, entertainment, security and a host of other aspects of daily life.

The U.S. currently ranks 14th worldwide for broadband speed, according to the networking company Akamai Technologies. That puts us behind other cyber-superpowers such as South Korea, Hong Kong and Japan, as well as Latvia and Romania, which aren’t exactly on par with Silicon Valley for tech smarts.

Depicting responsible broadband policy as a multibillion-dollar tax grab isn’t just unworthy of our country. It demonstrates a reckless disregard for America’s future competitiveness.

And that’s a scary thought indeed.

David Lazarus’ column runs Tuesdays and Fridays. he also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to