A Tax to Surf?

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By Robert MacMillan
washingtonpost.com Staff Writer
Tuesday, July 5, 2005; 9:51 AM

I can think of no better way to start July 5th than with the promise of a new Internet tax.

Don't rush out and start dumping fiber-optic cable in the nearest harbor, mind you. A new tax to subsidize rural high-speed Internet access is still at the discussion phase in Washington. According to early news reports, Internet service providers would be responsible for collecting such a tax, which means that it probably would show up in your monthly Internet service bill.

The tax, according to News.com, would be collected under the Universal Service Fund, the $5 billion-a-year program that makes telephone service affordable to people in rural areas: "The USF currently collects a fixed percentage of revenues from long-distance, wireless, pay phone and telephone companies so that it can pass on subsidies to low-income customers, high-cost areas, and rural health care providers, schools and libraries. Most companies come up with their share, set for this quarter at 10.2 percent, by charging their customers a fee."

Support for using the USF to fund rural broadband access comes from 62 members of the House of Representatives, most of whom represent districts with urban centers on the scale of Muskogee, Okla., Charleston, W.Va., and Sioux Falls, S.D. In other words, they come from places where the voters are spread thin and need some better choices for Internet access -- pronto.

They're speaking up now because House and Senate committees are starting to reexamine the Telecommunications Act of 1996. That legislation rewrote the rules that govern our communications media, but raised many more questions and ambiguities that Congress is eager to solve. Universal service, as News.com said, came out of the Telecom Act, so it is up for alteration as well, and the members of the rural caucus in Congress say it should not be forsaken "as the United States moves into the broadband age."

Some people are leaving Rep. Tom Osborne's (R-Neb.) district because they lack modern amenities such as broadband, the congressman said in a CBS MarketWatch article: "In today's world, if you don't have broadband, you don't have a chance." Here's more from Gil Gutknecht (R-Minn.) in the same article: "Having access to telecom is a little like having access to blacktop highways."

Random Access reader Sarah McPhee sent an e-mail describing her situation in Buckholts, Texas, a small town nearly 90 miles from Austin and 150 miles from most other Texas cities: "I had absolutely no luck trying to get online with dialup services, and we live half a mile from the road. Being a full-time student, I must have the Internet, so I had to get satellite from Direcway. It costs me $59.99 per month, and I had to purchase $400 in satellite equipment (unlike their parent company, you don't get the Internet satellite for free!). I have been using their service since January 2003, and have already spent another $250 on a new box because my original unit mysteriously fried not long after they introduced their upgrade."

Most people, especially as they spill into the land far beyond the exurbs, will demand easier 'Net access. As always, someone has to pay for it. Should that  warrant a federal tax? Some people will argue that living in the countryside is a choice that comes with advantages and drawbacks. Don't like the dial-up? Move back to the 'burbs. Others will remember that the United States sees universal broadband service as an official goal, and regularly issues progress reports on how the ISPs are doing.

It's unlikely that much of rural, remote America -- including McPhee's town -- will ever become the suburban centers of tomorrow. There always will be people living outside our population centers, and if we can ante up a couple of bucks a month to keep the phone service affordable, we'll probably end up having to do the same for Internet service. Only two complicating questions spring to mind:

* Is the Universal Service Fund the right program? Its $2.25 billion E-Rate program to provide discounts for school and library Internet access is, according to news reports and official investigations, riddled with fraud. Maybe there's a cleaner mechanism for doing this.

* Congress bans state and local governments from taxing Internet access. Would this change to the federal rules be subject to that ban?

Make the Access Come to You

Some communities that feel they are underserved by their local telecommunications providers have tried establishing municipal Internet access networks. That's raising quite a fuss in the United States where the telecom industry is persuading state governments to crack down on the practice. France, unsurprisingly, went in the opposite direction.


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© 2005 The Washington Post Company

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