Claims That Real Net Neutrality Would Result in New Internet Tax Skew the Math and Confuse the Law

[Commentary] The anti-Network Neutrality crowd at the Progressive Policy Institute claims that Internet service providers and users would pay billions of dollars in new fees if the Federal Communications Commission reasserts its Title II authority. PPI insists that following the law and reclassifying broadband Internet-access service under Title II would allow federal, state and local governments to collect for broadband the same kind of Universal Service Fund (USF) fees that are already levied on phone companies. PPI also claims that reclassification would lead to new state taxes.

There’s a problem with this argument: Authors Hal Singer and Robert Litan have let their pro-ISP bias skew their math and confuse the law. PPI’s main mistake -- or attempt to mislead -- comes from ignoring the difference between services that cross state lines and those that exist entirely within one state. If the FCC reclassifies broadband access as a Title II service, it will also (based on precedent) declare that broadband is a purely interstate telecom service. Because broadband access is interstate and not intrastate, none of the intrastate taxes or special telecom fees would apply. PPI’s argument also ignores the possibility that the FCC and Congress could take additional steps to remove or limit any future taxes or fees.

The bottom line is this: If the FCC does nothing more than stick with precedent and designate broadband as an interstate telecom service, the average potential increase in taxes and fees per household would be far less than PPI estimates. If Congress extends and updates the Internet Tax Freedom Act and the FCC declines to include broadband in the revenue base at this time, the increase would be exactly zero.