We've been begging the FCC to establish a National Broadband Policy. On Feb. 14th the FCC took action—only it might turn out to be as bloody for ISPs as the St. Valentine's Day Massacre was for George "Bugs" Moran's North Side Gang in Chicago, circa 1929.

by Patricia Fusco ISP-Planet Managing Editor [March 1, 2002]

The Tauzin-Dingell bill, also known as the Internet Freedom and Broadband Deployment Act [HR 1542], has passed the U.S. House of Representatives and moved on to the Senate. But this legislation that could cut Internet services providers out of the local loop has a long way to go before it becomes the law of the land.

In fact, there is a immediate threat to the future of independent ISPs in the U.S, but it's emanating from the Federal Communications Commission, not Capitol Hill.

The FCC initiated one major rulemaking change while it took another step toward transforming an old rule into a new tax. The rule change was put forth as a Notice of Proposed Rulemaking (NPRM) designed to add clarity to the muddied waters regarding broadband services.

The nucleus of the Notice tentatively concludes that "wireline broadband Internet access services—whether provided over third party or self-provisioned facilities—are information services, with a telecommunications component, rather than telecommunications services."

This means that data services like e-mail, and voice services like voice mail that ride over telecom companies' facilities, would be classified as information services, with a telecommunications component. As such, ISPs delivering e-mail over digital subscriber lines (DSL) would be lumped together with local exchange carriers and inter-exchange carriers, under the same classification as long-distance carriers and regional Bell operating companies (RBOCs).

And this is where things get really interesting. The Notice also seeks comment as to whether facilities-based broadband Internet access providers should be required to contribute to the universal service fund (USF). In all fairness, the Commission is also asking the same question regarding the regulatory classification of cable modem services in its Sept. 2000 Cable Modem Notice of Intent.

Do you suppose the Commission might decide to define cable modem access as information services, with a television component?

Now, these rulemaking initiatives all begin to make sense.

Were the FCC to reclassify all broadband service providers, all providers would be obliged to pay universal service fees. This is why the Commission took another step toward reforming the USF contribution system in mid-February. You see, the FCC also issued a Further Notice of Proposed Rulemaking (FNPRM) seeking additional comments about the way it collects universal service fees.

The Commission wants to assess contributions based on the number and capacity of connections telecom companies provide, rather than on interstate revenues earned. Bundled data and voice, including data and long-distance services, have depleted the pool of monetary resources that the FCC draws from to extract universal service fees.

Under this proposal, local exchange carriers, inter-exchange carriers, and wireless providers would contribute $1 a month for each connection to a public network for residential users—pager service providers, however, would only be accessed 25 cents per connection. Business connection assessments would be based on the maximum available capacity (i.e. bandwidth) of a connection.

Can you say, "rate increases?"

The Commission's current USF cap for residential service is $3.50 per month. Under the proposed rule, a consumer that has one phone line to their home for voice, another for data, a pager, a cellular phone, a cable connection, and a wireless personal data device would be accessed $5.25 a month in universal service fees. This reflects a 33 percent increase in universal service fees before any administrative costs are tacked on for processing and collections.

The Further Notice doesn't provide specifics as to what businesses would have to pay in universal service fees, but it does provide for allowing the maximum possible assessment because it is based on the available capacity, not the actual bandwidth used.

Included in this FNPRM is a possible prohibition of carriers from recovering amounts in excess of their required universal service fee contributions. I guess that would apply only to residential fees since overcharging businesses is built in to the FCC scheme.

This is supposed to promote broadband use in U.S.?

FCC Commissioner Michael K. Powell says broadband deployment is the "central communications policy objective in America" in a statement issued about both the Notice and Further Notice.

"With today's decision, among several others, we have stopped just talking about promoting broadband and started acting," Powell said.

Commissioner Kevin J. Martin disagrees. Martin resents the idea of accessing broadband Internet access providers with universal service obligations. A statement issued by Martin notes, "I object to its determination that we will consider imposing what is essentially an Internet access tax, extending universal service contribution obligations to non-wireline broadband Internet access providers, such as wireless, cable, and satellite providers."

Commissioner Martin contends that placing additional financial burdens on broadband service providers would only create barriers to deployment.

Martin is right. Extending universal service fee obligations to broadband providers would be contrary to the Commission's mandate of fostering competition among advanced communications services.

Only state or federal authorities have the power and authority to create new taxes. Apparently Powell finds it wholly within his power to extend existing taxes to the Internet.

— End