Heartland Institute Reacts to FCC Internet Tax Plans

August 27, 2012

The Federal Communications Commission on Friday announced the launch of the first phase of the new Connect America Fund, a "modernization" of the Universal Service Fund to provide broadband Internet access to rural areas the agency deems to be underserved. While the FCC classifies contributions to the Universal Service Fund as a “fee,” it is essentially a tax on urban residents to subsidize service in rural communities.

The following statements from tax and telecommunications experts at The Heartland Institute – a free-market think tank – may be used for attribution. For more comments, refer to the contact information below. To book a Heartland guest on your program, please contact Tammy Nash at tnash@heartland.org and 312/377-4000. After regular business hours, contact Jim Lakely at jlakely@heartland.org.

"Whether you call it the Universal Service Fund or the Connect America Fund, it's still a massive subsidy mechanism based on 50-year-old notions about the cost of rural telecommunications.

“While ratcheting up the taxes and subsidies, the FCC still has not adequately addressed the reason why rural universal service fees continue to increase even as rural broadband penetration declines. The FCC also refuses to consider the impact advances in wireless and satellite technologies might have in rural areas, and whether market forces can actually deliver them without subsidy.

“As structured, the Connect America Fund will slow new investment in potentially competitive technologies while allowing incumbent rural carriers to profit from the grace of government largesse, not through their own innovation."   

Steven Titch
Policy Advisor
The Heartland Institute
Internet and New Media Policy Analyst
Reason Foundation

"This isn't about helping downtrodden country folk. It’s all about the Obama administration spreading money to companies that will become campaign donors lest they lose their subsidies. It's blatant crony capitalism."

S.T. Karnick
Director of Research
The Heartland Institute

“The FCC's new proposed broadband Internet tax/slush fund for rural broadband implementation, paid for by broadband users everywhere, is both a drain on consumers and totally unnecessary. The vast majority of Americans (around 95 percent) already have some form of broadband coverage, and the market is doing a great job of bringing new broadband services to where they are in demand. The new tax would raise billions of dollars for the government and the FCC, becoming yet another wasted subsidy on a problem that does not exist.”

Matthew Glans
Senior Policy Analyst
The Heartland Institute

“If expanding broadband is so important, surely money could be shifted from the crony capitalist ethanol subsidies, sugar tariffs, farm bill, defense budget, commerce department, energy department, or numberless other government spending programs and agencies. But that would mean setting spending priorities, which the federal government hasn't done since it last had a budget more than three years ago.

“The government instead proposes taking billions more dollars out of nearly all Americans' pockets to benefit a relative handful of other Americans.”                

Steve Stanek
Research Fellow, Budget and Tax Policy
The Heartland Institute
Managing Editor
Budget & Tax News

The Heartland Institute is a 28-year-old national nonprofit organization headquartered in Chicago, Illinois. Its mission is to discover, develop, and promote free-market solutions to social and economic problems. For more information, visit our Web site or call 312/377-4000.