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Cable Modem Tax Proposed by FCC
TheSync writes "News.Com has an article by Declan McCullagh that says the FCC is considering a new tax of up to 9.1% on the revenue of cable modem providers. This is an expansion of the existing universal service fund, which currently does not apply to cable services. The USF could even be expanded to wireless IP and VOIP providers as well, expanding the fund to over $13 billion."
It provides internet to public libraries, seems like they should tax people for using the net too... only makes sense, at least its going to a good cause.
Visualize the world of wine
I canceled my service
$59 for the service
$5 'rental'
Yuck
I signed up when it was $39.99 and FAST and the modem was free.
Its gets slower and slower and more expensive.
Which, if you think about it, means a greater usage of broadband and an incentive to unroll ever greater bandwidth.
I know that after starting to use broadband I'd never think about going back. It's almost required on the Internet nowadays. Anything that brings it to more people is a good thing.
Try not. Do or do not, there is no try.
-- Dr. Spock, stardate 2822-3.
From the article, "If they want cable modem services to pay, they have to decide how to avoid sweeping in all other information services as well," Boothby says. "That's really the point. How do you say an information service like a cable modem has to pay, without saying that all other information services have to pay? And (how do you) do that in a way that survives court review?"
As much as it pains me to say this, I think its time that internet access be classified as telecommunications. The medium is an active system whereby users exchange significant amounts of information in the form of e-mail, instant messengers, and other means, as well as purchase any number of items. The difference between an information service and telecommunications is in the exchange of information. An information service takes a small amount of information and gives you lots, but a telecommunications medium is primarily about the exchange of information and ideas.
Unfortunately, I don't know what obligations this puts on the access providers, but I think its time the issue was reconsidered.
Besides, this would eliminate the need for taxing telecom providers and a specific category of information service.
While you guys gripe about cable internet costing you ~$40, I'm still paying around $70 for my DSL (I count the phone line I have to buy and never use here).
I like this part of the article:
"One important point to note: If the FCC goes ahead with its proposal and cable users end up paying more in taxes, DSL users will end up paying less. Because more people will be contributing to the same $6 billion fund, under FCC procedures, each person's contribution gets reduced. So, while DSL taxes currently are 9.1 percent, that rate could fall substantially."
Can someone tell me what a FCC telephone usage tax has to do with rural health care? How does the FCC have any authorization to do that?
-molo
Using your sig line to advertise for friends is lame.
Well, I can't really say that this surprises me and as much as it may suck that my cable bill would go up, at least the money is going to some somewhat good causes.
Actually not.
My company serves rural midwestern markets (largest town is 8,000) exclusively. We receive no federal subsidy (why? we're not a incumbant local telco, or rural utility service, which most of the rules are structured to and were designed to keep younger companies absent subsidy). We do serve 1/6th of one state and should cover 1/3 in the next year. We're privately funded, profitable, and provide a service that nobody else can match in our markets (for a good price).
While the incumbant aka lethargic independent telcos and Qwest ignore these markets, we're there providing this important service. Their product? 128 Kbps DSL, fed by a single T1 for an entire community resulting in un-broadband (sub-200 Kbps). Ours is SLA'ed, 256 to 6 Mbps customer links standard in the product line. Private backbone, and 100 Mbps upstream. As usual, this private business has had the incentive to provide a better product at a lower price than the "fat, dumb and happy" incumbants. And no, we don't have a $5 million vacation house in Vail or a Gulfstream as part of our expense structure.
So what does the FCC propose? Tax us and our customers to put money in the pockets of the RBOCs and ILECs. To buy more Gulfstreams and vacation homes for the FDH. Oh, and to ensure greater political contributions from the incumbants (the real story here).
Just like a chapter out of Atlas Shrugged...
*scoove*
This is utter crap.
the "e-rate" program (40 percent), which subsidizes school and library Internet connections,
We are already paying for these services with our property taxes and federal income taxes. I see no reason why someone who has a cable modem should pay more for these things than someone who makes as much money and owns as much property but doesn't have a cable modem.
and rural telephone companies (45 percent), which might otherwise end up paying more for telephone service than city dwellers
This is even more ridiculous. Living in a rural area is a choice - as is living in an urban area. There are costs and benefits associated with those choices. I don't see a tax on rural properties intended to make property more affordable for those of us who live in cities and would outherwise end up paying more for an apartment or house than rural dwellers.
The remaining 15 percent goes toward discounts to low-income subscribers and funds rural health care.
Again, this has nothing to do with cable modems.
Mmmm.. Donuts
I wouldn't mind paying that. I can't get friggin broadband, and satelite SUCKS. (I even tried that, and was sadly disappointed when the upload was only 2kbps) Hell, I tried every kind of broadband service out there, and none of them work in my area. I even begged the cable company. They won't run me a cable, even if I do pay extra. If the government would add service for poor 'just out of reach' consumers like me, then we (the just out of reach) should have to pay a little extra. I don't think the general public should have to foot the bill though.
Speak for yourself.
False.
Cable costs is really nothing. Maintaining and setting up the cable is a different matter. Truck roll and equipment costs suck. You're talking pole installation, running the wires. The increase in boosters/repeaters/gain equipment.
Hell, the health care and retirement benefits that the company gives to the employees that string up the wire is likely to cost more than the wire itself, esp. in relation to years in use. This is one of the reasons why electrical companies moved to automatic meter reading--they spent millions doing the transition, but will save millions from all the people they laid off since they don't have to worry about their pension plans.
People time costs lotsa dough.
Because of network effects. When you add a customer (either urban or rural) to the telephone network, the network becomes that much more functional for all customers, both urban and rural.
Did you ever consider that the investment needed to get phone service to "the rest of us" urban dwellers would never have been made (would never have made sense) without the promise of Universal Phone Service to make it also useful for rural dwellers.
It took the better part of century to convince businesses that enough people would have a telephone that it makes sense to have your business directly accessible by phone. How long did it take for everybody and his brother to have a web site? Seems to me like nobody had heard about the Internet prior to 1993, and everybody was on the web by 1998. Network effects.
The thing about things we don't know is we often don't know we don't know them.
The e-rate program is a rip-off. The monies that are provided to schools for Internet access end up right back in the pockets of the ILECs, in the form of "discounted" network service rates. Dave Hughes raised the cry against this years ago when it was first proposed, claiming it was just a pork barrel for the telcos, but it wasn't on anyone else's radar back then.
If the schools instead had gone to wireless networking (entirely possible at the time, as Mr. Hughes proposed), the schools could have cut out the ILECs entirely and provided their own network infrastructure at lower cost. And it wouldn't have required a tax hike... excuse me, service fee to do it, either.
Schwab
Editor, A1-AAA AmeriCaptions
Now, what was that you were about to say?
Only this. Taxation without representation. These taxes are not approved by Congress. They are determined and levied under the sole authority of the FCC. That is why they are referred to as a "stealth tax".
Furthermore, as I managed the implementation project for a major municipality's E-rate project, I can tell you that the 55% in question breaks down as follows:
All this was done "for the children". Within months of implementation, the system collapsed because of the lack of a maintenance staff. The function of the project was immaterial. Once paid for, it had accomplished what the politicians wanted it to do.
E-rate, like all gubmint programs I've ever known anything about, is a social edifice whose purpose it is to make money disappear into political payola and dirty back room deals. Yet another example of how it isn't the type of government that gets you, but its size.
Why should we fund Internet connections with "bad content" filters, complete with someone hovering over the students' backs at school?
Don't children deserve BETTER, real, live teachers in the first place?
With that said, I've never understood the hypocrisy in shunning communism (China, et al) for its inherent censorship, while at the same time, our (American) culture justifies it in the name of "child protection."
And mods... before you label this off-topic, just remember that the tax money coming from this initiative will fund the very actions stated above.
About 85 percent of the fund's revenues are split between two causes: the "e-rate" program (40 percent), which subsidizes school and library Internet connections, and rural telephone companies (45 percent), which might otherwise end up paying more for telephone service than city dwellers.
75-100 years ago, when most of America was rural, subsidizing services for rural people was politically expedient and helped bridge a pretty large technology gap between rural and urban.
I don't see the need for it anymore. Basic technology infrastructure (dialtone, power) has already been built for rural America and has been for some time. Why should we urban dwellers continue to subsidize a built infrastructure? And it's not like it's helping get DSL or any other expensive last-mile technologies to farmers, anyway.
At some point, it's necessary to just tell people that *yes*, if you live in extremely low-density areas it is VERY EXPENSIVE to provide you with technology that has a measurable cost per FOOT, let alone mile. It seems that we're actually subsidizing a rural lifestyle that some people choose to lead (or choose to continue leading). If you want the technology at an affordable cost, you need to go somewhere it's affordable to deliver.
Or maybe we should start taxing off-road vehicles owned by rural people so we can build an affordable infrastructure in urban areas for urban people to use off-road vehicles. Urban people paying for rural people to have urban lifestyles is just as ludicrous.
~"In 2001, 36 percent of U.S. households, most earning less than $40,000, had income tax liabilities of zero"
And how many households that earned MORE than $40,000 had Income tax liabilities of zero?
How many Large Businesses has zero or even negative tax liabilities? Enron anyone? in 2001, the government owed Enron money.
"the difference between myself and a madman is that I am not mad" -Salvadore Dali
To a certain extent, yes.
If your parents chose to invest your college fund in a dot-com and lost it all, you are penalized. If your parents chose to live a life of crime, you might have to grow up in a foster home with your chances in life somewhat stacked against you. If your parents chose to use contraceptives, you wouldn't be alive to start with.
I don't think it's possible to have every kid start off on the same footing, short of some truly draconian (and likely ill-fated) governmental meddling. Moving to a rural area is not nearly the only way parents can screw up their children's chances in life, in any case.
What does a third grader need a T1 for anyways?
One doesn't, but a shcool that has access to T1 can offer there student a much broader range of learning. A society that doesn't take it upon themselvs to educate their children will collpase in pretty short order.
What we are seeing is the fallout from 25 years of tax cuts. there isn't enpugh income from property tax to pay for shcools and libraries right now.
The Kruger Dunning explains most post on
..who have $300 million dollar arenas that are partly paid for by the state. Most rural people will never even see your damn arenas/stadiums/fields and they have to fork out money to pay for your entertainment.
This also applies to all the tax that has to pay for government workers that demand higher salieries to live in your city because of the cost of living.
And don't even get me started on trash. Do you realize how much trash a large city produces. Do you know where it winds up going?? Rural areas.
So don't be so conceited as to think that this is a one way street. We have to smell your shit and give you money for entertainment at the same time.
People who live in rural areas generally move there to get away from other people, enjoy a life not driven by technology, and own large tracts of land at rates next to nothing.
This means they have to pump their own water, dispose of their own trash, take care of the septic tank, drive on gravel, cut wood, fill the propane tank and sometimes even generate their own electricity. This is the price of living on land that only costs $2000 per acre instead of $200000 per acre. If their only internet connection is 256k via sattelite with a half second latency, then boo-hoo. If they want convience, they would live within 10 miles of a Walmart, not 100.
When I can pick up a quarter acre worth building a house on in the city for $5000, then I'll feel sorry for the people out in the boonies.
For now, I pay the extra to live in the city (and thus alot more property taxes too). I like being near a 15 screen theater, amusement parks, hundreds of restaurants, multiple shopping malls with 100+ stores each and a gas station or grocery store on every corner. I like being able to meet people that care about more than hunting and tractor pulls. But I think I pay quite enough as it is.
A USF for people in the ghetto, maybe. Country life is quite cheap enough as it is.
The company I work for uses subsidies to provide better service to rural areas where it would not otherwise make financial sense.
What does this mean? It means that people that do live in the middle of nowhere can get DSL, and other high speed services (such as T1's, etc) -- It means we can provide DSL out of "remote" boxes, that the larger RBOC's ignore... we dont just serve from the CO, we serve from the tiny little boxes on your street corners, etc.
What else does this mean? It also means that the cable companies no longer have a 9.1% price advantage over their phone competitors.... All phone services must charge this. DSL, Phone, etc... so the cable companies have been enjoying 'being out of the taxified circle' and now things are starting to even up.
This is obviously good for our company, but since the tax does go to a good cause, its good for everyone.
Another portion goes to help pay for phone lines for low income housings. The program is called LITAP (Low Income Telephone Assistance Program) -- and it helps poverished families... I can think of a few older women who are handicapped and homebound that this fund helps in our serving areas.
For those of you that suggest "People in the Rural area dont need hardwired phones, they should just use cell phones" are way out of the know. You deserve a swift hit with the clue bat.
1. Cell providers have no interest in serving rural areas... cell coverage in truly rural areas is horrible.
2. Two Words: Lifeline POTS -- The cell phone companies are not regulated in the sense that if they have an outage affecting customers, they pay a fine. Almost all telephone companies must submit performance figures to the PUC of that State -- If they have even a single customer outage of more then 24 hours, you can bet they are going to take some heat for it. This does not include "Designed" services, but regular POTS service is covered by this.
This means the telephone company better get your service working or pay the price. This is done so that everyone has the potential to call 911 in the event of an emergency.
Cell phones have no such obligation, and as such.. you are basicly screwed until they feel like getting to it.
These are just a few of the reasons... I could go on, but these are sufficient to show that the fund does work, and will benefit many people.
I wont even touch on the fact that Public Schools and Libraries that have a hard enough time putting books in the shelves can also help pay for high speed internet, computers, etc. to level the playing field with "rich" schools.
Forum Foundry, Inc.
The "Universal Service Tax" is not a benevolence fund and is inappropriately applied to cable modem or other services.
1) The UST was created to increase profits for "rural" telecos -- few which still exists due to the mega mergers (I do not consider Verizon a rural telco). The UST was heavily lobbied for by legislators with telco ties in the name of the poor rural folks (I am one). However, what the tax actually does is underwrite business costs -- not provide access. It works like this: everyone is taxed for teleco services. The tax is then given to telcos to offset the alleged costs of providing services to rural areas. The telcos continue to collect the funds but stall and complain about the burgeoning costs and delay any roll-outs due to the lack of demand. In other words, this tax has little to do with providing services to rural consumers. It is designed to enhance profits for telcos.
2) In many cases, for rural consumers, cable modem access is the only choice due to the strict technical limitations of DSL. That is, the promised competitivness where telcos will benevolently deliver DSL, and cable companies cable modem options is simply a fraud. Rarely is DSL available in rural areas by a telco (some rural governments are installing their own services). So where is all this money going? Really? I live in a rural area and only have cable as a choice. (I am thankful for it.) If the UST is truly designed to provide broadband to rural communities, I have seen no evidence of it. In the past two places that I have lived, one had cable modems as an option and one had no broadband access (the "local" telco would not even provide an estimate of access due to low demand).
3) In my example, I will actually be paying (as a rural consumer) under the new provisions an additional tax for rural access. I do not see the logic. Who then is defined as rural -- someone who does not have broadband access? The definition is absurd as is the whole UST. I selected cable because DSL is not an option in my rural area even though the FCC insists that it is an option or will be in the near future (oh, let's say by 2009 [no joke, this is the time estimate -- $6 billion per year for 12 years to make this happen--hopefully]).
4) I have not seen one published report that confirms that rural consumers have benefitted substantially from this fund. Not one. I am sure that their are anecdotal cases, but nothing to substantiate a $6 billion per year fund. where is the money going? (Nothign sinister. A simple question.)
5) The funds for schools are also questionable. Rather than a telco lowering costs or providing the connectivity for free to schools, the telcos continue to charge high rates because they know that the costs are underwritten by the UST. Again, money is directly funnelled to the telcos through this program and is guaranteed by the government -- who also legislated that all schools must have broadband. So this becomes a solid profit center for telcos -- government guaranteed money essentially.
My comments may sound sinister, but they are not intended to be so. A lot of legislation is written in this manner -- seemingly benevolent on the surface but in reality, the results are a simple corporate profit center.
It is time to abandon the UST entirely (and make the telcos refund the payments to consumers) unless solid progress is made by telcos in creating legitimate and real universal access in real rural areas.
Nevertheless, expanding the current program to cable franchises is simply absurd. Unless the telcos (who are really only concerned about collecting larger fees from the program -- cable companies are exempt from the funds) can show overwhelming proof that DSL and cable are competitive in a overwhelming majority of truly rural markets (Allentown and Hershey, PA are classified as rural for goodness sakes), the cable modem tax should not proceed. The additional tax will simply increase the profits of telcos but requires no increase in the roll-out of broadband to rural areas.