Federal Universal Service Fund

The FCC assertion that Chairman Tom Wheeler’s draft net neutrality order would impose no taxes or fees was disputed Friday by Commissioner Ajit Pai, who claimed in a statement it “explicitly opens the door to billions of dollars in new taxes on broadband.” An economist also claimed in a Forbes op-ed that the plan would lead to at least $500 million in federal fees and potentially more in state charges. An FCC spokesman Friday stood by a Wednesday fact sheet’s assertion, telling us the Internet Tax Freedom Act (ITFA) applies to broadband, even at the state and federal level.

The FCC portrayed the reclassification of broadband in Chairman Tom Wheeler’s net neutrality proposal as a modernized Title II. But pledges from senior agency officials not to impose traditional Communications Act common-carriage regulations like rate regulation didn't ease the concerns of reclassification’s opponents.

Though widely considered to be a likely supporter of the Communications Act Title II net neutrality approach FCC Chairman Tom Wheeler is expected to unveil later this week, Commissioner Mignon Clyburn said in an interview that she wants to make sure “everyone is able to point to something in the order that benefits them.” By that, Clyburn, who acknowledged she backed Title II in the 2010 net neutrality order, said she doesn’t want only the “well-heeled” to benefit, and wants the commission to maintain a regulatory backstop if needed. She also doesn't want to damage the continued deployment of broadband, Clyburn told us Friday.

The FCC plans to fine Advanced Tel of Simi Valley, California, $1.6 million for failing to make required payments to USF and other federal telecom programs, the Enforcement Bureau said in a news release Monday. “All phone companies are required to participate in universal access programs so that consumers everywhere have access to critical telecommunications services,” Enforcement Bureau Chief Travis LeBlanc said. “Service providers who flagrantly avoid these responsibilities damage these programs and the public interest, and we demonstrate today that we will hold them accountable.” The carrier did not make payments to USF and the Telecommunications Relay Service Fund, as well as the Local Number Portability Administration, and federal regulatory fees, the release said. Advanced Tel did not immediately comment.

FCC Chairman Tom Wheeler may be moving toward basing net neutrality rules on Title II (see 1501070054), but how he goes about it has become intertwined with another controversial issue -- whether to require broadband customers to begin paying into the USF. If the FCC approves reclassification, and forbearance from Section 254, the agency could block its own ability to require broadband to contribute to the fund, an NTCA official told us. The group made the case to the agency last week. ITTA, which like NTCA has called for requiring broadband providers to begin contributing to the fund, also opposes forbearing from the section, said ITTA President Genny Morelli in an interview.

In a move FCC Chairman Tom Wheeler and the commission's Democratic majority said would bring more broadband and Wi-Fi connections to schools and libraries, commissioners on a party-line 3-2 vote Thursday raised E-rate’s annual spending cap by $1.5 billion. They signaled their intent to approve another reform aimed at giving people more access to the Internet, adding broadband to Lifeline (see 1411120026). Republican commissioners, while backing the aim of E-rate, opposed raising the spending cap.

While NCTA and Republican Florida Gov. Rick Scott joined those arguing that a Title II Communications Act net neutrality approach could lead to billions of dollars in state and local tax and fee increases on consumers, telecom attorneys and other advocates differed whether that would actually happen. That is partly because broadband may be considered an interstate service not subject to state and local tax, they said in interviews.

Communications Act Title II opponents seized on a Progressive Policy Institute study’s estimate Monday that reclassifying broadband would create $15 billion nationally in new federal, state and local taxes and fees, and predicted it would dampen public enthusiasm for basing net neutrality rules on Title II. The “sleeping giant has been awakened, and once the size of the fee increases becomes more widely understood, I think consumers will react,” said Free State Foundation President Randolph May.

Going into more detail about the issues he sees facing a Title II approach than he has said publicly, FCC Chairman Tom Wheeler told public interest advocates that the agency would have to grapple with its legal authority to impose net neutrality rules on wireless, given a section of the Communications Act that some say prohibits treating mobile as common carriers, said three people who attended the Nov. 10 meeting. Wheeler also raised questions about the impact reclassification would have on privacy, according to the attendees, as well as an issue commissioners Mike O'Rielly and Ajit Pai brought up Friday at a Free State Foundation panel discussion on net neutrality: Would broadband providers have to begin paying into the USF?

Top telecom issues set for discussion at NARUC’s annual meeting this week in San Francisco include states’ authority under Communications Act Section 706, 911 reliability, the USF contribution base and municipal broadband, NARUC members said in interviews.