If the Internet were regulated as a public utility, as President Obama has proposed, average government fees on wireless access would increase by $89 annually per household. All combined, these fees will cost Americans approximately $18.5 billion a year.
On Nov. 10, Obama released a video asking the Federal Communications Commission to protect net neutrality and reclassify Internet service under Title II of the Telecommunications Act. According to Robert Litan and Hal Singer, “What this means is that the Internet would be treated and regulated as a public utility, like your local electricity or gas distribution company, which is a monopoly.”
As a result, Internet service providers would be relabeled as telecommunications providers and be subject to government taxes and fees similar to those that apply to phone companies. Eighty-one percent of the government fees would be collected by state and local governments.
Legislatures at all levels of government would have to separately exempt broadband providers from the newly-applied taxes and fees to avoid punishing homes for Internet access. The FCC would be unable to apply tax exemptions under reclassification of Internet services. “We don’t think the FCC could do anything to stop the states from exercising their constitutional authority to tax based on reclassifying [ISPs] as telecom services,” Singer told the Washington Examiner.
Litan and Singer looked at the average prices for broadband access and mobile service across the United States, and then examined the non-business state and local fees applied to those prices to find their data. The results are outlined in a new policy brief published by the Progressive Policy Institute, a center-left think tank focused on “progressive, market-friendly ideas.”
“With a particular sector of the economy that is actually doing a very good job of innovating, you want to be very careful and not put too restrictive regulations on that sector,” said Steven Chlapecka, a spokesperson for the Progressive Policy Institute, to the Examiner. Additional fees on ISPs would harm investment in broadband and, more importantly, the consumers that rely on those investments for better service.
Revenue aside, there would be negative economic consequences. Internet speeds would slow, hurting businesses that rely on up-to-the-second data for their logistics. ISPs would likely raise their prices, forcing households to spend more for slower Internet.
Despite Obama’s support for reclassification under Title II, the FCC is independent from the administration. However, all five of the current FCC commissioners were nominated by Obama, including the two sitting Republicans. No more than three FCC commissioners may be members of the same political party.
At a time when Americans are increasingly reliant upon the Internet, reclassifying ISPs as a utility would make Internet access unnecessarily expensive. Obama wants to ensure the Internet is “free and open.” The best way to do so is not to regulate the Internet as a 20th century utility, but by letting ISPs continue to innovate and compete without excessive government restraint.
