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May 24, 2021
Executives in the global telecom market have long bemoaned the fact the Internet industry siphoned off most of the profits they had hoped to make from their networks.
For example, almost exactly a decade ago I listened to the CEO of Telecom Italia complain of the "big burden" that Internet companies like Facebook and Netflix put on telecom operators' networks. "Business models ... need to be revisited," he said at the time.
Now, ten years later, it looks like that may actually happen.
"Big Tech has been enjoying a free ride on our Internet infrastructure while skipping out on the billions of dollars in costs needed to maintain and build that network," wrote Republican FCC Commissioner Brendan Carr this week.
He said that companies like Amazon, Facebook and Google should help fund the construction of broadband networks in rural areas because they have been making record profits off the use of those networks. "Congress should enact legislation that ensures Big Tech contributes an equitable amount," he wrote.
The USF compromise
Carr argued that Internet companies should be required to funnel money into the Universal Service Fund (USF) to pay for broadband services in rural areas. Created in the 1990s, the USF collects around $10 billion annually from telecommunications providers – many choose to pass this expense on to their customers.
Carr's new proposal arrived just days after the Biden White House said it is willing to accept a Republican proposal to spend $65 billion – instead of Biden's initial $100 billion – to construct broadband services in unserved areas.
While Democrats and Republicans appear to have reached an agreement on the amount of money they're willing to spend on crossing the digital divide, they still haven't agreed on how to finance all that spending. As noted by the New York Times, Biden wants to raise taxes on corporations to fund the effort, which Republicans oppose. Meantime, Republicans want to raise user fees like the gas tax, which the president opposes.
Thus, the notion of requiring Internet companies to pay into the USF would appear to provide a happy compromise.
Changing the new Gilded Age
"There's bipartisan support there," analyst Roger Entner of Recon Analytics told me. "It would solve the quagmire that we currently have in Congress."
Entner himself has written that Internet companies should help finance construction of the networks they use. "Everybody looks at the untold riches of this new gilded age: Why do they get all the benefits without having to pay for it?" he asked.
To be clear, this isn't the first time those in the telecom industry have called for changes to the USF. "It is effectively a regressive tax on consumers," AT&T CEO John Stankey wrote last year. In 2011, Light Reading's Carol Wilson was writing that USF need to be reformed. (See Why USF Reform Matters.)
But this time things might be different. It's "a serendipitous moment," Entner said.
Given Democrats' general interest in regulations on Big Tech, coupled with Republican openness to corporate taxation, the stars appear to be aligning around the notion of Big Tech paying up for telecom. And even Big Tech's man-made stars may not stop it this time.
Editorial Director, 5G & Mobile Strategies, Light Reading
Based in Denver, Mike has covered the wireless industry as a journalist for almost two decades, first at RCR Wireless News and then at FierceWireless and recalls once writing a story about the transition from black and white to color screens on cell phones.
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