Reps. Terry and Boucher Propose New Internet Taxes

November 17, 2005. Rep. Lee Terry (R-NE) and Rep. Rick Boucher (D-VA) released a discussion draft [31 pages in PDF] of a bill to be titled the "Universal Service Reform Act of 2005". The bill would impose new taxes on a range of internet services for the purpose of subsidizing the Federal Communications Commission's (FCC) Universal Service Fund (USF) programs, including funding of rural telecommunications carriers, and funding of the scandal ridden schools and libraries program.

The bill states in its recitation of findings and purposes that "The current State and Federal mechanisms used to collect and distribute universal service support are not sustainable in a competitive and rapidly changing technological environment."

Rep. Terry (at left) and Rep. Boucher wrote in a joint release that they "encourage interested parties to provide comments on the draft by December 23, 2005."

See also, joint section by section summary, and Rep. Boucher's short summary.

The bill would also expand the subsidized entities to include providers of "high speed broadband services", and "an evolving level of telecommunications services that the Commission shall establish periodically".

The bill would tax new information services to subsidize old and less efficient telephone technologies. It states that "Universal service support mechanisms should be used to provide incentives for continued investment in and enhancements to the public switched telephone network ...", or PSTN.

The bill would add a new term to the Communications Act, "communications service provider", or CSP. The bill would then require all CSPs to pay taxes to the FCC.

A CSP would include "any entity that ... uses ... Internet protocol addresses ... to offer a service or a capability ... that provides or enables real-time voice communications; and ... in which the voice component is the primary function".

A CSP would also include any provider of access to any kind of electronic communications network, including networks accessed by DSL, cable, fiber, power line, and spectrum.

The bill would include any entity that "offers for a fee, directly to the public, or to such classes of users as to be effectively available directly to the public, a physical transmission facility, whether circuit-switched, packet-switched, a leased line, or using radio frequency transmissions, regardless of the form, protocol, or statutory classification of the service, that allows an end user to obtain access, from a particular end user location, to a network that permits the end user to engage in electronic communications (including telecommunications) with the public." (Parentheses in original.)

The bill also exempts the USF from the Anti-Deficiency Act.

The bill does not use the term "tax". Rather, it refers to mandatory "contribution" of money to the federal government. Nor does the bill use the term "subsidy". Rather, it refers to "support".

Walter McCormick, P/CEO of USTelecom (USTA), stated in a release that "Congressmen Boucher and Terry have taken a leadership role in crafting legislation that takes a common sense approach to preserving the future for universal service. This legislation is another important step toward updating the nation's telecom laws and we applaud Congressmen Boucher and Terry for their dedication to ensuring a sustainable universal service fund. We also strongly recommend that important concepts in this legislation, like broadening the base of support for the fund, tightening the ETC requirements and providing certainty on compliance with the Anti-Deficiency Act, should serve as the core universal service components for comprehensive reform."