FC: Why the FCC "may" tax Internet providers, from Chris Savage

[Declan McCullagh <declan () well com>]

Previous Politech messages:

"Colleen Boothby on local telecos pushing for taxes on ISPs"
http://www.politechbot.com/p-04817.html

"Replies to reporter about Earthlink levying additional fees"
http://www.politechbot.com/p-04810.html


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From: Chris Savage <chris.savage () crblaw com>
To: "declan () well com" <declan () well com>,
   "politech () politechbot com" <politech () politechbot com>
Subject: RE: Colleen Boothby on local telecos pushing for taxes on ISPs
Date: Fri, 6 Jun 2003 05:30:55 -0400

-----Original Message-----
From: Declan McCullagh [mailto:declan () well com]
Sent: Friday, June 06, 2003 1:40 AM
To: politech () politechbot com
Subject: FC: Colleen Boothby on local telecos pushing for taxes on ISPs
[adr]

Declan... a slight revision to Colleen's post (from another veteran telecom 
lawyer :)  ).

Colleen said:


>>Right now, only providers of interstate "telecommunications" -- meaning 
plain vanilla transmission services like voice lines, T1s, DS3s, DSL 
without the Internet access, etc. -- have to pay into the federal Universal 
Service Fund.<<

There is a subtle distinction in the law here, but it matters.  Section 
254(d) of the Communications Act says that every provider of interstate 
"telecommunications ***SEVICES***" "shall" contribute.  Providers of 
telecommunications **SERVICES** are the plain-vanilla transmission guys.

But the statute also says that the FCC "may" require payments from any 
provider of interstate "**TELECOMMUNICATIONS.**"  The distinction, 
basically, is that "telecommunications" is shipping customer data at all; 
telecommunications is doing it for a fee.

The statute also defines "information service." This is, more or less, 
storing, manipulating, etc. data "via telecommunications."  ISPs are 
providers of "information service."  So are cable modem service 
providers.  The FCC is pondering whether to move combined phone company 
DSL+Internet access into that category.

ISPs, in short, use and in some sense "provide" telecommunications as part 
of their information services, even if they don't sell the 
"telecommunications" as a separate thing.  They therefore "may" be called 
on to contribute.  A big deal back in late 1997-early 1998 was an analysis 
of this issue done at the behest of Sen. Stevens.  In April 1998 the FCC 
said that ISPs were not providing telecommunications services and that no 
contributions would be required of them -- for now.  Kevin Werbach was 
instrumental behind the scenes in getting this generally 
good-for-the-Internet ruling to come out the way it did.

The phone companies obviously want to spread the pain of contributing to 
the universal service fund, partly just to lower their own "tax" burden, 
and partly since they are and would remain the biggest recipients of 
funding from this system.  But this isn't some bizarre policy frolic and 
detour.  Assessing USF fees on ISPs may be a bad idea, but the statute 
expressly says that the FCC "may" do it.

Chris Savage

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