Net neutrality’s cost to consumers pegged at $17B — or zero

19 Comments

After a dramatic shift in the debate over net neutrality last month, many expect the FCC will reclassify internet providers so as to bar them from giving special treatment to some websites over others. The question now becomes how much (if at all) the agency’s decision, which turns on an arcane process called Title II, will cost consumers.

Depending on who you ask, the answer is that Title II, which would treat internet providers akin to public utilities, will be ruinously expensive — or will have little financial impact at all. Among the Cassandras, you can count Republican FCC Commissioner Ajit Pai:

“It will cost $17 billion in new fees,” Pai told an audience of telecom lawyers in Washington on Friday, warning that consumers’ monthly internet bills are set to soar.

Pai’s number, which has also popped up on the Wall Street Journal‘s editorial page and in other right-leaning outlets, is lifted from a purported study by the Progressive Policy Institute, a think tank that has reportedly taken funding from [company]AT&T[/company].

The crux of the PPI study is that state and local governments will seize on the Title II legal regime to impose a bevy of new internet taxes, and that the FCC will soon apply a levy known as the Universal Services Fund levy to internet users.

The $17 billion figure, if accurate, provides additional ammunition for companies like [company]Comcast[/company] and [company]AT&T[/company], which are lobbying fiercely to stop net neutrality. The companies have already claimed that the new legal classification will dissuade them from investing in new internet infrastructure (though the $41 billion the industry just spent on spectrum casts doubt on that claim).

Like so much else in the pitched debate over net neutrality, however, the $17 billion number may have been ginned up for political purposes. According to Free Press, a nonpartisan advocacy group for open internet, the figure represents a misleading worst-case scenario that will never come to pass.

As the group points out, reclassification does not appear to require any new consumer fees. Such fees, it they do appear, will instead be the result of a separate set of decisions by the FCC and various governments.

Two different debates

To understand the fuss over the alleged $17 billion of new consumer costs, it’s helpful to recognize that the current debate over the internet is actually two debates: the first turns on net neutrality; the second turns on what sort of taxes and fees should apply to the internet. And one debate is not intrinsically tied to the other.

In the case of net neutrality, an FCC decision to reclassify internet providers as “common carriers” under Title II would trigger a new set of regulatory obligations. But the agency has the power to immediately excuse the companies from many of these obligations — a process called “forbearance” in telecom parlance.

Already, the agency has signaled that’s exactly what it plans to do. If the plan goes ahead, broadband providers will be barred from providing “fast lanes” for select websites, but will also get a pass from antiquated portions of the reclassification law. For consumers, no new broadband fees spring into place if the FCC waves its regulatory wand and turns internet providers into common carriers.

But that doesn’t end the larger concerns over fees and taxes, or eliminate conservatives’ fear that consumer internet bills will soon be filled with the same maddening series of charges that appear on their phone bills.

The outcome of this debate will turn not to Title II, but on issues tied to the FCC’s general powers over telecommunications and, to a large part, on whether Congress decides to extend the Internet Tax Freedom Act, a law that forbids states and local governments from taxing internet services. That law, known as ITFA, will expire on December 11 and, unless Congress renews it, consumers could get hit with all sorts of charges no matter what the FCC does with net neutrality.

As for the FCC adding charges to broadband bills, the agency already has the power to do so under the Universal Service Fund. This is a levy that has appeared on consumers’ phone bills for decades, and is spent on things like subsidizing phones for low-income Americans, school broadband or building telecommunications infrastructure in rural areas.

Collecting and spending the fund is a policy decision for the agency that is unrelated, however, to net neutrality.

“In the short term, nothing changes the next day when broadband gets declared Title II,” said Harold Feld, a lawyer with the advocacy group Public Knowledge. “On the Universal Service Fund, the FCC already has a proceeding on USF reform going and would need to have further proceedings on USF to determine how to apply the statute.”

A source close to the agency, meanwhile, said that if the FCC does decide to apply the Fund levy to broadband, it won’t necessarily mean that consumers’ overall expenses will go up. As it stands, a nonprofit corporation decides how much the Fund requires every quarter (the most recent amount was $16.1 billion), and the FCC then instructs a variety of companies to pay into it. If the list of contributors is expanded to broadband companies, that means that consumers could see new charges appear on their internet bills but, at the same time, see the same charge (currently $1.23 per month in my case) decrease on their phone bill.

The bottom line is that broadband users could see new fees and taxes on their internet bills in coming years, but that’s hardly a sure thing — and, more importantly, the outcome will have little to do with whether or not we have net neutrality.

19 Comments

anonymous

… and what about government lobbying. so special interest groups with their wads of cash can lobby for the NRA, Big Tobacco etc. why is that not neutral too so small ma and pa companies can lobby to have a chance to compete.

how about some neutrality there????

anonymous

….

what about comparing to a government utility service called transportation or roads. if there were no special fast lanes then why are some states charging: toll fees, HOV lanes some requiring a pass, car pool lanes, bus lanes. why do we have dedicated lanes then. why do these same governments charge a fee for a transponder in your car for toll booths as a convenience to fishing your pockets for change to pay in cash?

IT IS FOR TRAFFIC MANAGEMENT.

imagine if that all was neutral. everyone would be going at the same speed. it would be chaos. non essential traffic would hold up emergency services. there would be no investment in bridges and roads – if any then it would be extremely slow.

Now apply the same rules to the internet which is TRAFFIC OF DATA.

anonymous

what about comparing to a government utility service called transportation or roads. if there were no special fast lanes then why are some states charging: toll fees, HOV lanes some requiring a pass, car pool lanes, bus lanes. why do we have dedicated lanes then. why do these same governments charge a fee for a transponder in your car for toll booths as a convenience to fishing your pockets for change to pay in cash?

IT IS FOR TRAFFIC MANAGEMENT.

imagine if that all was neutral. everyone would be going at the same speed. it would be chaos. non essential traffic would hold up emergency services. there would be no investment in bridges and roads – if any then it would be extremely slow.

Now apply the same rules to the internet which is TRAFFIC OF DATA.

anonymous

The ISPs have invested billions in infrastructure and they have the right to make a profit. The companies asking for net neutrality are the Googles, Facebooks, NetFlixes who have not spent a dime on infrastructure. They just want consumers to view their content and pay them for their services using the ISP infrastructure. They make high profits because they do not have the high costs. Government wants to treat the internet as a public utility without putting any of its money in.

What will happen with net neutraility is new taxes by government. Then there will be new charges by the ISPs because they will want to tax their consumers with just internet. The ISPs will not invest decreasing competition. The rates will be jacked up for higher bandwidth tiers. There will be charges for visits or technical problems.

net neutraility is a bad thing. yes my neighbor may get a faster connection by paying more but is it not like anything else – I go to Disney’s parks and pay a small fee for quicker access. Or I pay a fee and get priority seating and boarding on an airline.

Ryan Mathis

Wow, just wow. Bravo my friend. Perhaps you should ask your local ISP’s how much of that infrastructure was paid for by government subsidies. Or the tax breaks they were granted for promises they never delivered. And perhaps you should be a whistle blower for the likes of Google, Facebook, and Netflix as their public financial statements all show extensive capital expenditures.

Of course I’d love to see companies like Verizon try to sell overpriced internet without Google, Facebook, and Netflix. By the way how much do ISP’s pay for astroturfing these days? Must be a pretty good racket.

Matt

Here’s another possible out come; cable companies get included in title two, local utility commissions in every city of America doubles its staff to handle the new resposibilities; local district fees are added to federal ones using pre-existing laws, cable employees get scared of the change and unionize, talks break down and strikes occur, proper network maintenance funding gives way to regulation not written by network administrators, good employees leave for less union/political jobs, network advancements slow to a trickle.

This could never happen, I’m crazy. Oh wait, it already did to every phone company in America.

Let’s do that again. ;)

takeymctaker

Misspelled Harold F-E-L-D’s last name, which does not contain a ‘U’.

tim

If it’s not broke, don’t fix it. And, if it’s not REALLY broke, don’t have the government fix it.

Jordan

The FCC Open Internet Order 2010 helped to cement net neutrality, until Verizon started a lawsuit last year and won claiming the FCC didn’t have the authority. Now in order to implement those regulations again and create a level playing field on the internet, the FCC will need to classify the internet as a common carrier.

tim

And, what about the first 18 years of commercial Internet growth, from 1992 to 2010? The Internet has always had fast lanes. If you host your www site on a fatter connection, your customers get faster access to your content. Or, even better, pay Akamai, etc. to cache it closer to the end user. That is what has allowed the Internet to grow and innovate. There has never been a level playing field. This is a bizarre disinformation campaign from the content industry duping well meaning consumers.

Ryan Mathis

Yeah forget broke. The American Broadband market is on the verge of shattering and long since been in desperate need of repair. At least as far as residential is concerned. If you’re a business you can find plenty of places with extensive fiber networks as well as the freedom to choose from a large number of ISP’s. If you’re residential you’re pretty much limited to choosing between 2005 speeds and your local broadband monopoly.

Prices are going up (along with revenue and profit), choices are going down, and companies like Verizon have literally argued that Net Neutrality is a violation of their first amendment right in that it removes their ability to exercise editorial discretion.

Keep in mind virtually every developed country with a vibrant broadband market uses some form of the local loop unbundling provision that would be provided in Title II. The same one that led to competition and consumer choice in the phone market circa the 1980’s.

What you seem to forget is that government regulation isn’t the only source of unintended consequences. Deregulation that paves the way for anti-competitive monopolies and the creation of artificial barriers to entry can wreak just as much if not more havoc than the most burdensome regulations that the FCC could enforce.

Regardless I submit that anyone that goes out of their way to defend anti-competitive monopolies should cease to be taken seriously if they want to try to advocate for free markets, as its obvious to anyone who has taken an Economics 101 course that monopolies and free market competition are incompatible.

dd36

Verizon broke it with a lawsuit because they thought they could buy government to prevent it from being fixed. Hopefully, for all of our sake, Verizon was wrong.

jjj

That’s complete BS, stopping internet providers from getting payed by both sides ( in the end the consumer pays for the entire amount) is a hell of a lot more than 17B on plus not on minus. Just online retailers could have to pay more than 17B per year ISP tax, a tax that in the end comes from the consumer’s pockets.
Not collapsing the internet economy and crippling the US internet industry, not making access to information and culture harder are again far more than 17B per year.
Hell, net neutrality from an economic point of view is a matter of national security. If food, water, energy are that, then the internet it too.
Carriers already crippled the computing devices US industry and the cost is hundreds of billions and a lot of jobs if you include the entire hardware ecosystem.
The lack of competition costs consumers a lot more than 17B a quarter and that’s actually really easy to calc.
The prices, data caps and low speeds are crippling media delivery too, how much is that cost?
Yet they want the freedom to offer less and charge a lot more, the freedom to decide who lives and who dies on the internet and the freedom to fatally cripple the US economy.

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