ISPs ask FCC for tax on Big Tech to fund broadband networks and discounts

Internet service providers are again urging the Federal Communications Commission to impose new fees on Big Tech firms and use the money to subsidize broadband network deployment and affordability programs. If approved, the request would force Big Tech firms to pay into the FCC's Universal Service Fund (USF), which in turn distributes money to broadband providers.

The request was made on June 6 by USTelecom, a lobby group for AT&T, Verizon, CenturyLink/Lumen, and smaller telcos. USTelecom has made similar arguments before, but its latest request to the FCC argues that the recent death of a broadband discount program should spur the FCC to start extracting money from Big Tech.

"Through focusing on the Big Tech companies who benefit most from broadband connectivity, the Commission will fairly allocate the burden of sustaining USF," USTelecom wrote in the FCC filing last week.

The USF spends about $8 billion a year. Phone companies must pay a percentage of their revenue into the fund, and telcos generally pass those fees on to consumers with a "Universal Service" line item on telephone bills.

The money is directed back to the telco industry with programs like the Connect America Fund and Rural Digital Opportunity Fund, which subsidize network construction in unserved and underserved areas. The USF also funds Lifeline program discounts for people with low incomes.

USTelecom cites death of discount program

FCC Chairwoman Jessica Rosenworcel hasn't stated any intention to expand USF contributions to Big Tech. Separately, she rejected calls to impose Universal Service fees on broadband, leaving phone service as the only source of USF revenue.

The USTelecom filing came in response to the FCC asking for input on its latest analysis of competition in the communications marketplace. USTelecom says the USF is relevant to the proceeding because "the Universal Service Fund is critical for maintaining a competitive marketplace and an expanded contributions base is necessary to sustain the fund." No changes to the USF would be made in this proceeding, though USTelecom's comments could be addressed in the FCC's final report.

Some people have called for the USF to be expanded in order to revive the Affordable Connectivity Program (ACP), which provided $30 monthly discounts until Congress allowed funding to lapse. That program reduced the price of broadband for people with low incomes while providing more revenue to ISPs. USTelecom's request for payments from Big Tech argues that the ACP's lapse is a reason to impose fees on Big Tech.

"Expanding the contributions base to include Big Tech would not only sustain the current USF programs, but would also fund affordability efforts like the ACP long term," USTelecom wrote. Payments from Big Tech could "enable a permanent Affordable Connectivity Program," the group said.

In other news related to the Universal Service Fund, the US Supreme Court today rejected a challenge to the fund's legality that was brought by the conservative Consumers' Research group. The group challenged the FCC's authority to raise revenue for the fund but previously lost at the appeals court level, and the Supreme Court declined a petition to take up the case.

Big Tech accused of getting “free ride”

USTelecom also brought up this topic in a January 2024 filing that opposed the FCC's imposition of net neutrality rules. That filing urged Congress to give the FCC "clear authority to assess the revenues of services whose business model substantially depends on consumer or business access to broadband, such as digital advertising, streaming video services, and app stores." USTelecom said this proposed authority "should focus on the Big Tech companies who benefit the most from broadband connectivity and are the largest in terms of revenues and/or market capitalization."

ISPs could eventually get what they want if Republicans gain control of the FCC. Republican Commissioner Brendan Carr has repeatedly called on tech companies to pay for broadband network upgrades, arguing that "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." However, Carr has said the FCC would likely need new authority from Congress to collect fees from Big Tech.

Arguing on behalf of tech companies, lobby group Incompas told the FCC during a previous proceeding in 2022 that there is no "free ride" for Big Tech firms. "Indeed, it is the edge providers' products that are contributing to the demand for BIAS [Broadband Internet Access Service] and the incentive to build more BIAS networks that are faster and more robust. This investment is far from a 'free ride,'" the group said.

Incompas also said that tech firms already contribute to the USF because they use telecom services that charge Universal Service fees. The group argued that it would make more sense to impose Universal Service fees on broadband service than on tech firms and that the FCC lacks the authority to require contributions from tech companies.

Europe ISPs want direct payments

A similar debate in Europe has moved further along than in the US. The European Union last year sought public input on a proposal to make online platforms pay for telecom companies' broadband network upgrades and expansions.

In contrast to USTelecom's suggestion of payments into a government-run fund, European ISPs sought direct payments from tech companies to broadband providers. European providers argued that they should be allowed to demand fees from online companies that account for over 5 percent of a telco's average peak traffic.

The Biden administration urged Europe to reject the idea, saying that payments from online platforms to ISPs would "distort competition" and undermine net neutrality. The proposal was also criticized by Meta, Google, Netflix, and the Body of European Regulators for Electronic Communications (BEREC). The group of regulators from European countries said it found no evidence of "free-riding" by tech companies or evidence that ISPs' costs weren't fully covered.

The European proposal was reportedly rejected by most EU countries, and it appears to have been shelved, at least for the time being.