The latest bad idea from the net neutrality crowd, President Obama included, is that the FCC should reclassify broadband services, wired and perhaps even wireless, as telecommunications services under the Federal Communications Act. Such a move would grant the Commission much greater authority over the operations of the broadband companies, most famously Verizon and Comcast.
But a new study by the Progressive Policy Institute, a centrist think tank associated with the Democratic Party, shows that such a move would also result in new fees on the services from federal, state and local governments. These fees are assessed on telecommunications services for the USF (Universal Service Fund) which subsidizes service in underserved areas.
The PPI report is by Robert Litan and Hal Singer and shows that annual fee increases in the US will vary wildly from state to state. In Delaware the increase would be $8, but in some parts of Alaska it would be almost $148. The average ranges from $51 to $83, depending on how you calculate it. The average increases in wireless broadband would be higher. It would all total up to about $15 billion annually in new user fees.
In 2011 the FCC voted to create a new "Connect America Fund" to focus on areas that are underserved for broadband. The new fund was capped at US$4.5 billion a year. But under the law, once reclassified as telecommunications services, broadband services would also be assessed for the USF. The FCC cannot waive the fee without authorization from Congress.
Like telephone companies, the broadband companies would pass this cost on to their customers and detail the numbers on the monthly bill. It's easy to imagine how unpopular this would be, and all to solve a problem that doesn't exist.
It was always unlikely that reclassification would succeed, but once the full political implications of it sink in, it will certainly be forgotten by those in power.
You can download the Litan and Singer report by clicking here or read the embedded version below.