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No to Internet taxes

A number of US Senators want to extend telecommunications taxes to cover Internet communications. To do so would miss an opportunity to undo the hyper-regulation of the telecommunication industry's past.
Written by John Carroll, Contributor

When I read that Ted Stevens, an Alaska Republican and chairman of the Senate Commerce Committee, was a strong supporter of plans to tax Internet communications in order to prop up the wilting Universal Service Fund (a pool of funds used to subsidize telecommunications services in rural areas), I had the same reaction as IT_Guy when he observed that Alaska pays generous oil dividends to its citizens every year. Surely some of that money could go towards wiring Alaska so that a population that is disproportionately male can do something interesting with their evenings. That certainly makes more sense than funneling more money down the chute that leads to Gravina Island, population 50, and the endpoint for a new bridge costing close to a billion dollars that will be longer than San Francisco's Golden Gate and higher than the Brooklyn Bridge.

Of course, when IT_Guy lamented that Republicans were supposed to the be party of small government, I thought, that's so 1990s. Republicans are now the party that promises tax cuts AND spending increases. The moral of the story is, if your opponents are known as big spenders, beat them by spending even more.

But I digress. As should be obvious, I think extending the Universal Service Fund (USF) taxes to include Internet communications is a singularly bad idea. I can list a string of government-funded market-skewing boondoggles, from France's investment in the Minitel system (the root cause of France's slow entry into the Internet age) to New Orleans' dodgy levee system. Government has a habit of tilting the natural flow of an economy in artificial directions. That tilt caused lots of people to build houses in New Orleans that were essentially underwater, something that would only be economically feasible if government is hiding the cost by footing the bill.

If the cost of wiring Alaska to compete with urban areas in the 48 contiguous states makes economic sense, then someone else will fund it, and make money from it. Frankly, thinking government should coat everything with single-tone paint and enable "universal telecommunications access" irrespective of whether that connectivity makes sense is a legacy of the devil's bargain made between the US Government and pre-breakup AT&T. Back then, the government protected AT&T from competition in exchange for AT&T serving as a cash cow.

Well, the hyper-regulated telecommunications environment that resulted from that arrangement was a bad idea, and we are STILL paying for it through a communications industry that is just now starting to cut away the strangulating coils of red tape.

Besides, consider that Internet access is vastly cheaper than was the case with traditional voice networks. Your options include satellite, cable modems, and high-speed data access over cell networks (which is actually not a bad option; my brother uses an all-you-can-eat fixed-rate broadband modem from Verizon Wireless so he can connect from his shack somewhere on the windy planes of Colorado). In the not too distant future, we may even have broadband access over power lines. As far as I know, Alaskans aren't forced to make do with candles.

Frankly, attempts to extend the USF into Internet communications just feeds the beast whose gut already spills well over its Texas-sized belt buckle. The revolution set in motion by a global Internet provides an opportunity to create a telecommunications universe free of the graft, inefficiency and opportunity for monopolization that typified the old one (the USF is just one more way to make it more expensive to enter the telecommunications market). Blocking that opportunity are greedy politicans trying to pound square new telecommunications pegs into old regulatory round holes. Yes, it's possible to do this, but the result may end up breaking things.

Minimizing government regulation is a stated goal of the current party in power. The best way to start is to let the Universal Service Fund die the slow death it deserves.

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