COVID-19 shed a bright light on the value of America’s internet infrastructure. As stay-at-home orders spread across the country, millions of families turned to the internet for educating their kids, working remotely, connecting with doctors or streaming their favorite shows. It is safe to say that we have never relied more heavily on our high-speed connections.
So it is no surprise that regulators and lawmakers in Washington are focused on extending our broadband networks to every American. Republicans and Democrats alike are pledging to inject billions of dollars in federal support to get the job done. The question is how to pay for this massive investment in our internet infrastructure.
Up to now, there have been two leading approaches. The first is the FCC’s current model for funding internet builds. Many consumers are unaware that the federal government collects roughly $9 billion a year through a tax on their monthly bills for traditional telephone service—both wireless and wireline. The FCC then uses that pot of money, known as the Universal Service Fund, to support internet builds in rural areas and on other efforts to close the digital divide.
This model made sense when Congress established it back in 1996. But it is now hopelessly outdated. The dominant platform for communications has shifted from the telephone network to the internet. Indeed, the revenue base associated with the traditional telephone network has fallen sharply from a peak of around $80 billion in the 2000s to less than $30 billion today as more and more services—including those now offered by Big Tech—are delivered over the internet instead. Yet we continue to rely on that shrinking base of revenues from the telephone network to fund the broadband network. This is like taxing horseshoes to pay for highways.
This antiquated system is on the verge of collapse. The FCC has kept it on life support by increasing the tax on consumers’ telephone bills at an accelerating clip. Indeed, that tax recently surged above 30 percent for the first time. This is not sustainable; relying on this model to fund additional infrastructure would strain the system well past its breaking point.
A second funding option that policymakers have been considering is direct appropriation. While this is an improvement over the FCC’s failing model, it is not without its downsides. The annual budget process in Washington is far from predictable, so it could lead to an unreliable source of funding. There is also growing concern about adding to the national debt.
It is time to fundamentally rethink how we fund our high-speed networks. That is why I am proposing a third way. We should start requiring Big Tech to pay its fair share.
