Cities Should Promote Telecommunication Innovation, Not Stifle It

Over the years, there has been no shortage of proposals intended to improve access to broadband internet service. In a recent filing with the Federal Communications Commission (FCC), our friends at Citizens Against Government Waste home in on a couple barriers to deployment, that if removed, would go a long way to achieving this important policy goal. One such barrier often occurs at the local level, where taxes and fees can increase consumer costs and suppress network investment. For instance, in 2007, the city of Eugene, Oregon began imposing a 7 percent gross internet sales licensing fee on companies that provide broadband internet services. Just last year the courts finally ruled on the legality of the fee, ending eight years of legal battles between internet companies and the city. In the end, the Oregon Supreme Court affirmed a lower court decision; ruling that federal laws do not prohibit the city from imposing the fee on broadband companies. The Court also ruled that broadband providers like Comcast, are required to pay fees going back to the start of the dispute, a sum close to $18 million.

In their FCC filing, CAGW documented the impacts these policies have on consumers and broadband providers. They also note that additional cities and towns throughout the state are considering similar revenue-enhancement measures through these fees. These proposals have the ability to stifle innovation, delay development, and increase the divide between those who have and don’t have access high-speed internet. State and local governments must do more to lower the cost of 21st century technology, not the opposite.

The tax has led broadband providers in Eugene to raise prices on consumers to recoup lost revenue. Now, households are facing an additional monthly fee of $3.15, or about $40 a year. However, that additional revenue is not even being used to upgrade internet services around the city. The revenue is directed to the city’s general fund, where it can be spent for any purpose deemed appropriate by the city government.

NTU urges state and local governments to support policies which enable greater innovation, expand coverage, and lower costs on providers and consumers. Additional taxes, fees, and regulations make it more difficult for low and moderate income residents to take part in the market. We hope that Eugene, and other Oregon cities will reconsider proposed revenue-enhancement measures.

If you have any questions, please contact NTU Policy and Government Affairs Associate Thomas Aiello at (703) 683-5700