FC: Colleen Boothby on local telecos pushing for taxes on ISPs

[Declan McCullagh <declan@well.com>]

[Colleen is a veteran telecom lawyer in DC. --Declan]

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Subject: FC: Replies to reporter about Earthlink levying additional fees
Date: Thu, 5 Jun 2003 12:25:12 -0400
From: "Boothby, Colleen" <cboothby@lb3law.com>
To: <declan@well.com>

One of the responses mentioned the FCC's universal service fund 
("USF").  The FCC does not require ISPs to pay a USF charge, for 
now.  ISPs, like any other end user of telecom services, may nevertheless 
end up paying a USF charge when they buy telecom services because telecom 
companies choose to pass through to end users, including ISPs, the USF 
"contribution" that the telecom company must pay.

But local telephone companies are currently pushing the FCC to expand the 
list of companies who must contribute and add ISPs.  That means a new 
federal regulatory fee could be imposed on ISPs.  Right now, only providers 
of interstate "telecommunications" -- meaning plain vanilla transmission 
services like voice lines, T1s, DS3s, DSL without the Internet access, etc. 
-- have to pay into the federal Universal Service Fund.  The FCC currently 
collects a little over $6 billion (that would be a "b") PER YEAR for the 
USF and the amount goes up every year.  The bulk of the money is handed out 
to local phone companies who claim that their costs are above 
average.  Local phone companies are pushing for new rules that would 
require ISPs to "contribute" directly to the fund, in addition to the local 
and long distance phone companies who already pay.  And if ISPs have to 
pay, they will most likely try to pass their "contribution" on to their 
customers.  They wouldn't HAVE to, because no regulator dictates how these 
things are passed through; they aren't sales taxes.  But that hasn't 
stopped long distance companies from routinely passing through their USF 
"contribution" as a separate line item on customer bills, e.g., the 
"Universal Connectivity Charge" on AT&T bills.  (Funny how they never pass 
through regulatory reductions but that's a different problem.)

This fund isn't small change -- the current charge that telecom providers 
must "contribute" is 9.1% of their interstate retail revenues, up from 3.9% 
only five years ago when the program started.

The FCC has asked for public comment on whether ISPs should pay the USF in 
its proceeding to de-regulate the Bell companies' broadband Internet access 
services.  




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