Obama’s taxing plan to regulate the Internet

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By Phil Kerpen

President Obama is leaning heavily on the Federal Communications Commission (FCC), an independent agency, to change the Internet from a competitive, free-market service into a government-regulated public utility.  Philosophically and politically, it is a strangely tone-deaf response to a landslide national election calling for smaller, less-intrusive government.  But the most important impact for most people will be much more immediate: Obama’s plan includes a new 16.1 percent tax on your Internet bill, and would automatically rise every three months – all without the approval of the people’s elected representatives in Congress.

Broadband Internet is the greatest infrastructure success story in America.  While private investment has driven remarkable growth and innovation in the Internet, our water, sewer, power, and transportation infrastructure – largely run by government with tax dollars – are, to put it kindly, not doing nearly as well.  Who, besides our president, looks at the state of infrastructure in America and says Internet is the problem area?

Beyond that obvious fact, there is this even more concrete problem Obama’s plan: it will replace private investment with taxes that will hit every American hard in the pocketbook.

Former FCC commissioner Harold Furchgott-Roth explained: “By classifying broadband access services as ‘interstate telecommunications services,’ those services would suddenly become required to pay FCC fees. At the current 16.1% fee structure, it would be perhaps the largest, one-time tax increase on the Internet.”

It will only get worse from there, because the tax will go up every three months –without a vote of Congress – and there is reason to believe that private investment would rapidly collapse, forcing the new tax higher and higher just to keep the Internet working.  (And forget about it actually continuing to get better.)

On Wall Street, Obama’s plan is known as the nuclear option because of the devastating effect it would have on private investment.  In fact, simply the announcement of Obama’s plan has caused AT&T to stall billions of dollars of investment in deploying expensive fiber-optics networks on about 100 cities.

Has anyone stopped to ask what exactly the problem is that we’re trying to solve?

Even Bill Clinton’s favorite think tank, the Progressive Policy Institute, railed against the Obama plan, warning that it is “inconsistent with the Democratic Party’s legacy. After all, the Internet took off in the 1990s, thanks in significant degree to the ‘light touch’ approach to regulation adopted by the Clinton-Gore Administration.”

When was the last time anybody said: “The Internet has really gone downhill since it was opened up to private commercial development”?

Who looks at bad old days of monopoly public utility regulation of Ma Bell and says: “The Internet would be so much better if it worked liked the old phone system”?

The whole push for the Obama plan comes from two constituencies: rent-seeking video giants like Google/YouTube and NetFlix who think a taxpayer-funded, government-regulated utility will guarantee them zero-cost access to customers, and ideological extremists like Free Press, whose founder Robert McChesney once famously explained: “the ultimate goal is to get rid of the media capitalists in the phone and cable companies and to divest them from control.”

For pretty much everybody who isn’t a giant content company or a hardcore liberal extremist, regulating and taxing the Internet is obviously a terrible idea and Congress should therefore step in and stop the FCC from implementing Obama’s plan.