Self-styled consumer advocates are pressuring federal regulators to “reclassify” access to the Internet as a public utility. If they get their way, U.S. consumers will have to dig deeper into their pockets to pay for both residential fixed and wireless broadband services.
How deep? We have calculated that the average annual increase in state and local fees levied on U.S. wireline and wireless broadband subscribers will be $67 and $72, respectively. And the annual increase in federal fees per household will be roughly $17. When you add it all up, reclassification could add a whopping $15 billion in new user fees on top of the planned $1.5 billion extra to fund the E-Rate program. The higher fees would come on top of the adverse impact on consumers of less investment and slower innovation that would result from reclassification.
How did we reach this precipice? In early November, FCC Chairman Tom Wheeler floated a “hybrid” compromise that would have deemed Internet service providers (ISPs)—telcos and cable companies—as public utilities under Title II of the Communications Act of 1934 for purposes of their dealings with websites, such as Netflix. But when it came to the rates and download speeds offered to broadband customers, ISPs would continue to be subject to “light touch” regulation under Section 706 of the Telecommunications Act of 1996, which directs the Commission to promote broadband deployment. This would allow them to give their customers choices: those who were willing to pay more for higher speeds could. Think of it as being willing to pay more to take the faster Acela train as opposed to the regular Amtrak line.