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Four Ways to Scale Back Government in Telecom, Internet and Media

Cut telecom taxes, stop subsidizing PBS

Steven Titch
April 21, 2010

The Federal Communications Commission (FCC) recently unveiled its strategy for managing the nation’s telecommunications, Internet and information industries. The so-called “National Broadband Plan” is part of the FCC’s attempt to gain more influence over the Internet. This impulse towards greater regulation contravenes the fact that for the past 25 years consumers and businesses have benefited enormously from bi-partisan policies that reduced government involvement in telecom and kept it out of the Internet and information technology business altogether.

But, the past year has seen stimulus money wasted on propping up municipal broadband operations and funding dubious technology experiments where commercial choices already thrive. And now, there’s growing momentum in Washington for bans on the type of corporate agreements that brought consumers revolutionary products like the iPhone. Congress and the FCC are also pressing for greater control of Internet content, from e-commerce to social networking sites.  

The U.S. information industry is among the country’s healthiest sectors and has shown great resilience through the recession. Approximately 75 percent of Americans use the Internet, according to a report last year from The Nielsen Co. Among all Internet users, 94 percent use broadband, according to US Telecom. The same study found that the U.S. leads the world in broadband users, a finding that tracks with past research from other agencies. The industry doesn’t need government meddling.

Americans would, in fact, be best served by less government intervention. Here are four specific places where government involvement in the telecom, Internet and media industries should be cut back.

Excessive Telecom Taxes


Even as our politicians claim telecommunications to be essential to our national economy—with some, like San Francisco Mayor Gavin Newsom, going as far to declare Internet access as a human right—they choose to pile on taxes and fees, in effect pricing service beyond the means of many low income people. In all, Americans pay an astounding $37 billion a year in taxes, surcharges, and fees on cable TV, landline, and wireless phone calls, according to a study I co-authored for the Heartland Institute in 2007. That translates into an average telecom tax of $250 a year on every household. The federal government collects a three percent excise tax on local calls. It then layers on a universal service fee, which feeds a monstrous $7 billion fund largely used to maintain outmoded dial-up wireline service that consumers are abandoning for wireless and broadband services. States and cities only add to the burden, and telecom is a convenient target when it comes to filling budget gaps created by out of control spending. In 2008, Michigan proposed a new $1.35 phone tax to pay for public safety communications. Massachusetts wants to increase property taxes on telecom companies—costs that would be passed on to consumers—to pay for schools. If the government truly wants to promote greater investment, competition and penetration of broadband, the first step is to stop taxing it.

FTC Blog Regulation

For over 200 years, Americans have had the right to publish what’s on their minds without any preemptive approval or oversight from the government. That sort of changed last October when the Federal Trade Commission (FTC) issued rules that require bloggers to disclose whether they accept advertising, payments or free sample products from any companies they write about, threatening them with an $11,000 fine for non-compliance.

The FTC was appalled when it learned that manufacturers would send bloggers sample products in hopes of a good review. If the manufacturer thought the blog was popular enough, it would even buy advertising.

Print publications have been doing this for years. Publications regularly get the latest tech gadgets and software gratis from the manufacturer for upcoming product reviews. Publishers provide advance review copies of their books. Movie studios host press screenings.

Consumers can judge the difference between publications that report honestly and those that shill. This is one case where what’s worked for old media will work for new media. For the FTC to devote a small army of bureaucrats to keep tabs on tens of thousands of small web sites is a waste of resources. Mary Engle, associate director for advertising practices at the FTC’s Bureau of Consumer Protection, promised, “We are not planning on investigating individual bloggers.” If so, then why create the rule—and the $11,000 fine—in the first place?

Cable Public Access Channels

The FCC allows local franchising authorities to require cable companies to set aside special channels for public, educational and government programming. Cable companies are often required to provide expensive studio facilities as well. These costs are all rolled into your cable bill.

Today, the ease and relative low cost of producing Internet video means public-spirited individuals of limited means can reach thousands or even millions of people via YouTube and other video sharing sites. In most cases, public access televisions channels never fulfilled their potential to provide engaging, thoughtful coverage of neighborhood issues and the government should stop demanding that taxpayers fund public access through higher cable bills.

Public Broadcasting

Federal, state and local tax dollars accounted for 37.4 percent of the $2.85 billion in public broadcasting revenue in 2008, the latest year for which data is available. Yet, the case for taxpayer-funded public television ended once local PBS stations started running ads. The ever-increasing menu of special-interest cable channels like Discovery, Animal Planet and the History Channel, weakens claims that PBS offers alternative programming audiences would not otherwise have. Sure, there is quality children’s programming and some strong prime time offerings, but these shows draw audiences that suggest they could easily attract enough donor money to cover their full costs. Taxpayer subsidies aren’t needed for Curious George, Sesame Street, Newshour or Bill Moyers Journal. Those shows will be just fine. It is time for PBS to be a self-supporting, non-profit organization.

Steven Titch is a telecom policy analyst at Reason Foundation.



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