How do we address surging bandwidth usage and bridge the digital divide in a country where tens of millions of families don't have any high-speed access to the Internet at home -- and everyone sees high prices often without the speeds for the most cutting edge uses of the Internet? Just this week, The Wall Street Journal highlighted how many low-income teens, a third of whom have no broadband at home, turn to places like McDonalds with free Wi-Fi to get their homework done. New money to bridge that gap is an obvious need cited by many political leaders, but the money needs to come from somewhere.
One question is whether content providers on the Internet like Netflix, Google and Facebook, who profit tremendously from the existence of a fast Internet, should be taxed to support the physical infrastructure supporting broadband?
In Europe, at least, political leaders are increasingly arguing that the answer should be yes. A report commissioned by French President Francois Hollande recently argued for an "Internet tax" on the financial value of the personal data collected by companies in providing online services. Advertising-supported firms make tremendous profits collecting user data and de facto reselling it through targeted ads, so returning some of that revenue to the users in each country through taxation would help sustain the physical networks that make those businesses possible. Similarly, the European Telecommunications Network Operators Association (ETNO) proposed last year revising international treaties on Internet governance to require high-volume content providers to pay a larger share of the infrastructure costs necessary to transmit their traffic to local customers. Google is already paying the Orange wireless network in Africa to defray the costs of transmitting its data to users on that Continent.
A few voices in the U.S. have made similar proposals. The National Telecommunications Cooperative Association has argued in the past that content providers like Google should be taxed to help support the Universal Service Fund and more generally help local Internet providers support the use such Internet giants make of local infrastructure. "Search engines run bots that run through the Internet to take pictures of every Web page," noted Dan Mitchell, vice president of legal and industry affairs for the NTCA, a few years ago. Netflix alone is estimated to use almost 10 percent of bandwidth at many Internet service providers.
The fact that many of the largest online content providers are also engaged in some of the most notorious global tax avoidance schemes is helping drive the debate on having those companies pay their fair share of an infrastructure from which they benefit so dramatically. French political leadershave been explicit that they are proposing these new taxes to make up for the fact that these companies generate large revenues in France while paying relatively little in local taxes. A number of newspaper exposes in the U.S. have highlighted how Google and Facebook engage in massive tax evasion in the U.S. by shifting global profits and intellectual property assets to low-tax countries like Ireland, then claiming minimal taxable profits in the United States and many other countries. U.S. companies are sitting on $1.4 trillion in earnings from foreign subsidiaries from which they've paid no federal income tax. The trick of transferring key intellectual property ownership to foreign tax havens is a common part of the game by corporations to avoid paying taxes. These overseas tax games cost the U.S. government over $100 billion in revenue each year, according to this report by U.S. PIRG.
With political leaders talking about general tax reform in D.C., it's also time to have a serious evaluation of how online content providers can help pay for the next generation of high-speed Internet and finally close the digital divide. Light taxation of online companies had a certain logic at the birth of the Internet age, but now those companies boast some of the fastest growing revenues and profits in our economy. Having benefitted so significantly from past public investments, reasonable tax reform should have them begin paying their fair share. And if that money is earmarked for expanding the number of high-speed online users, they would actually benefit in the long-run from a far larger customer base for their products.
A version of this appeared at SpeedMatters.org, the blog of the Communication Workers of America.
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Concerning schools, did you get a free education? My property tax (~$1600/year) does not cover the cost of my kids education (~$15,000/year). I am indirectly paying for my own education. Once my kids get a job and start paying taxes, they will pay off their own education.
A high school education cost around $150,000, depend on how much interest is charge.
But I agree with you concerning infrastructure projects like roads.
The solution might be to establish rates based on type of traffic and charge the sender based on the type of traffic. Should all traffic be carried at no charge to the sender. I think not. Cost can be from zero to a fee to help the ISP to offset the cost of upgrade their networks to deliver 4GB movies. Transactions under the a specified throughput limit would be exempt from any fees. Google for example would be exempted because each transaction is small. On the other hand those transmitting large files or streaming should be charged based on how their service impacts the ISP's network. Remember many companies offer toll free lines to allow customers to call at no cost. The government might have to established an organization like the Interstate Commerce Commission to establish rates.
A company like Netflix has the economic power to negotiate reasonable rates for ISP's to deliver their movies. If the sender pays the subscriber should not have the traffic charged against their monthly data throughput allotment (CAP).
Doesn't a content delivery network (CDN) charge Netflix based on bandwidth? With Netflix's Open Connect initiative, local ISP can negotiate contracts based on bandwidth.
In fact, local ISP can create their own CDN and contract services to Netflix. But this would compete directly with their cash cow, cable TV.
Time Warner cries foul over streaming services while offering their own streaming services. Sorry if I don't have much sympathy for them.
With Netflix, I queue up shows to be watch. I watched 2 episodes of "House of Cards" and plan on watching 11 more episode. Just download the remaining episode during non-peak hours and I will stream them from my computer or play them back from my hard drive.
A hybrid system, streaming and downloading, may solve the problem.
While they complain about high bandwidth use but without downloading and streaming service, most consumers could not justify paying for higher speeds for email and web surfing.
Netflix's Open Connect initiative puts a server at your local ISP network, for network usage this is the same as Time Warner offering Movies/Videos on Demand. It seem Time Warner is more concerned about protecting their cable TV business then bandwidth issues.
People who choose to live in rural areas do so for a reason
You need to stop second guessing people
The Internet is already fast enough.
The idea that Internet access is needed for school homework is ridiculous!
If you TRY to tax content providers, they will move offshore where you can't tax them.
And lest we forget, 80% of internet content and bandwidth consumption is Pornography!
Why should we subsidize that?
Maximize profits does not fit with Universal Service. Either Government regulates forcing Universal Service or Government does it. Private will not.
Remember what happened when the airlines were deregulated? If you lived near a major hub - you did great! If not, too bad, so sad.
Rural electrification projects. Near Universal Telephone service only happened with significant Government intervention - charging business and urban much higher so that rural was affordable.
Health Insurance - Private Insurance prefers to cherry pick the best risks.
Is the cellular network available everywhere? Look at the coverage maps,
If Universal Service is the goal - Government is the path. Private will NOT do it until there is no better way to make money.
There is no need to have high speed internet located every darn place someone wants to live.
If you think you can't live without it, then move to an area that has enough volume to support it.
What the heck is wrong with you people?