Monday, December 21, 2015
Friday, December 18, 2015
Starting 2016, consumers must pay an 18.2% surcharge on part of their phone bills. The surcharges pay into the Universal Service Fund (USF), a multi-billion-dollar subsidy system.
Functionally, USF surcharges are taxes. But the FCC doesn't call them "taxes" because the rate is assessed and the money collected and spent outside the control and accountability of Congress. Apparently, labeling USF taxes "surcharges" is the FCC's way of dodging the constitutional maxim of "no taxation without representation."
USF surcharges appear as a line item on consumers' monthly bills for voice services. The surcharge rate – 18.2% – is assessed against the interstate long distance portion of those services. The money is remitted to an entity established by the FCC to administer the USF program. In 2014 alone, money paid into the USF program was given to:
- schools and libraries -- $2.27 billion;
- health care facilities -- $193 million;
- voice providers serving low-income consumers -- $1.6 billion.
Not to be overlooked are the expenses incurred by the FCC-established entity established to administer the USF program -- nearly $119 million in 2014.
Over the last several years the USF subsidy system has snowballed in size. 2014 USF disbursements total over $7.8 billion, marking a significant increase from 2000 USF spending of $4.0 billion. Corresponding to climbing USF subsidy spending are climbing USF surcharge rates. The following pair of charts shows the unmistakably upward march in the effective tax rate on consumers.
As further explained in my blog post, "USF Surcharge Hikes Hit Over-Taxed Wireless Consumers Hardest," the FCC generally treats 37.1% of a wireless consumer's calling plan as the interstate long distance portion subject to USF surcharges. Wireless consumers face a tax pile up from multiple state and local wireless taxes, fees, and surcharges. Often, wireless services are taxed at higher rates than general sales tax rates. Federal USF surcharges heighten the problem of wireless consumer over-taxation.
Plans for future increases in USF subsidies further heighten concerns for taxpaying consumers. For example, the E-Rate Modernization Order (2014) authorized a $1.5 billion annual increase in school-related subsidies. Consumers must ultimately pay for such USF subsidy increases. As the FCC looks to direct USF subsidies to certain broadband services and "experiments," Chairman Tom Wheeler has not ruled out the possibility of subjecting broadband consumers to USF surcharges – in effect, a USF "Internet tax."
Going forward, the FCC needs to make consumers a priority by reducing the burden of USF surcharges. It also needs to resist the bad idea of imposing USF surcharges on consumers of broadband services. For starters, the FCC must take steps to reduce the overall size of the USF program, especially the high cost fund. And it must resist the temptation to make grand new USF subsidy giveaways from the pockets of consumers.
Monday, December 14, 2015
Thursday, December 10, 2015
Thursday, December 03, 2015
- Advertisers lose $4.4 billion from invalid traffic, which induces systems to generate ad-related actions for purposes other than support of the delivery of the right ad at the right time to the right user.
- Infringed content represents a $2.4 billion loss for the digital marketing and media industry. Two billion dollars is lost revenue to content providers and $456 million is lost revenue to potential advertisers.
- The remaining $1.4 billion in losses come from “malvertising” (or malicious advertising) and the cost of fighting all these illegal activities. The $1.4 billion includes lost revenue from malware-related ad blocking ($781 million), lost revenue from search engine blacklisting when a website is impacted by malware ($57 million), and the cost of investigating illegal activities and documenting direct incidents ($423 million).
Wednesday, December 02, 2015
- Challenging the FCC’s Unlawful Open Internet Order, Justin (Gus) Hurwitz, August 13, 2015. (This Perspectives from FSF Scholars reviews an amicus curiae brief submitted by the International Center for Law and Economics and economics and administrative law scholars, including myself.)
- Why Chevron Deference May Not Save the FCC’s Open Internet Order – Part II, Randolph J. May, May 4, 2015.
- Regulating Interconnection (Lightly!), Daniel A. Lyons, May 19, 2015.
- The FCC, Still Lawless, Randolph J. May, November 23, 2015.
- Net Neutrality, Administrative Procedure, and Presidential Overreach, Enrique Armijo, November 19, 2015.