A study on rural broadband found that — wait for it — taxes are far and away the largest cost involved in providing telecommunications services.
This comes after another report last year indicated taxes could slow down wireless broadband expansion.
The tax they refer to is the USF (Universal Service Fund) which has morphed into the Connect America Fund, which you might see mentioned at CAF.
They note that the tax is confusing by its name, although I think “universal service fund” might imply a tax to fund service universally…
“Rather than being transparent and saying we need to have a subsidy to get the last farm on the road … we adopted the Universal Service Fund,” Kuttner said.
The Federal Communications Commission administers that fund, which was originally designed to provide telephone service to rural areas and now includes the expansion of broadband. The USF reaps some $8 billion annually from taxpayers and telecommunications providers, going to four primary programs:
Lifeline, which helps low-income customers pay for phone and internet charges.
E-Rate, which helps provide phone and internet services to (primarily rural) schools and libraries.
Connect America, which offers subsidies to qualifying telecommunications providers to serve higher-cost (again, primarily rural) areas.
Rural Health, which offers lower-cost telecommunications for rural health care providers to make tele-health service more affordable.
The article also notes that half of the USF funds support CAF…
He told Watchdog that municipal broadband providers have a capital advantage because they can usually borrow money at lower rates — not to mention the fact they’re also financially backed by ratepayers or taxpayers.
But Kuttner said private providers also receive ratepayer backing through Connect America. About half of USF money goes to that program.
Taxes are part of the equation either way you slice it – providers pay taxes and providers benefit from government support, especially to serve areas where the market will not support expansion and upgrades.