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September 24, 2018

FCC Should Hold the Line on Local Franchise Taxes & Fees

 
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Ronald Reagan was fond of reminding us of a fundamental economic truth: “If you want less of something, tax it.”

Of course, President Reagan wasn’t referring to broadband infrastructure at the time.  But his observation is no less true in today’s digital economy.  In fact, since the earliest days of the commercial internet back in the ‘90s, a bipartisan consensus in Congress has recognized the universal truth of President Reagan’s warning and worked to ensure that local taxes and fees didn’t become an impediment to the build-out of our national broadband infrastructure.

Congress enshrined this prohibition against local taxes on broadband in the bipartisan Internet Tax Freedom Act.  Similarly, the Cable Act provides a national framework that encourages network deployment by limiting the power of local governments to impose investment-killing fees.

The success of this light-touch framework is self-evident.  Since 1996, broadband providers have invested $1.6 trillion to build out our nation’s broadband infrastructure, deploying high-speed networks at a pace that far exceeds what European countries have managed.  And while there are clearly deployment gaps still to be closed – particularly in rural America – the urgent necessity of closing these gaps argues even more strenuously for continuing to heed President Reagan’s warning.

But as sure as the sun rises in the East, there will always be high-tax local jurisdictions eager to treat private sector investments as their own personal piggy bank to be raided to fund big-spending government budgets.  Despite the obvious historic success of the federal prohibition on internet taxes and fees – and despite the fact that world-class broadband infrastructure is increasingly become table stakes for any local community that hopes to thrive in the digital age – some localities have challenged the bipartisan pro-investment consensus in court.

Faced with these legal challenges, the FCC is about to kick off a proceeding to clarify its policies limiting how local jurisdictions can use local franchising laws to impose taxes and fees on broadband providers.  We strongly urge Commissioners to defend the longstanding, bipartisan consensus pre-empting state and local efforts to add new fees or obstacles to broadband investment.

Make no mistake about it:  The internet is an interstate service.  Networks – and the packet of data that fly across them at the speed of light – don’t stop at state lines.  If ever a technology existed that met the Constitutional definition of “interstate commerce”, it’s the internet.  That means it’s up to federal policymakers to defend the (wildly successful) national pro-deployment framework against attacks from local jurisdictions more interested in grabbing a few short-term bucks.

As a nation, we want more broadband investment.  It’s one of the few things Democrats and Republicans seem to agree on.  So the FCC should remember President Reagan’s wise advice and preempt local governments from adding taxes and fees that will discourage the very investment we all agree is needed.




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