Big Telecom Wants To Tax Netflix To Pay For Broadband Upgrades ISPs Refuse To Deploy Themselves

from the ride-my-pipes-for-free dept

Last year, FCC boss Ajit Pai repeatedly hyped the creation of a new “Broadband Deployment Advisory Council” (BDAC) purportedly tasked with coming up with creative solutions to the nation’s broadband problem(s). Unfortunately, reports just as quickly began to circulate that this panel was little more than a who’s who of entrenched telecom operators with a vested interest in protecting the status quo. The panel has yet to really offer up a meaningful proposal, but it has been rocked by several resignations due to cronyism, and at least one member who was arrested for fraud.

As the FCC looks to expand the council’s charter for another few years, the panel itself has been pushing a plan that pretty clearly highlights the cronyism intentionally inherent in its design. More specifically, the panel has been pushing the FCC to adopt a new system that urges states to tax Netflix and Google to fund rural broadband deployment:

“A Federal Communications Commission advisory committee has proposed a new tax on Netflix, Google, Facebook, and many other businesses that require Internet access to operate. If adopted by states, the recommended tax would apply to subscription-based retail services that require Internet access, such as Netflix, and to advertising-supported services that use the Internet, such as Google and Facebook. The tax would also apply to any small- or medium-sized business that charges subscription fees for online services or uses online advertising.”

To be clear, this is extremely unlikely to come to pass, even in the most myopic of states. Still, if you’re playing along at home, this is just an extension of a multi-decade effort by ISPs to force somebody else to pay for network upgrades they refuse to fund, despite having received countless billions to accomplish this goal. In fact this push to have content companies pay for ISP network upgrades is really what began the net neutrality fight back in 2003 or so, when former AT&T CEO Ed Whitacre proclaimed that Google should pay him an additional troll toll just to access his network. You know, just because.

This mantra was long rooted in telecom envy of Silicon Valley online ad revenues, and a belief by telecom executives that they’re somehow “owed” a cut of those revenues. Over time it evolved into endless claims by telecom sector allies, think tankers, and other cronies that companies like Google and Netflix were somehow getting a “free ride” on incumbent ISP networks, despite having invested billions into their own global transit and network operations. Over time it became a global telecom executive mantra of sorts, even if it never made coherent sense.

People forget, but it’s this telecom industry attempt to “double dip” that truly launched the modern net neutrality debate just about fifteen years ago. That point has gotten lost as ISP efforts to extract unearned rents have gotten more elaborate over the years, but at its heart the fight has always been about monopoly ISPs trying to offload network construction and operation costs off to somebody else, while already earning fat revenues thanks to limited competition.

Of course AT&T, who generally drives most dubious DC telecom policy moves and would reap the lion’s share of said tax, had originally tried to insist that the panel’s recommendations (and the proposed tax) should apply to pretty much all traffic that touches the internet:

“An AT&T executive who is on the FCC advisory committee argued that the recommended tax should apply even more broadly, to any business that benefits financially from broadband access in any way. The committee ultimately adopted a slightly more narrow recommendation that would apply the tax to subscription services and advertising-supported services only.”

The real problem here (or one of many) is that companies like AT&T and Verizon were already given billions upon billions in taxpayer dollars to fund these upgrades years ago. American history is filled with examples of these companies getting massive tax cuts or subsidies to deploy fiber, then using their lobbying prowess to wiggle out from under the obligations after the fact. Had the government ever conducted any real audit, you’d likely find American taxpayers have paid to upgrade the country with fiber several times over, yet still somehow often only have access to pricey, sluggish DSL.

That, nearly two decades later, AT&T’s still running a lame variation of the same ploy is equal parts frightening and sad, but seems to be par for the course for a country that refuses to learn from history, and an FCC that has made it abundantly clear it’s a glorified rubber stamp for lumbering natural monopolies and their very worst instincts.

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Companies: at&t, google, netflix, verizon

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Comments on “Big Telecom Wants To Tax Netflix To Pay For Broadband Upgrades ISPs Refuse To Deploy Themselves”

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Anon says:


There already is a “tax”. It’s the fee you pay to Bell or Comcast or whomever in order to connect to the internet. Funny, but I thought the purpose of that fee was the building, upgrade, and maintenance of the infrastructure we like to call “the internet”. This sounds like the airlines and their “fuel surcharge” – there’s no such thing as a fuel surcharge, it’s just a polite word for “higher ticket price”. Same here – we don’t need a tax, we need the telecoms to use the money they collect for the purpose it was intended.

mcinsand (profile) says:

Re: Re: foxes and henhouses

>A better question might be how many times will we let
>>them fail to spend the money we give them on what they
>> are supposed to spend it on?

This will continue until we stop electing officials that sell their votes to the telecoms. Those are same people that are responsible for holding industry accountable, but they’re now well-paid to look the other way.

Pop Ulist says:

Re: Hmmmm - here's a thought.

Consider internet infrastructure a "ward".

What weird socialist / European idea is this?

In the US of A, persons and even corporations OWN property and it cannot be taken away without compensation (imperfectly done now as corporations gain more control, but still, there’s the principle in writing).

We don’t need your Marxist ideas of gov’t of arbitrarily taking away "rights" when don’t fit the demands of children.

Anonymous Coward says:

Re: Re: Hmmmm - here's a thought.

No not socialist. Well the part about the corporations getting subsidized that’s a bit socialist.

The customers, taxpayers in this case, gave money to company A in return for company A supplying a product (the internet) and for company A to look after said product and criteria were set for this requirement.
-Company A did not provide the customers what they were paying for and is asking (demanding) more money for not providing it. … Now if this was a deal between two corporations where would this be allowed ? No where the customer would sue for their money back either in cash or as the assets they were paying for.

So f*ck off with the Marxist boogie man that is brought up anytime a corporation fails to deliver what taxpayers paid for and then wants to keep the cash.

Anonymous Coward says:

‘Big Telecom Wants To Tax Netflix To Pay For Broadband Upgrades ISPs Refuse To Deploy Themselves’

and this is taking the piss even more considering these same companies have received gazillions in tax breaks and additional funding from government and from local councils etc and, after receiving all the extra cash under promises of doing what they were funded for, they haven’t done a fucking thing!! yet, because certain politicians on both sides get ‘campaign contributions’, no action is ever taken against the companies, money is thrown at them continuously by a man with no arms as soon as they start demanding God knows what and saying what they’ll do if they get it but get away with cutting jobs, not upgrading any networks and definitely not installing the latest technology and speeds instead! so, why wont they get what they are demanding now?

Pop Ulist says:

Netflix is approaching 40% of ALL internet data now.

Real neutrality would mean that largest users pay the most.

Increase of streaming is NOT at zero cost like broadcasting, but constantly requires more and faster equipment. (The price is a bit quantized because exceeds demands for a while, but then so are costs of the new equipment when needed.)

So, IF you were actuall “neutral”, you’d see some justification for this.

But you’re just pirates making demands that more bandwidth be provided at no extra cost to you, just as you expect the entertainments to be FREE. You are simply FREELOADERS.

Anonymous Coward says:

Re: Netflix is approaching 40% of ALL internet data now.

“Real neutrality would mean that largest users pay the most”
– Please explain, extra credit for showing your work.

“Increase of streaming is NOT at zero cost like broadcasting, but constantly requires more and faster equipment.”
– Not entirely clear here what you are attempting to claim. An increase in stream quantity might require more equipment but the speed does not necessarily need to increase unless you are talking about some futuristic 64K tvs.

“IF you were actuall “neutral”, you’d see some justification for this.”
– Justification for a tax so that a private business can upgrade and/or maintain their infrastructure? I don’t think so Tim.

“But you’re just pirates making demands that more bandwidth be provided at no extra cost to you, just as you expect the entertainments to be FREE. You are simply FREELOADERS.”

So, the business is incapable of increasing its rates in order to support their business model so you think the government should levy a tax to bailout these upstanding citizens thusly protecting them from those despicable bloody pirates. How do you feel about other social programs?

Anonymous Coward says:

Re: Netflix is approaching 40% of ALL internet data now.

sigh This seems to be a continually reoccurring red herring. Yes, Netflix is producing a large amount of traffic. But the thing you don’t seem to understand is that Netflix is NOT originating a large amount of traffic. Netflix is instead responding to a large number of requests originated by their customers.

For an analogy. Consider the difference between unsolicited junk mail and packages being delivered by Amazon.

In the case of unsolicited junk mail, you’re getting items that you didn’t desire, nor request. This seems to be what you’re comparing Netflix to.

In the case of packages being delivered by Amazon, every one of those packages was REQUESTED by a customer. This is closer to the actual situation with Netflix.

kallethen says:

Re: Netflix is approaching 40% of ALL internet data now.

No, the argument isn’t “the internet should be free!”

Netflix already pays a hefty amount for their connection. And I already pay an amount for my connection. Netflix has even invested money to make it easier for their data to move around. There is no free ride. Not here at least.

“Free ride” implies getting something for nothing. Like, perhaps, getting billions of dollars for the purpose of building out networks but then never doing so?

Anonymous Coward says:

Re: Netflix is approaching 40% of ALL internet data now.

Netflix likely pays a huge amount for their internet connections. More importantly, take a look at modern ISP marketing. Why do you think people are upgrading from, say, 100 Mbps to 200 Mbps services? It’s for live video streaming, mostly Netflix, and ISP advertisements often say that explicitly. (You have a family of 5 all streaming HD video? Here’s the plan you need.)

Without Netflix and the like, few people could justify paying for more than a few tens of megabits per second.

Aussie Anon says:

Re: Re: Netflix is approaching 40% of ALL internet data now.

I’m paying $90 AUD/month for 350GB/month data at what is barely 8mbps down/0.384mbps up on ADSL running on Copper POTS exchange that hasn’t been touched since 1985.

I luck-the-hell-out getting 720p HD (HD = 720p. FHD = 1080p. QHD = 1440p QFHD/UHD = 2160p/4K) Netflix or Youtube with moderate buffering on a good day, and often spend the next few days with an idle PC waiting for a new 50GB+ game like Doom 2016 downloading at around 800KB/s on this PoS connection.

My best alternatives are paying another $90 AUD/month for 200GB 25/5mbps Satellite (impossible to play most modern games on with ping times reaching 600-1000ms just for regular websites), or paying out the nose at $60-per-10GB for 4G mobile data using my smartphone as a tether to get 34-75mbps down/up over Telstra’s “4GX” (4G LTE using 700MHz Band 28).

Anonymous Coward says:

Re: Netflix is approaching 40% of ALL internet data now.

We, the end-users, already pay for our access to the internet. This is the service that ISPs perform. If we want to be content providers, too, we pay for that connection. ISPs are already paid by anyone who wants to connect to the internet for any reason.

And news flash, we pay per bandwidth. Yeah, that’s right, Netflix already pays dearly for the bandwidth consumed by the data they provide. So Netflix is already paying.

Nothing is free about any of this and nobody is asking for it to be free. Well, except the ISPs.

Anonymous Coward says:

Re: Netflix is approaching 40% of ALL internet data now.

Just so you know. On large business levels. The largest users do pay the most minus any discounts for large volume. Usually it is based on two pieces to determine a monthly fee. The first is connection speed. The second is bandwidth usage.
Connection fee is a flat fee and that cost is determine by 1gbps, 10gbps,40gbps, etc. Then next is the bandwidth usage. I don’t know how all large companies do it but what I have seen is they look at the average bandwidth over a week and then charge for that as well. I bet you couldn’t afford 1 day of netflix’s ISP bill.

PaulT (profile) says:

Re: Netflix is approaching 40% of ALL internet data now.

“Real neutrality would mean that largest users pay the most.”

They do, despite the claims of the greedy and wilfully ignorant. Netflix does not magic up their own bandwidth for nothing, they pay for it. In some cases to the point of installing expensive equipment in rented space in the ISPs’ premises.

Their customers also pay for the connection. Netflix has no customers if they are not online, and they are not supplied with those connections for free.

Why are you demanding that everyone pays a 3rd time for the same connection? Why are your ISPs so incompetent that they can’t build in predictable equipment upgrades into their price plans?

That One Guy (profile) says:

Re: Re: Netflix is approaching 40% of ALL internet data now.

Why are your ISPs so incompetent that they can’t build in predictable equipment upgrades into their price plans?

Because it’s more profitable to just pocket the subsidy money and jack up the prices for the same service. ‘Incompetent’ implies that they can’t manage upgrades, when the truth is closer to ‘greedy’, in that they choose not to unless they believe it will be profitable to do so.

PaulT (profile) says:

Re: Re: Re: Netflix is approaching 40% of ALL internet data now.

I know that, of course, I was just curious as to whether our resident clown understood that the most charitable interpretation of his argument is “ISPs need to ask people to pay 3 times for the same bandwidth because they’re so incompetent”. Greed is the obvious other choice, I just wanted to play with his premise that these are companies trying to do the right thing, only mean old Netflix are making them need to provide a modern service.

Anonymous Coward says:

Re: Re: Insanity

“AFAIK I could leave a car in my garage for decades without any ongoing costs.”

Yup. But what happens when/if you then want to drive it upon said roads? Upon registering the vehicle that has not been registered for a while, some states will demand back payment as if you were driving it on the roads for all those years. Sucks – but they seem to get away with it.

Anonymous Coward says:

Re: Re: Re: Insanity

Yeah, I bought a used motorcycle that was out of registration in California for 8 years. I was in Mexico. I registered the bike in South Dakota, where they don’t care where you live, or if you have a permanent address. To re-register the bike in California would have cost much more than the bike was worth (Blue Book wise), the cost in South Dakota was like $50, and with other things, including a delay in getting title information, the total bill was less than $75.

Anonymous Coward says:

Re: Re: Re:2 Insanity

Sounds about par for the course. I find it interesting that justification for and amount of the vehicle tax is based partly upon the potential damage said vehicle can cause to the road. Now how much damage will a motorcycle cause to the road? Oh, and where do they get those numbers used in how much the vehicle is worth? Not Blue Book.

Anonymous Coward says:

It’s never a good thing when private corporations come running to the government for favors. Especially when they’re in a position of strength to begin with. If Comcast (to use a random ISP) doesn’t like having all its bandwidth sucked dry by Netflix, then simply block or throttle Netflix. That’s exactly what ISPs were doing to P2P traffic for many years (including forging reset packets) so why should Netflix be treated any differently? And if a bandwidth behemoth like Netflix wants special “fast lanes” then they can pay for it, directly, without having to do so through government taxation.

That’s assuming of course that ISPs are private companies and not public utilities in the eyes of the law. So as private companies ISPs should be able to do whatever they want, even going as far as canceling service for people who express the wrong political views, though for some reason ISPs seem to be the only link in the internet chain that does not *yet* practice this policy (except of course for people accused of copyright infringement).

ShadowNinja (profile) says:

Well sure, of course that’s a good idea! I mean we all know Ford and GM pay for all the roads and bridges in rural areas, so why not do the same thing with the Internet?

-Gets whispered into the ear-

Oh… so we don’t do that you’re saying?

Well still, we hold Ford and GM accountable when people use their automobiles to commit crimes like smuggling drugs or kidnapping sex victims! It works great there, so we should do the same to the Internet!

-Gets more frantic whispering into the ear-

Oh… so we don’t do that either?

Hmm… it’s almost as if Telecomms want to treat Internet companies differently then any other industry out of pure greed…

Anonymous Coward says:

So basically ISPs aren’t making enough money, what with Comcast illegally charging anyone over 70 extra fees, AT&T heavily investing in Iran (illegally), Verizon funnelling money to ISIS (for who knows what reason), and now the millions of dollars used (illegally) to buy the soul of Ajit Pai have eaten further into the profits, so they gotta tax Netflix etc.

Toom1275 (profile) says:

"double dip"

I think your count is a little low.

How paying is supposed to work

-Users pay their ISP (one dip)

-Webflix pays their ISP

-ISPs and transit peer with each other as usual


The model ISPs want

-Webflix pays their ISP

-Users pay their ISP (dip #1)

-Users pay the ISP again for using the portion of their paid-for subscription that exceeds a deliberately low value (cap scam – dip #2)

-equitable peering agreements dropped in favor of extorting money out of transit providers by holding bandwidth hostage (dip #3)

-fraudulently charging large-wallet content providers extra before the ISP will provide the function their customers paid for (called "Real neutrality" by that pathological liar upthread)(dip #4)

-collecting government handouts as Title II services, while accepting none of the responsibilities that come with it (dip #5)

ECA (profile) says:

God protect us from idiots..

How much money has the Gov. PAID over many years to keep up the access to RURAL areas?? Millions per year. Even Pai, has pulled recently those monies??

Our gov has paid the corps Twice in the last 18 years to get the internet REBUILT/UPDATED and those SAME connections to all homes in the USA..

WHICH, is kinda, a small thing, as long as ALL the old system had been kept up to par and maintained..

But since the past is the past, how many companies and corps, have owned these systems?? And after the First installations, what has been needed to maintain it..
They DONT need to upgrade telephone poles, as those are controlled by the State and electric corps. they only have to reinstall any damaged cables..

What have these corps gained over time..Phone service, Cable service, Cellphone communication(which needs the Backbone of the system, The old cables between all the towns and cities), And basically the Whole of the communications infrastructure in the nation, AT THE ENDS of this pipeline of data. They are not responsible for the Middle ground..its already updated and paid for.

What do they NOT want to do?? Most Cities and towns, have MOST of their connections under ground and replacing them Should not be that hard. Its the EDGE/OUTSKIRT areas where the lines are STILL up on the poles.. ANd also, that those persons needed for the job, ARE NO LONGER CHEAP…They get paid good money to do this job, even with the equipment we have NOW, compared to the OLD DAYS.. To bury all these lines to all the outlying areas is going to be ALLOT of fun.. Set up to EACH and every house with a BOX on the outside of EVERY HOME, is going to be allot of hassle..
ANd they didnt invent the equipment..(as with the old system) THEY GET TO PAY FOR IT…
Well, we paid for it..more then 1 time, more thne 1000 times over the years

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