Consumer group wants to tax Netflix to pay for rural broadband

Mark Cooper, director of research for the Consumer Federation of America (CFA), says Netflix should have to pay into the Universal Service Fund.

"The Internet is not an infant industry anymore. It can certainly bear the burden of making sure that wires and the communications mediums are there," Cooper said. 

Phone companies pay into the Federal Communications Commission's $8 billion telecom fund, which subsidizes phone service in high-cost and rural areas. They write off the cost on consumer telephone bills. 

The FCC is trying to migrate the subsidies to fund broadband rather than phone calls this year. As it begins the overhaul, the question of who must contribute into the fund is heating up. 

It would be "legitimate" to force Netflix and other high-bandwidth companies to contribute to the fund, Cooper, a longtime consumer advocate, said Wednesday during a panel discussion.

"Notice that when I suggest we tax Netflix — which is using the network — to help pay for the network, we get this complaint: Wait, you're hitting consumers," he said. 

But this framework has a precedent, he said. Providers of toll and business phone services, who provided "discretionary services," traditionally paid into USF. 

"The exact same logic that was in used in the old days for whacking a toll could actually be used to impose legitimate costs on high-bandwidth users and say 'that's discretionary consumption,' " he said. "But we have difficulty bringing ourselves to do that."

Former FCC official Blair Levin said rural phone companies have make it a habit to say the solution is to "tax Google."

"That's an appropriate debate to have, I'm all for it," said Levin, who served as executive director for the commission's broadband agenda.

He stressed, however, that the FCC must address the mechanisms for distributing the money — before it overhauls contributions. Tackling these questions simultaneously is a recipe for "political stalemate."

"If we have [the contribution] debate at the same time we're doing distribution, I absolutely guarantee they won't have it done by the end of the year," he said. 

The rural phone industry reiterated the long-held view that websites should pay into the fund.

"Netflix takes up about 10 percent of every telco's bandwidth," said Shirley Bloomfield, chief executive of the National Telecommunications Cooperative Association.