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Study Says Telecom Costs Are High Due to Taxes

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Study Says Telecom Costs Are High Due to Taxes

April 27, 2016

  By Rory J. Thompson, Web Editor

If you think you’re paying a lot for your broadband while living and working in the big city, count your blessings. New research has shown that those living in rural areas and looking for similar service are paying a lot more for it, primarily through taxes.

That’s the conclusion from, a project of the Franklin Center for Government & Public Integrity, “that promotes a well-informed electorate and a more transparent government.”

The group recently cited the Hudson Institute’s “Economic Impact of Rural Broadband” study, and found that excise-type taxes that providers collect and remit to governments make up $1.3 billion of the “purchases” required to produce telecommunications services. That’s more than triple the next category of purchases: about $400 million in advertising and related services, Watchdog said.

“Hans Kuttner, author of the study, told that taxing telecommunications services has historically been an attractive funding mechanism for governments, going back to 1898 when the federal government used such a tax to help pay for the Spanish-American War,” they noted. ‘I guess it was the kind of thing where it would be on bills and people wouldn’t notice,’ Kuttner said.” For those keeping track, the war began and ended in 1898; the tax was repealed in 2006.

The Federal Communications Commission administers the so-called Universal Service 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,” Watchdog said.

But here’s where the problem comes in: The USF surcharge hasn’t been imposed on Internet services, so providers and users of home and wireless phones bear the burden of the fee. That’s become a problem as the fund has grown and home phone usage has shrunk.

“Wireless customers now pay a nearly 6.5 percent average USF fee on their bills, more than double the 3 percent average rate a decade earlier,” Watchdog said.

When was the last time you looked at your bill?

Edited by Stefania Viscusi
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