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Does Net Neutrality ruling open the door for billions of dollars of new taxes for money starved governments?


The Federal Communications Commission finally made a decision on something called Net Neutrality that a lot of people were waiting to hear about. In a split 3-2 vote, they decided that the Internet was in fact a telecommunications service and not an information service as it was previously considered.  That makes the Internet a so-called common carrier subject to regulation under Title 2 of the Communications Act of 1934, which allows the FCC to regulate utilities, like traditional phone companies and wireless mobile carriers. So what does that mean and why are so many people now worried that this decision will lead to new taxes and fees on the Internet?

Net neutrality is the principle embraced by many technology companies and public rights activists that argues that individuals should be free to access all content and applications on the web equally, regardless of the source, without Internet service providers discriminating against specific online services or websites.  In other words, they argue that the folks who connect you to the Internet shouldn’t control what you do on the web. Okay, none of us will argue with that principal, but net neutrality isn’t that simple.  On the other side of the equation, you have the Internet Service Providers like Comcast, Verizon and Time Warner that say the free market should be the determining factor and they should be able to charge more for certain content providers use because companies like Netflix consume a lot of  bandwidth.

In announcing the decision, Tom Wheeler, the Chairman of the FCC, explained that the only thing they wanted to do was prevent ISPs from unreasonably interfering consumers and content providers to use the Internet but the fact is that designating the Internet as a telecommunications service is that it opens it up to more than just mild regulation.  Just like telephone and mobile phone services, the FCC is now free to impose fees on Internet users and that scares people who afraid that the Federal government is so desperate for money it can’t help but be tempted to do it.  In fact, the two dissenting committee members, who happen to be Republican appointees by the way, said that specifically.

Since the Internet became a critical part of our commerce and day-to-day lives, there’s been a fear that someday governments at all levels will find a way to tax it.  For example, most of us enjoy buying things online and avoiding sales tax.  That’s been the case until now because the Commerce Claus of the Constitution doesn’t let any government charge taxes on an entity unless it has a presence in that state.  That exemption may be in jeopardy however, because the Supreme Court has recently indicated that the massive growth of Internet commerce in the United States represents a new reality and that maybe their past opinions on the matter should be revisited.

I think we all need to realize that the days of the Internet’s de-facto tax free status are numbered. It’s just too big and juicy a target for governments to ignore!

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