FCC Chairman Concedes Future Internet Tax Is Possible After All

By Rudy Takala | March 17, 2015 | 2:31 PM EDT

Federal Communications Commisson (FCC) Chairman Tom Wheeler testifies on Capitol Hill in Washington, Tuesday, March 17, 2015, before the House Oversight and Government Reform Committee hearing on net neutrality.  (AP Photo/Lauren Victoria Burke)

(CNSNews.com) – Federal Communications Commission (FCC) Chairman Tom Wheeler acknowledged in congressional testimony today that an Internet tax--which he had previously said would not be imposed--could be imposed in the future.

Wheeler’s remarks came during a Tuesday appearance before the House Oversight and Government Reform Committee, where he was asked to shed light on the process by which the FCC passed rules last month regulating the Internet.

Wheeler’s admission came after Rep. Ron DeSantis (R-FL) asked him to go on the record with his previous assurances that there would be no new taxes.

“Can you guarantee to the American taxpayer, people who use broadband service, that if this goes into effect, that they will not see taxes show up as contributions to the Universal Service Fund (USF)?" DeSantis asked.

Wheeler said: "We have carefully drafted this with two specific things in mind--"

DeSantis interrupted: "Can you guarantee them that they will not pay more?"

Wheeler said: "We have said that this does not trigger universal service, as I said to a previous question."

DeSantis said: “But that’s been disputed. I know that one of your members dissented and said that he believes Title II imposes a statutory obligation [for the tax].”

Wheeler then said:"We're talking past each other. Let me just be clear, because this is a specific point. That the provision--we have foreborne from the provision that would authorize us, today, in this rulemaking, to do that, to have Universal Service.

“There is a joint federal-state board addressing that very question today," Wheeler said. "How they resolve things in the future I do not know. But this rulemaking was very clear to say that we do not trigger that,” Wheeler testified.

He was referencing the Federal-State Joint Board on Universal Service that created in 1996 to administer the USF fund.

A fact sheet Wheeler issued about the rules on February 4 stated: “The Order will not impose, suggest or authorize any new taxes or fees--there will be no automatic Universal Service fees applied and the congressional moratorium on Internet taxation applies to broadband.”

However, the new FCC rules reclassified Internet Service Providers (ISPs) as Title II utilities, which are normally subjected to a USF fee. The fund is meant to enable the provision of universal service to customers of the utilities that contribute. The commission’s decision granted ISPs “forbearance” from the requirement to pay the fee, but it would not protect them from contrary decisions in the future. 

In fact, two FCC members warned in dissenting opinions that a new Internet tax was imminent.

Commissioner Michael O’Rielly said that ISPs were only being granted “fauxbearance,” while Commissioner Ajit Pai observed that the commission’s net neutrality ruling even requested that the federal-state board make a recommendation by April 7th.

“It’s no surprise that many have interpreted this referral as a question of how to tax broadband, not whether to do so,” Pai wrote.

In an announcement after the hearing, Oversight Committee Chairman Jason Chaffetz (R-UT) told reporters that the office of the FCC inspector general (IG) would be opening an investigation into the process by which the FCC’s net neutrality rules were approved.

Wheeler said he had not been made aware of the IG investigation.

Related: FCC Minority Report Warns That New Internet Tax May Be Coming Soon

Related: House Tech Subcommittee Chairman Denounces FCC's Net Neutrality Rules

Related: FCC Commissioner: Reclassifying Internet as Utility Will Increase Costs to Consumers