As more Americans cut the cord on traditional landline phones, a government program that subsidizes internet service to poor communities is in danger of collapsing because it relies on taxes from dwindling long-distance calling fees.
That's prompting calls to shore up the more than 20-year-old Universal Service Fund by tapping technology companies such as Amazon and Netflix that profit from the growing use of broadband.
"We're taxing the telephone networks to pay for the broadband network," said Brendan Carr, a Republican member of the Federal Communications Commission. "That's like taxing horseshoes to pay for highways."
The fund, which distributed $8.3 billion last year, helps connect schools, libraries and rural health care facilities. It also provides a connection subsidy for roughly 7 million poor households.
But over the past two decades, the use of old-fashioned phone service has plunged and the revenue against which the levy could be charged dropped to $30 billion, from about $80 billion, Carr said. That's led to an increase in the rate of the tax, which has soared to more than 30% from 5.7% in 2000 and is typically passed along to the shrinking pool of landline users.
The pandemic has spotlighted the need for fast internet connections for schooling, work and health care and has emerged as an area of agreement as President Joe Biden and lawmakers of both parties grope for ways to support more broadband.
Carr, in an interview, said one way to do that is by getting companies such as Amazon, Google and Netflix to pay. He cited "businesses that are benefiting from the modern network and paying virtually nothing."
The proposal adds to the big technology companies' travails in Washington, where lawmakers and regulators are threatening to break up social media providers, and to strip them of key legal protections. Now Carr, who once called for the FCC to "do our part to rein in Big Tech," is bidding to deepen the pain.
Congress in December voted $3.2 billion for an emergency broadband program that offers $50 in monthly subsidies. The program has attracted more than 2.3 million households. But once it's tapped out, perhaps in a matter of months, reliance reverts to the troubled subsidy set up in 1997 -- which generally pays $9.25 per month per household.
Carr in a Newsweek editorial suggested lawmakers and regulators could set fees for web companies such as Google, Facebook, Apple and even Microsoft for Xbox gaming.
The call from Carr, a Republican, has drawn interest.
"It's an intriguing idea. And we're going to need ideas," FCC Acting Chairwoman Jessica Rosenworcel, a Democrat, told Bloomberg TV on Friday.
"Keeping the Universal Service Fund strong is really important for making sure that broadband helps reach rural America, and also provides support for broadband and affordability in urban America," she said.
USTelecom backs having "all policy options on the table," said Jonathan Spalter, president of the trade group, which includes top carriers AT&T and Verizon Communications. Spalter called for "a conversation" about having "the entire internet ecosystem" share in the responsibility.
AT&T, the largest U.S. phone company by revenue, perked up when Carr laid out his plan in Newsweek.
"Hard to imagine successful reform that does not include some version of this proposal," Hank Hultquist, vice president of federal regulatory for AT&T, said in a tweet. The company has advocated for appropriations from Congress -- an idea opposed by others who fear the subsidy may fall prey to annual funding fights.
AT&T Chief Executive Officer John Stankey on Thursday called the system "dramatically overtaxed." If appropriations aren't adopted, gathering fees from "across all of industry that benefits from the internet" could stabilize the subsidy, Stankey said in an interview with David Rubenstein at the Economic Club of Washington.
K. Dane Snowden, president of the Internet Association trade group, in an emailed statement called on the FCC to "take a common sense approach and not punish innovative, high-quality streaming services." Members of the trade group include Facebook, Amazon, Google, eBay and other online companies.
Because the FCC doesn't have authority over web companies, Congress would have to step in.
"It's a ticking time bomb, and only getting worse. But I don't see Congress moving quickly on this," said Doug Brake, director of broadband and spectrum policy at the Information Technology & Innovation Foundation, a nonprofit research outfit. "Really, almost any proposed source of funding is going to be controversial."
Information for this article was contributed by Scott Moritz of Bloomberg News (WPNS).