Motley Fool Caught Hyping Mythical Costs Of Net Neutrality

The multimedia financial services company The Motley Fool joined a chorus of media outlets uncritically promoting the misleading claim that reclassifying broadband Internet services as a public utility could amount to a multi-billion dollar tax on the internet.

In a December 6 blog suggesting net neutrality policies could “raise your internet bill,” the Motley Fool joined the Wall Street Journal and others in hyping the misleading findings of a policy brief on Internet reclassification performed by economists Robert Litan of the Brookings Institution and Hal Singer of the Progressive Policy Institute (PPI). The brief, titled "Outdated Regulations Will Make Consumers Pay More For Broadband," concluded that reclassifying the Internet as a public utility under Title II of the Communications Act would create “more than $15 billion” in new annual fees to be passed on to consumers and stifle telecommunications innovation:

We have calculated that the average annual increase in state and local fees levied on U.S. wireline and wireless broadband subscribers will be $67 and $72, respectively. And the annual increase in federal fees per household will be roughly $17. When you add it all up, reclassification could add a whopping $15 billion in new user fees on top of the planned $1.5 billion extra to fund the E-Rate program. The higher fees would come on top of the adverse impact on consumers of less investment and slower innovation that would result from reclassification.

According to the nonpartisan open Internet advocacy group Free Press, PPI's claim that Internet reclassification would amount to more than $15 billion in new local, state, and federal taxes is an unlikely “worst-case scenario” that fails to account for how net neutrality works in practice. The multi-billion dollar estimate ignores the fact that reclassification of the Internet as an interstate telecommunications public utility would remove it from most in-state forms of taxation. Correcting this methodological error would reduce allegedly burdensome fees associated with net neutrality reclassification by nearly 75 percent, to roughly $4 billion.

Further regulatory decisions by the Federal Communications Commission (FCC), coupled with legislation from Congress, “could take additional steps to remove or limit any future taxes or fees,” according to Free Press. For instance, FCC fees associated with the Universal Service Fund (USF) could be suspended if the FCC deems the fees to be contrary to the USF mission of subsidizing the expansion of telecommunications to under-served communities. Furthermore, a simple congressional renewal of the Internet Tax Freedom Act could guarantee against local, state, or federal governments imposing “Internet-specific taxes.”

Net neutrality is the status quo by which the Internet operates. Establishing and codifying the neutrality that has always existed is an important step to ensure free markets and fair competition for consumers and content producers.