Last week, Mark Cooper, director at the Consumer Federation of America, proposed a “Netflix tax.” The tax would make content providers, like Netflix, pay into the troubled United Service Fund (USF) in order to help pay for broadband infrastructure in rural and low-income areas.  Another idea, Net Neutrality, posits that ISPs should not have major content providers pay more in order to support upgrades in broadband infrastructure.  What’s funny about this?  The group that helped think up the first idea, also fights for the second.


Net neutrality stops Internet service providers (ISPs), like Comcast or Time Warner, from two-sided pricing, whereby consumers pay their subscription fees and content providers, like Netflix or Hulu, pay a portion for delivery of their content.  The idea was to generate more revenue to pay for broadband infrastructure upgrades without raising consumer prices.  Against the idea was the Consumer Federation of America, which has supported net neutrality and opposed two-sided pricing – once stating “let the consumer pay,” to use Mark Cooper’s own words.  However, Cooper’s new proposal to make Netflix and similar sites pay into a fund suggests the mirror opposite of net neutrality.


The proposal seems to be a confession from a net neutrality proponent that infrastructure upgrades need to be paid for somehow, and the parties who should be responsible are the ones utilizing the ISPs services.  Only, it appears that the CFA would like to redirect the money from the content providers straight into the hands of the government, instead of giving it to the ISPs, who need to make the investment.  Why the added layer of bureaucracy, especially given the outrageous growth of the FCC over the past 10 years?


The idea that any money should flow to the Universal Service Fund should be put out of everyone’s head.  The USF, as we’ve recently found out, is a bureaucratic mess.  Fifty-nine cents of every dollar that’s paid into the USF goes to overhead rather than its intended purpose (building out the telephone network).  The recent proposal shifts USF funds from telephone infrastructure to broadband infrastructure.  So a plan to make a new generation of companies pay into the fund doesn’t seem like the best solution.


Why not drop the ideas of a Netflix tax and of net neutrality, and let ISPs deal with content providers directly, in order to pay for the next generation of broadband upgrades?


 Zack Christenson is a Chicago-based digital strategist who writes on tech policy.