Freedom Line Blog

More than thirty years ago, Congress gave local governments the power to impose “franchise fees” and other regulations on cable television service.  It was part of a broad framework for shared national and local authority over cable television in the 1984 “Cable Act,” which laid the foundation for the cable (and eventually satellite) TV boom of the 1980s and beyond.

By contrast, local governments have very limited power to tax or regulate the internet.  Unlike television, which has a long tradition of serving independent local markets with discrete programming, options, and infrastructure, from the beginning it’s been clear that the internet is inherently national and interstate and can only be effectively regulated at the federal level.  That has been core federal policy for decades, as most recently expressed in the 2017 Restoring Internet Freedom Order, which concluded that, “regulation of broadband Internet access service should be governed principally by a uniform set of federal regulations, rather than by a patchwork that includes separate state and local requirements.”

But recently, a number of local franchising authorities have tried to upend that federal policy and claim the right to impose local taxes and regulations on the internet by seizing on the fact that some broadband providers also offer cable television services.  Now, the Federal Communications Commission (“FCC”) is rightly working to put a stop to this local government internet power grab – moving to make clear that the Cable Act only allows local franchising boards to tax and regulate cable companies based on their cable television operations.

If every local franchising board in the country can impose its own rules and fees on internet providers, the freewheeling and open internet we all enjoy today will slowly grind to a halt.  The resulting cacophony of regulation will overwhelm operators, slowing down cyberspace and making it less reliable and less secure.  It will drive away new investment needed to continue to achieve ever-increasing speeds users have come to take for granted.  And it will confuse consumers who expect the internet to be a consistent experience everywhere they go.

This is the exact harm federal policy strives to avoid.  As the FCC explained, “allowing state or local regulation of broadband internet access service could impair the provision of such service by requiring each ISP to comply with a patchwork of separate and potentially conflicting requirements across all of the different jurisdictions in which it operates.”

For that reason, the FCC’s “Section 621 Proceeding” must move quickly to shut down the local power grab by making clear that neither the Cable Act nor any other source of local regulatory power authorizes franchise boards to tax or regulate the internet or any other non-cable-television businesses.

The future of the internet and our unfettered access depend on it.

In a letter to Senate Majority Leader Mitch McConnell and Senate Minority Leader Harry Reid, the Center for Individual Freedom (“CFIF”) today joined a coalition of more than 40 other organizations representing tens of millions of consumers from across the nation to urge support of a permanent extension of the Internet Tax Freedom Act currently embedded in H.R. 644, the Trade Facilitation and Trade Enforcement Act.

“In the 17 years since Congress first passed a ban on Internet access taxes, the Internet has evolved from a luxury into a necessity of modern life. ITFA helped to spark this revolution,” the letter states.  “Without ITFA, it is likely that Internet services would be taxed at the high rates of tax imposed on traditional telecommunications services, which often are more than double the rate of tax imposed on other goods and services.”

The letter concludes by urging the U.S. Senate “to act swiftly and decisively to pass a permanent extension of ITFA.”

To read the letter in its entirety, click here (.pdf).

To read the coalition press release, click here.

When the clock strikes midnight tonight, the federal moratorium blocking states and localities from taxing Internet access and shackling electronic commerce with multiple and discriminatory taxes will expire.  Consumers beware.

Congress first passed the federal law banning state and local governments from taxing Internet access in 1998. Since then, the moratorium has been extended on a temporary basis five times – a move that, among other benefits, has helped keep access to the Internet affordable for citizens and families of all economic levels. 

With the current ban set to expire, however, a number of state and local governments are eager to impose new taxes on the Internet. According to a recent report by the American Action Forum, lifting the ban on Internet access taxes could cost consumers as much as $16.4 billion.

That’s why the Center for Individual Freedom yesterday joined an impressive coalition of national free-market organizations on a letter urging Congress to pass H.R. 644, a trade bill that contains language to finally make the Internet tax ban permanent, something for which we have been advocating for well over a decade. 

To be sure, few in Congress dispute the benefits of keeping the Internet tax ban in place.  Except for a handful of Members of Congress who continually work to hold the policy hostage to the completely separate issue of whether the federal government should give states and localities new powers to force out-of-state retailers to collect and remit sales taxes on their behalf, the ban on Internet access taxes probably would have been made permanent long ago.

Fortunately, the House of Representatives today passed H.R. 644 by a vote of 256-158.  It’s time for the Senate to end the political games and follow suit.