Senate Once Again Ponders Internet Tax

WASHINGTON — The Senate Commerce Community met yesterday to talk about the possibility of extending the Universal Service Fund (USF), the 1996 tax on telephone services, to Internet services.

While no specific numbers were discussed, any extension of the USF would mean increased costs to consumers.

Currently, all phone companies, including mobile and long-distance providers, are required to pay into the fund, originally designed to keep the price of basic telephone service affordable throughout the country by subsidizing phone services in rural areas.

The companies cover the expense by passing it onto customers. Accordingly, Internet companies would likely also pay for their contributions by tacking on additional user fees.

The idea of making broadband providers also contribute to the fund is backed mainly by lawmakers from rural states, including Committee Chairman Ted Stevens, R-Alaska.

Stevens said during the hearing that without the USF, Alaska residents would have to pay up to $200 per month just to get a dial tone.

When asked by reporters after the hearing exactly what types of companies should have to pay into the USF, Stevens cast a wide cloth that included any company that “[transmits] knowledge from one person to another.”

He elaborated, “I believe fax is a communication, I think email is a communication, and I do believe they all should contribute.”

In 2005, the Senate mulled the possibility of extending the century-old federal excise tax on telephone services to the Internet, with opponents ultimately convincing proponents that such a measure would not gain enough votes to pass.

Last month, Sen. Conrad Burns, R-Mont., introduced legislation that would require VoIP providers to pay into the USF, but was clear to point out that he felt contributions should be limited only to broadband voice service.

Legislators in the House also have promised a bill that would extend the USF to Internet services, but rather than funds going to subsidize phone service, they would be used to bring broadband services to remote areas.

Some senators have expressed fear that, while the stated goal is admirable, they doubt its execution would produce the desired results. Recent government audits of the program’s administration hint at widespread mismanagement of funds.

Critics point out that deployment of USF funds is not handled by the federal government, but by nonprofit corporation called USAC whose board members are mostly telecommunications industry executives.

Also, according to a recent Pew Internet and American Life Project report, broadband service is moving into rural areas without government assistance.

Copyright © 2026 Adnet Media. All Rights Reserved. XBIZ is a trademark of Adnet Media.
Reproduction in whole or in part in any form or medium without express written permission is prohibited.

More News

Nalpac/Entrenue, Jen Jenivive Sign US Distro Deal

Nalpac/Entrenue and U.K.-based author Jen Jenivive have signed an exclusive U.S. distribution deal for Jenivive’s books.

Male Power Debuts 'Open Ended' Collection

Male Power has introduced its new Open Ended collection of men's underwear.

Utah 'Porn Tax' Bill With VPN Provisions Passes State Senate

The Utah state Senate has passed a bill that would impose a 2% tax on the revenues of adult websites doing business in that state, and make sites liable if Utah minors use VPNs to circumvent geolocation.

Magic Silk Debuts 'Euro Lux' Collection

Magic Silk has introduced its new Euro Lux line of lingerie.

Fast-Tracked Arizona Bill Includes Consent 'Catch-22' for Adult Sites

A bill advancing rapidly through the Arizona state legislature would impose new requirements for adult content uploaded online, including seemingly contradictory provisions that could effectively make it impossible for adult sites to operate in the state.

XR Brands Debuts Stroker Collection, Love Doll

XR Brands has introduced its new Hentai Fantasies stroker collection, as well as the K-Pop Idols love doll.

VirtualRealPorn Launches New WebXR Site

VirtualRealPorn has officially launched its new site, powered by Web Extended Reality (WebXR).

'MyAsianGFs' Launches Through Paysite.com

MyAsianGFs.com has officially launched through Paysite.com.

Corey Silverstein to Host Webinar on North Carolina Age Verification Thursday

Adult industry attorney Corey D. Silverstein has announced his latest "Legal Impact" webinar, titled "North Carolina AV Law — Content Creation Issues," to livestream Thursday at 4 p.m. (EST).

Ofcom Fines 8579 LLC $1.8 Million for AV Noncompliance

U.K. media regulator Ofcom on Monday imposed a fine of 1.35 million pounds (more than $1.8 million) against adult site operator 8579 LLC for failing to implement age checks as required for compliance with the Online Safety Act.

Show More