Washington may be about to make Florida’s broadband problem worse. The bipartisan Universal Service Fund (USF) working group, led by Senators Ben Ray Luján (D-NM) and Deb Fischer (R-NE), is reportedly working to develop proposals to shore up funding for USF programs, which subsidize telecommunications services for low-income consumers, high-cost rural areas, schools and libraries, and rural health care providers. One idea that often comes up in USF reform discussions, despite years of widespread, bipartisan criticisms, is to require internet service providers (ISP’s) to start contributing to the Universal Service Fund.
The USF was created under the Telecommunications Act of 1996 to make phone and internet service more affordable for low-income and rural Americans, funding programs like E-Rate and Lifeline. It’s paid for through a contribution factor charged on interstate calls. That factor has now been set at 38 percent because the base it draws from, interstate and international calls, keeps shrinking, and the cost of administering the program remains high, and legislators must find ways to make up the difference
That’s a costly mistake at a time when affordability is already squeezing nearly every Florida household. And the argument for a broadband tax doesn’t even hold up on its own terms. Broadband prices, unlike almost everything else people buy, have actually been falling. One recent analysis of FCC data found real prices down roughly 9 percent over the past year. Meanwhile, the FCC’s own estimates show that requiring broadband providers to pay into USF could add as much as $17.96 to the average household’s monthly bill. Taxing a service that’s getting cheaper to prop up a program meant to make service more accessible is backward. It won’t close the digital divide. It’ll only widen it and push more people into the digital dark age.
Florida is also poorly positioned to absorb a new federal tax, because it’s already one of the most expensive states in the country for communications services. The state levies a Communications Services Tax on every sale of communications services within its borders, made up of a 7.44 percent state rate plus a local rate that can run as high as 7 percent on top of that, depending on where you live. Standalone broadband is technically exempt from the CST under the federal Internet Tax Freedom Act. But that exemption evaporates the moment broadband gets bundled with cable or wireless service, which is exactly how most Floridians buy it. Adding an additional tax on top of the CST would only further raise prices for Floridians, making the service more expensive and making it harder for residents to work remotely, access virtual healthcare, or get an education from anywhere.
Creating a broadband tax on top of Florida’s CST risks making the service unaffordable for the very people the USF was supposed to help. With the additional fee associated with a broadband tax, rural and low-income Floridians will be the ones most likely to forgo service, while wealthier Floridians will likely be able to absorb the additional cost, further exacerbating the digital divide that the program was ostensibly designed to close.
The need to reform USF is not news to Congress, or to the Federal Communications Commission. As far back as April 2001, a quarter century ago, the Commission opened a formal rulemaking acknowledging that the system needed to be “streamline[d] and reform[ed],” warning that the funding mechanism built for a 1996-era phone system was already straining to keep up with “current market trends.” At the time, the concerns were things like the rise of wireless calling plans and the entry of new long-distance carriers. The specifics have changed since then. The core problem hasn’t: a funding base tied to a shrinking category of revenue, propping up a fund that keeps growing. Twenty-five years later, Congress and the FCC are still having the same conversation, just with broadband now in the crosshairs instead of long distance.
As Congress and Florida’s congressional delegation consider how to best fix USF, their number one priority should be a fix that doesn’t raise taxes on Floridians, who are already facing an affordability crisis and some of the highest communications prices in the country. There are ways to shore up USF that don’t run through Florida households: direct appropriations, subject to real congressional oversight, instead of an open-ended surcharge that keeps climbing as its base shrinks. What lawmakers shouldn’t do is solve a 1996-era funding problem by taxing 2026-era broadband, especially in a state where that bill is already one of the highest in the country. Florida’s congressional delegation, in particular, should be the loudest voice making that case. Their constituents are the ones who’ll pay for it if they don’t.
