European telecom trade organizations have tried for a few years to get the European Commission to prompt (read, force) big technology companies to pay their “fair share” of the cost of building and maintaining wireless and broadband networks, Inside Towers reported. Now U.S. trade groups are getting into the act.
USTelecom represents the biggest U.S. communications service providers. The trade association is trying to convince the FCC that because the big tech companies generate huge volumes of data on the wireless and broadband networks, they should contribute to the expansion and upkeep of those networks, Forbes reported. USTelecom is suggesting that the established Universal Service Fund (USF) might be the appropriate funding vehicle.
Given the billions that CSPs invest in broadband and wireless infrastructure every year, USTelecom argues that big tech companies which rely on this infrastructure should contribute to the USF to help pay for network operation and maintenance. The big tech companies in question include hyperscalers and cloud providers like Amazon (NASDAQ: AMZN), Alphabet’s Google (NASDAQ: GOOG), Microsoft (NASDAQ: MSFT), Meta Platform’s Facebook (NASDAQ: META) and Netflix (NASDAQ: NFLX).
The USF is administered by the FCC and funded by contributions from telecom companies, which generally pass that cost on to consumers in the form of a Universal Service fee, Inside Towers reported. USTelecom is trying to make the case that USF has been supported by CSPs and federal funding programs while Big Tech gets a free pass.
In reality, it is the end users or Big Tech customers that generate the traffic on the network by using the internet for transactions, social media and streaming content provided by the Big Tech companies. Yet, USTelecom argues, Big Tech is monetizing end user data collected over the networks to which they connect but have not helped to build.
USTelecom is suggesting that there may be a need to impose a sufficient corporate tax or even data tax to force Big Tech to compensate society for the user content it accesses. What should such a tax be?
The Universal Service Contribution Factor represents the percentage of interstate and international end user telecommunications revenues that service providers must contribute to the USF. For the third quarter of 2024, the proposed contribution factor is 34.4 percent.
The FCC uses end user telecommunications revenues for determining CSP USF contributions, Inside Towers reported. In the context of Big Tech, the parallel calculation would be the percentage of their total revenues derived from services and offerings that utilize wireless and broadband networks. This revenue calculation could then be adjusted for operational costs and investments by Big Tech to ensure a fair contribution factor.
Big Tech companies generate substantial profits from data collected from users, according to Forbes. That data is monetized and used for advertising and personalized services. Taxing the revenue derived from this user-generated data may be a way to ensure these big tech companies are contributing fairly to the public networks from which they benefit.
European Commissioners, so far, are unconvinced of similar arguments. We will have to see how these debates play out in the U.S.
By John Celentano, Inside Towers Business Editor
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