Permanent Internet Tax Ban A Win-Win For ISPs and Consumers

The broadband industry received a big holiday surprise on Wednesday, as Congress officially declared a permanent moratorium preventing states from taxing Internet access.

The moratorium, which was part of a new agreement modernizing the standing U.S. customs policy, was a modification of an Internet tax ban initially established in 1998.

Under the previous agreement, which outlawed Internet taxation, seven states—Ohio, Hawaii, New Mexico, North Dakota, South Dakota, Wisconsin and Texas—were all allowed to continue their practices of taxing Internet service. Under the new agreement, however, these states will be required to phase out their Internet taxation policies by mid-2020. This should provide adequate time to compensate for the millions of dollars in revenue which they are expected to lose from the moratorium.

It should be noted that since the original 1998 moratorium on Internet access taxation, four extensions were passed—most recently a 2014 extension, passed last November. As PC World explained following last year’s extension, if it had failed, several new states would have pounced on the opportunity to begin levying taxes on Internet access; and it can be assumed that states would have pursued it again this year, too.

With this in mind, the broadband industry can rest assured that no further extensions will be needed to ensure tax-free Internet access.

So, who will benefit the most from the moratorium? Amongst those expected to experience the most benefits will be broadband providers, as well as their business and residential customers. Businesses and customers will “finally be free from the threat of hundreds of dollars in new taxes each year, just to access the Internet,” Sen. Ron Wyden, D-Ore, was quoted as saying in a recent CED article. As a result, broadband business should continue to flourish.

It’s worth considering that the moratorium modification comes at an important time for the U.S. broadband industry, which—along with the help of the federal government—is trying to achieve universal Internet adoption in America. Now that there is no threat of a restrictive tax to worry about, which would have hindered market growth and competition, broadband should continue to move  at an aggressive pace throughout 2016.

As it stands, the U.S. broadband market ended 3Q15 at 108.5 million subscribers, which represented a YoY growth rate of about 4.0 million subscribers.

With this in mind, as we prepare to turn the corner into 2016, Internet service providers are encouraged to look for new ways of improving—and profiting from—their networks. By offering fast network speeds, modern, customer-friendly subscription services as well as reliable connectivity, broadband providers can ensure a strong and profitable year.