Don't Tax Municipal Wi-Fi

Could a little-noticed clause in the U.S. budget lead to taxes on city-run wireless broadband access?

President Bush has established the important goal of achieving universal broadband availability for all Americans by 2007. Yet, in a little-noticed portion of its budget, the Administration urges Congress to enact a new tax, euphemistically described as a "user fee" on unauctioned spectrum licenses that give holders the right to transmit radio signals. It is hard to discern precisely what is intended by this obscure proposal, but within 24 hours of its release the White House said it had no intention of taxing Wi-Fi services that operate in unlicensed spectrum.

But with the federal government facing huge budget deficits, we remain concerned that the Administration and Congress will be tempted to tax something that today is made available for free: namely, the spectrum in which Wi-Fi devices operate. (Don't forget, the transition to digital television has been driven largely by the federal government's desire to free up spectrum used by TV broadcasters so it can be auctioned to the highest bidder.) Short of a law banning municipal broadband networks, it's hard to imagine something so inimical to competition and achieving universal access for all Americans.


  Unlicensed spectrum has spawned investment and innovation. Taxes kill investment and innovation. In fact, even a nominal tax on Wi-Fi would eviscerate the business models of new broadband entrants. With wireless technology, we are helping to stimulate the torrid pace of broadband deployment (there are 300 systems to date in the U.S, with 5 million homes projected to be reached by the end of the year).

This growth in large part is due to high volume shipments of Wi-Fi radios for a broad range of applications, which in turn are possible because the spectrum is free. So, instead of promoting broadband, taxing and restricting who can use unlicensed spectrum will choke it and hurt economic growth. As a nation, we can't afford that.

In just the past few years, the U.S. has lost its broadband leadership position. Having been first in the world in the 1990s and fourth in 2001, the U.S. has fallen to 16th among industrialized nations in broadband subscriptions per 100 inhabitants, according to the International Telecommunication Union. In fact, only 30% of U.S. households subscribe to broadband services, a reflection of high prices, too few choices, and unavailability of attractive services.


  A bright spot for the U.S. is in the deployment of broadband Wi-Fi access points, where it continues to rank first, in part as a result of the emergence of municipal systems. Many countries that are outpacing us in broadband deployment, including Canada, Japan, and South Korea, have successfully combined municipal systems with privately deployed networks to bring high-speed broadband to their citizens.

Municipal broadband networks offer the promise of increased economic development and jobs, enhanced market competition, improved delivery of e-government services, and enhanced capabilities by first responders, such as police and firefighters.

For example, Corpus Christi, Tex., is today reading 73 gas meters per second over the city's Wi-Fi mesh network (in computer speak, a mesh network is one in which the wireless "nodes" or radios communicate with each other, a few of which have direct connections with the Internet). St Cloud, Fla., is attracting businesses and residents to its city outside of Orlando with a citywide Wi-Fi network. Anaheim, Calif., has partnered with a private service provider to bring the benefits of citywide wireless broadband to homes and businesses at no cost to taxpayers.


  After Katrina blew through the Gulf Region, new telecommunications options, such as wireless broadband, were among the fastest to rebuild vital services used by first responders and citizens in the affected regions. Wi-Fi mesh technology will stay up the longest in the event of catastrophe -- be it a tornado, hurricane, or terrorist attack -- and can be brought back up first to aid in the rescue effort. Wi-Fi mesh and other new technologies are far superior to the old way of communicating via wires.

As towns aggressively launch these municipal networks to promote economic development and enhance first-responder capabilities, just the hint of a tax on Wi-Fi is cause for great alarm. The thought of Congress enacting a tax ostensibly to bring "parity" to spectrum license acquisition costs for both the new and old means of communication is an anachronism. A principal purpose of a spectrum license is to mitigate potential interference from contending uses.

The very fact that Wi-Fi is so widely popular proves that it meets customer needs, which means that interference and contention are not a problem. We should not mess with a very good thing just because the federal budget is not in balance.


  In an environment where business models, technologies, and user preferences are changing faster than any one service provider can embrace, our legislative environment should encourage rapid deployment of a full complement of approaches to keeping citizens well connected, well served and safe. Taxing unlicensed spectrum would limit the ability of local governments to provide more broadband opportunities in their local communities.

Congress should reject any tax proposal on unlicensed broadband wireless spectrum. Instead, it should adopt the Lautenberg-McCain bill, which would encourage the development of new community broadband networks.

The U.S. is not going to regain its No. 1 ranking in broadband penetration overnight. But encouraging the growth of municipal broadband networks will get it there sooner than will a tax masquerading as a user fee.

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