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A rumor surfaced in the mid to late 1980s that the FCC would begin imposing a tax on phone lines being used by modems.

Without a doubt, the addition of the modem in the late 1970s but more importantly the early to mid-1980s put an enormous strain on the phone system. Where before it was rare to have someone spend hours and hours on a telephone, the number of folks who were doing just that were growing steadily.

This has had a number of profound effects on how the telephone system has conducted its business, including how it asks for rates and how much hassle it has gotten for the quality of lines from normal, "residential" customers. This was all a major sea change, and worth going into.

Especially worth going into is the insane and involved relationship between the phone company and the FCC, and the concept of "Universal Access".

Anyway, the situation is that there have been occasional moves by the FCC to consider adding charges to the use of modems on phone lines, which would increase the cost substantially for modem users. This has often been referred to as the "Modem Tax". This rumor has flared up greatly over the last decade and a half, and it has stuck in many people's minds as the first online "urban legend".

Bruce Wilson writes "There was a "grain of truth" in the infamous "modem tax" rumor. The FCC had exempted "enhanced service providers" from the local access charges paid by voice grade carriers and announced that it was considering ending that exemption, the effect of which would've been to eliminate PC Pursuit and very substantially increase the cost of the early on-line services such as CompuServe. (Anyone making direct-dial long-distance modem calls was already paying the local access fee as part of the long-distance charges.) Telnet made sure the effect was known among its users and encouraged them to make objections known to the FCC."


  • Scott, Jason. The BBS Documentary Library. [1]