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Update: What Biden's presidency could mean for tech and telecom

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Update: What Biden's presidency could mean for tech and telecom

President-elect Joe Biden has already begun outlining his transition plan for the incoming administration, even as President Donald Trump's reelection campaign is challenging the election result on a number of fronts.

With several media organizations — including CNN (US), FOX (US) and The Associated Press — declaring Biden the winner of the election on Nov. 7, Biden said his priorities will include beating COVID-19, improving the economy, furthering racial equality and addressing climate change. But should the former vice president take office Jan. 20, 2021, he is also likely to bring a number of changes to the current administration's approach to key areas of tech and telecom policy.

Under a Biden administration, one of the biggest changes on the horizon, according to most policy experts, is a return of net neutrality protections for broadband service. However, Biden's approach to other issues, such as antitrust scrutiny of large online platforms, could be rather similar to Trump's.

Meanwhile, Trump and other Republican groups are challenging vote counts in at least five states, including Pennsylvania, the state whose electoral votes pushed Biden over the critical 270 mark. "Our campaign will start prosecuting our case in court to ensure election laws are fully upheld and the rightful winner is seated," Trump said in a Nov. 7 campaign statement.

SNL Image

President-elect Joe Biden is expected to pursue changes to how the FCC regulates broadband.

Source: Biden campaign

Net neutrality

One key area of disagreement between the Trump administration and the administration Biden will construct, policy experts believe, is the issue of the Federal Communications Commission's authority to regulate broadband.

In 2018, the Republican-led FCC eliminated the FCC's authority to impose net neutrality rules. Instead, the agency requires internet service providers to publicly disclose if traffic is blocked, throttled or prioritized — though operators are not prohibited from those activities.

The 2018 order specifically reclassified broadband as a Title I information service, giving the FCC less regulatory authority over broadband service providers like Comcast Corp., Verizon Communications Inc., AT&T Inc. and Charter Communications Inc.

A Biden FCC, however, is expected to classify broadband as a Title II telecommunications service, restoring the agency's authority to regulate internet service and its ability to impose net neutrality protections.

A Biden campaign spokesperson has also reportedly said Biden is a supporter of net neutrality protections.

Section 230

A Biden administration could also take a look at a prized legal liability shield for online platforms.

The law, known as Section 230 of the Communications Decency Act, is a landmark piece of legislation that protects internet platforms from civil and criminal liability for content created and posted by users. It also enables those platforms to moderate content posted on their sites.

While it has been threatened by both Trump and Biden, Republicans and Democrats have not yet coalesced behind a bipartisan overhaul proposal in Congress.

The Internet Association — a trade group representing online giants such as Twitter Inc., Facebook Inc. and Alphabet Inc.'s Google LLC — has warned that rolling back Section 230 protections will make it harder for online platforms to operate and offer the services that they provide.

In May, Trump signed an executive order that directed the U.S. Commerce Department to ask the agency to review the law and propose regulations to clarify the scope of immunity. In line with that order, FCC Chairman Ajit Pai recently announced that he intends to "clarify" the meaning of the law.

While Biden has said Section 230 should be "revoked," he was reportedly critical of Trump's executive order.

Additionally, both Democratic commissioners at the FCC were critical of Trump's executive order and the role it wants the FCC to have in influencing the law.

House Speaker Nancy Pelosi, D-Calif., has said Section 230 "could be removed," but has strongly opposed Trump's executive order, saying it "does nothing to address big Internet companies' complete failure to fight the spread of disinformation."

Taxes

Prior to the election, Biden vowed to get tough on big tech and tax breaks should he win the U.S. presidential race in November, but analysts and legal experts previously told S&P Global Market Intelligence that current global uncertainties could hinder the Democratic challenger from taking up the tax code in the near term. Moreover, tax reform would likely face strong opposition from Republicans in the Senate.

Biden pledged to raise the corporate tax rate to 28% from 21%, undoing some of the tax cuts implemented under the Trump administration. The former vice president also also aims to set a minimum tax of 15% on companies' book income, or profits reported to shareholders, and to raise taxes on foreign earnings of U.S. companies located overseas — two policies that directly impact the U.S tech sector.

Specifically, Biden has criticized Amazon.com Inc. and other large tech companies for not paying higher taxes, claiming his proposals would hold these companies more accountable by tightening current loopholes. However, while experts note tech giants are perhaps the best-equipped to absorb a future tax hike, they say that prioritizing tax reform could be difficult given the current partisan divide and the ongoing coronavirus pandemic.

It is also unclear exactly how much any change would impact tech companies, as the tech sector is notorious for having an effective tax rate that is significantly lower than the statutory rate, or the percentage set by federal law. Companies report their effective tax rate as a calculated figure that includes federal, state, local and foreign taxes, as well as various tax breaks.

All told, information technology companies in the S&P 500 reported an average effective tax rate of 14.5% for 2019, 650 basis points below the 21% statutory rate. For 2016, the companies reported a 24.0% effective tax rate, 1,100 basis points below the 35% statutory rate.

Antitrust

One area where there could be consistency between Trump's and Biden's administrations is in regards to antitrust scrutiny toward large online platforms, which has been somewhat of a rare area of bipartisan agreement in Congress.

The Trump administration's Department of Justice launched an antitrust legal challenge against Google in October; however, policy experts told S&P Global Market Intelligence prior to the election that federal antitrust legal scrutiny will likely rage on regardless of the election results.

"I do not think a change in administration will demonstrably impact the [DOJ] complaint," Sally Hubbard — director of enforcement strategy at the Open Markets Institute, a research and advocacy organization focused on antitrust — said in an email in October.

In 2019, Biden told The Associated Press that dismantling large technology companies, such as Facebook, should be looked at but said it was "premature" to make a final judgment on the matter.

Democrats in Congress have also expressed an interest in taking antitrust action toward certain large online platforms.

In the 2019 interview, Biden also praised a plan from Sen. Elizabeth Warren, D-Mass., that called for appointing regulators committed to unwinding previously approved "illegal and anticompetitive tech mergers."

Specifically, Biden said Warren "has a very strong case to be made" for cracking down on tech giants, according to The Associated Press.

Additionally, House Democrats recently wrapped up a 16-month antitrust investigation that culminated in a detailed report, which was released Oct. 6. The report accused major online platforms of having monopoly power and recommended structural separations of certain businesses.