NCTA Opposes New Multi-Million Dollar Tax on Broadband Service

WASHINGTON, D.C. – Despite a national consensus that increasing broadband service should be a top U.S. priority, a proposal under consideration at the Federal Communications Commission (FCC) could result in a new several hundred million dollar tax on broadband services that will chill investment and consumer adoption of high-speed Internet access especially in rural areas, the National Cable & Telecommunications Association (NCTA) said today.   NCTA also said the proposal is based on an incomplete analysis about how much cable operators pay to attach their network or facilities to utility poles.  NCTA filed its views in the attached filing at the FCC in Docket 07-245.

According to an economic analysis submitted by Microeconomic Consulting & Research Associates (MiCRA), adoption of the FCC’s tentative conclusions could raise the price of providing broadband services by up to $670 million each year, which could equate to a per-customer increase of up to $390 annually in rural areas.  Rural customers could be particularly hard hit because systems in rural areas typically have more poles per subscriber than urban systems, and fewer attaching parties on the poles, NCTA said.

“The Commission’s tentative conclusion to adopt a uniform broadband attachment rate that is higher than the current rate for cable attachments amounts to a broadband tax on cable customers, particularly rural customers, and discourages any future investment by operators that hope to bring broadband to unserved areas,” the filing states.  “If the Commission is at all serious about promoting broadband investment and facilities-based competition, it should not raise rates for broadband attachments by cable operators.” 

While the cable industry supports the proceeding’s goal of achieving rate parity among similarly-situated providers, NCTA said that parity can better be established by lowering the rates of others, not doubling or tripling the rates that cable operators already pay.  The FCC claimed that cable gets “subsidized” rates when it attaches; however, NCTA said the FCC is wrong about that economic conclusion because cable’s lower rates have consistently been held to be fully compensatory by courts – and the FCC itself.  These repeated findings mean that cable operators pay more than adequate rental fees plus all incremental expenses to attach their facilities to utility poles (called “make ready” expenses).   After decades of regulatory policy in which the Commission promoted investment in broadband and protected the right of providers to attach to poles at reasonable rates, the FCC’s proposal is a “stunning change in direction,” NCTA said.

NCTA said there is no sound policy reason for a dramatic increase in the pole attachment rate.  Higher rates would overcompensate pole owners, penalize companies that already have invested in broadband, and discourage critical new investment by companies trying to deploy broadband to unserved communities, NCTA said.

“In essence, the Notice proposes a huge windfall for shareholders of electric utilities and incumbent LECs at the expense of broadband customers, the exact opposite of what the Commission should be doing to advance federal policies aimed at encouraging ubiquitous broadband availability at reasonable prices,” the filing states.  “To promote broadband investment and facilities-based competition, as well as regulatory parity for similarly-situated parties, the Commission should move the rate for telecommunications attachments closer to the rate produced by the cable formula.”

“Raising the attachment rates for cable operators when they provide broadband service would have an exceedingly detrimental effect on deployment and adoption of broadband services,” the filing states.  “As Congress and the Commission struggle to find ways to promote investment in rural broadband facilities (e.g., through the Universal Service Fund or Rural Utilities Service loans), it is impossible to understand why the Commission would even consider a policy that raises the costs of providing broadband service to areas where it is not available today.”