As many bills up on capitol hill do, SB112 came back from the dead after some tweaking and passed the Senate on a 20-8-1 vote. It’s now with the House, though it’s not yet on the reading calendar for a vote. While the tax break for cable operators isn’t as large as before, the premise of the bill is still fundamentally flawed as it does not consider a franchise fee to be payment for right-of-way. Make sure you call your member of the House and tell them to oppose this bill!
For the most part, the Utah Legislature has spent very little time focusing on telecommunications issues. From my stance, that’s usually a good thing as when they focus on the sector, it is almost always to promote an anti-municipal telecom bill. This year, however, brings a bill worth opposing. SB112, sponsored by my own Senator, Wayne Neiderhauser, seeks to cut the state excise tax rate for cable television without making any adjustments for satellite providers.
Sen. Neiderhauser explains the rationale behind the bill: cable subscribers pay more taxes because of franchise fees, so the excise tax needs to be reduced so that the total of excise tax and franchise fees is equal between the two platforms. This, however, is an entirely illogical basis for providing the discount. Franchise fees are paid to a municipal government as compensation for accessing right-of-way. This includes being able to tear up city streets and erect poles in order to deploy this infrastructure. It has no relationship or bearing upon the state excise tax.
The end effect of this bill is to give cable television providers an unfair advantage in the tax system, enjoying a much higher benefit for the same level of taxation. If you want to cut taxes, that’s fine, but doing so in such a manner as to create a greater inequity in the tax structure is absurd. I encourage you to write your legislator to ask them to oppose SB112 as currently written.
On the DVR front, AT&T has finished deploying whole-home DVR in 69 markets. This will allow customers to watch recorded programs on any TV in the house and is a smart move on AT&T’s part to drive DVR adoption. While there’s no fee for this service, AT&T does charge for the STBs for each set. Dish Network, meanwhile, will be deploying a new kind of DVR next week that can record from satellite broadcasts, analog over-the-air and HD over-the-air and function as a digital-to-analog converter box. Not all is good in DVR news, however. The Supreme Court is going to hear appeals in the Cablevision networked DVR case and the content cartel is aggressively lobbying to make sure it gets outlawed. This will be an important case to watch as it will have a lasting effect on video innovation.
Forget triple-play: welcome to the quad. Cox Communications plans to use recently-purchased spectrum to deploy cell-phone serivce in its markets. Since Cox can leverage its existing infrastructure to keep transport costs low, the profit margins should be substantial. They will also deliver video services to handsets for existing video customers as they had tried to do with Pivot. AT&T and Verizon have been using wireless revenues to help subsidize the construction of their next-generation networks for quite some time with a lot of success. Qwest, meanwhile, has had poor financial performance as it does not offer its own video or wireless products.