FCC

FCC Regulatory Fees Lag Behind Sub Losses

8/10/2004 10:41 AM Eastern

Cable operators have never been thrilled by the design of the user-fee program that helps to fund the Federal Communications Commission’s $274 million budget.

But the program will inflict even more punishment this year because cable operators will be paying thousands of dollars in fees based on subscribers they no longer serve.

Starting Tuesday, cable companies have until Aug. 19 to pay 70 cents per subscriber to the FCC. In the aggregate, the commission expects to receive $45.5 million from the industry. Last year, the per-subscriber total was 66 cents.

Here’s the catch for cable: The FCC’s financial projections are based on cable-subscriber totals as of Dec. 31, 2003. As several Wall Street analysts have noted, cable operators have been losing subscribers this year -- a net loss of about 250,000.

The upshot is that when cable operators write checks to the FCC over the next 10 days, they will be making payments based on a formula that is not keeping pace with cable’s declining subscriber base.

“It is Dec. 31 numbers, and you don’t get any interim relief,” cable attorney John Seiver said. “Even though subscribership has gone down, that’s kind of too bad for them this year.”

For those cable companies that have actually gained subscribers -- Cablevision Systems Corp., for example, picked up 7,500 in the second quarter -- the reverse is true, and they won’t have to pay user fees on those new subscribers until the following year.

But in the tough competitive climate, Cablevision is the exception. In the second quarter, Comcast Corp., Time Warner Cable, Charter Communications Inc. and Cox Communications Inc. all reported subscriber losses.

In years past, the cable industry has complained that its contribution to the FCC was too high because the industry's burden on agency resources dropped off after March 31, 1999, when Congress eliminated rate regulation of expanded-basic rates.

The direct-broadcast satellite industry, which has racked up strong gains this year, does not pay per-subscriber user fees to the FCC. Instead, the agency charges DBS companies about $114,000 for each satellite.

With nine satellites, EchoStar Communications Corp., for example, owes the agency about $1 million.

March