News

AT&T Yields on Fees

10/31/2008 8:00 PM Eastern

As a provider of a startup Internet-protocol television service, AT&T has been exempt from paying regulatory fees used to help fund the Federal Communications Commission’s $313 million budget, much to the displeasure of incumbent cable operators.

In a concession last Monday, AT&T said it should begin to pay video-based fees — not necessarily at the same rate as cable incumbents, but more likely at a level that represents the burdens imposed by its nascent video service on FCC staff resources.

“AT&T fully agrees that, as a [pay TV] provider, it should pay an equitable share of the [FCC’s] regulatory costs,” the company said in an Oct. 27 FCC filing.

On Oct. 22, AT&T reported 781,000 U-verse TV subscribers, a gain of 232,000 in the third quarter. The company expects to serve 1 million IPTV customers by year-end.

With so few pay TV subscribers, AT&T doesn’t have much at risk in the regulatory fee dispute at the FCC.

Nevertheless, it did step into the middle of a fierce debate between the incumbent cable operators and Verizon Communications on the one side and DirecTV and Dish Network on the other about how much cable and satellite carriers should pay in FCC regulatory fees. AT&T’s exemption has only added to the intensity of a fight that has been going on for several years.

The National Cable & Telecommunications Association, the American Cable Association and Verizon insist that cable operators are not being treated fairly, while satellite-TV providers DirecTV and Dish assert that cable MSOs pay at a rate commensurate with the level of regulatory activity they generate at the FCC.

In an attempt to document the disparity, Verizon told the FCC in September that based on current policy, it will need to pay more in regulatory fees than Dish Network in 2008, even though Dish has 20 times the number of Verizon subscribers.

Under current FCC rules, cable operators need to pay 80 cents per subscriber, contributing $51.8 million total. Direct-broadcast satellite carriers pay $119,000 on a per-satellite basis, putting their FCC tab at $2.3 million.

If DBS paid at cable’s 80-cent per-subscriber-rate, the industry would owe the FCC about $24.5 million, 10 times what is it paying now.

The ACA, a trade group for small, independent cable operators, noted that in 2006 cable paid 77 cents per subscriber while satellite-TV providers paid an effective rate of 6.7 cents.

“There is no rational policy or any other justification for imposing regulatory fees on cable operators that are more than 11 times than those paid by the two national DBS providers. The [FCC] should impose per-subscriber fees on all [pay-TV providers], including DBS,” ACA said in an Oct. 27 FCC filing.

DirecTV and Dish Network want the FCC to keep the status quo, saying they do not require FCC oversight on as broad a scale as cable operators.

AT&T didn’t volunteer how much IPTV providers should pay in regulatory fees. It did say, however, that the FCC should turn to the IPTV question only after it had settled the cable-DBS dispute.

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