Policy

Tax Battle Unites Enemies

3/16/2007 8:00 PM Eastern

The political season in Massachusetts is creating an interesting dynamic between the telephone and cable industries, which will fight tooth-and-nail on a cable franchise-reform bill this session but will link arms to fight Gov. Deval Patrick's plan to eliminate some decades-old personal property tax exemptions.

“In the morning we're allies. In the afternoon we're knocking each other's blocks off,” joked New England Cable & Telecommunications Association president Paul Cianelli.

Incumbent cable companies, RCN, Verizon Communications, wireless-service providers, chambers of commerce and high-tech industries have formed a coalition to fight Patrick's initiative to close what he described in February as “tax loopholes” used by Massachusetts businesses. Patrick, a Democrat, has targeted a number of business-tax breaks he wants to eliminate in order to resolve the commonwealth's $13 billion budget shortfall.

Telecommunications companies now have an exemption from personal property tax on poles and wires that pass over public rights-of-way. Cianelli said that exemption was made to promote the deployment of advanced services. “Our deployment is now second to none and we don't want to end up behind the curve” due to increased taxation, he said.

Eliminating the exemption could increase state telecommunications taxes by $40 million, providers estimate. Of that, $14 million to $20 million would be paid by cable customers, who would be hit with a double whammy, according to Cianelli. The tax on cable-owned infrastructure would increase, and the higher cost of phone poles would prompt pole-attachment rates to rise.

The telecommunications tax-reform package, H3749, is now expected to be heard in June or July.

Hearings are scheduled for mid-May on the video-franchising reform bill, backed by Verizon. Authority for franchising would go to the state Department of Telecommunications and Energy, which would have 15 days to act on an application.

Also, Utah's legislature ended its session without passing a statewide franchising bill. Utah Cable Telecommunications Association chairman Shane Baggs said in a statement that the proposal was unfair because it did not require franchise-fee payments or impose-customer service standards or broad deployment rules on new entrants.