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Taxes, Telemarketing Top Lists of Local Issues

11/25/2001 7:00 PM Eastern

Taxes and telemarketing don't pop up on many people's lists of favorite things. But in the coming year, they'll be top-of-mind for cable trade associations.

Industry lobbyists fear that a slumping economy will prompt revenue-hungry local and state governments to turn to operators as a source of new revenues. They vow to fight any new assessments — and to attack current tax schemes they claim give the competitive advantage to municipal cable systems, private overbuilders and direct-broadcast satellite providers.

And if that's not daunting enough, operators in several states must get used to new "do-not-call" laws enacted to curb abusive telemarketing practices. Failure to observe the new measures could be costly: A misplaced call in Louisiana could cost a company $1,500 — or $3,000 if the recipient is a senior citizen.

The Louisiana Public Service Commission is still fine-tuning how it will enforce the bill, said Louisiana Cable Telecommunications Association executive director Cheryl McCormick. For example, businesses that will continue to make telemarketing calls to consumers who opt in must post a bond. But operators still don't know if they can post one bond to cover an entire MSO, or if each individual system must be bonded.

There's a lot riding on getting it right, as the bill allows for no slip-ups. Companies who telephone a consumer on the "do not call" list after Jan. 1 can be fined for the first offense.

"We had hoped the bill would be amended so fines were contingent on a pattern of abuse … but there's no safe harbor," she said. "You're presumed guilty."

The fine under Indiana's anti-telemarketing bill might be the nation's largest: $10,000, said Indiana Cable Telecommunications Association executive director Dottie Hancock.

It's a bill the cable industry "doesn't particularly like," Hancock said. The attorney general is still promulgating rules for implementation, but as things currently stand, it appears that Indiana operators can't even telephone "do not call" list customers to collect a past-due bill or to remedy a missed service call.

"I could see [assessing the fine] if you violate repeatedly, but if you can prove you did due diligence …" she said.

Lobbyists in California recognized they couldn't head off curbs on telemarketers, so they elbowed into the discussions to negotiate concessions.

"There was no stopping it," said California Cable Television Association vice president of goverment affairs Dennis Mangers. "It's the No. 1 bitch they have here."

Cable convinced the lawmakers to implement escalating penalties, which start at $500 for the first offense. To prevent lawyers from shopping for plaintiffs, the bill also bans the awarding of attorney's fees in first-offense cases.

Operators were also afraid that telcos would urge consumers to join "don't call" lists — thus preventing cable systems from using telemarketing to tout their telephony and data products. Therefore, all vendors are prevented from soliciting signatories to the lists.

West Virginia dodged the telemarketing bullet completely.

"It was targeted on cold calling, but it would have infringed on our businesses," said West Virginia Telecommunications Association executive director Mark Polen. Fortunately, the state is home to many call centers that lobbied effectively against the bill.

But opposition may not be so strong should the issue arise in the future: the state lost two large United Airlines call centers to downsizing following the Sept. 11 terrorist attacks, he noted.

Now that lawmakers have told companies, "We don't want your calls," cable lobbyists are afraid the next thing they'll hear is, "We do want your money." Most states are forecasting budget shortfalls, and lobbyists hope election-year politics will stop legislators from creating a passel of new taxes to resolve those deficits.

But in some states, the shortfalls are large enough that lawmakers are contemplating drastic action. Oklahoma, Gov. Frank Keating advocates broad-based tax reforms, including the elimination of the personal income tax.

His initial proposal would replace it with a gross receipts tax on business. But the government surveyed businesses that have a substantial presence in the state — including telecommunications firms, aircraft manufacturers, airlines and other heavy industry — and all of them panned the scheme.

Cable operators expect a backup plan any day now, said Cable Telecommunications Operators of Oklahoma executive director Jimmy Walker. The new plan could be a combination of a sales tax on services and a lower gross-receipts tax, he said.

Budget crunches have caused jitters in Oregon, Ohio and Tennessee, as well.

Tennessee has no personal income tax, so legislators are looking for new sources of revenue. Currently the first $15 of a cable bill is tax-free in order to maintain affordability.

"We want to preserve that and get them to focus on bigger pots," said Tennessee Cable Telecommunications Association executive director Stacey Briggs.

Many cable associations said they plan to take advantage of any focus on taxes to point out disparities in current levies. The Kentucky Cable Telecommunications Association will follow the lead of member Insight Communications Co. by challenging that state's tax on intangible goods.

Insight recently filed suit in state court to challenge the constitutionality of a tax applied to cable and not to other telecommunications providers.

Tax relief will be the Tennessee Cable Telecommunications Association's No. 1 priority, said executive director Patsy Judd. Negotiating changes will be a challenge, and the group's best bet is to come up with a revenue-neutral solution, such as lowering cable's burden by extending the tax to municipally owned systems, competitive overbuilders and direct-broadcast satellite, Judd said.

DBS companies "got a break" on taxes because regulators wanted to foster its ability to compete with entrenched cable incumbents, industry executives noted. Now that one in four homes is a satellite household, they contend that it's time to attack that tax disparity.

Some states have already tapped DBS revenues, such as Florida, which subjected satellite providers to its new, simplified tax structure (adding as much as 13 percent to some home dish owners' bills). North Carolina this year passed a satellite TV tax, adding 5 percent to consumer's bills.

"That moves closer to equalizing rates," said lawyer Ed Turlington of Brooks, Pierce, the counsel to the North Carolina Telecommunications Association. However, most cable companies still have to pay a 5 percent gross-receipts tax (in lieu of a franchise fee) and 6 percent on the rental of set-top boxes and remotes.

Cable lobbyists also have other perennial issues on their agendas this year, including:

Rights-of-way:
As the industry waits for the U.S. Supreme Court to define cable's rights as a lessee of telephone poles, state-level squabbles continue. Many states have different regulatory policies for businesses such as rural electric companies or investor-owned utilities. And some of those power companies are trying to define "attachment" to mean a separate transaction and inspection for each new amplifier or other addition to a pole. One company in the Northwest is trying to hit up its cable tenant for a $61-per-hour inspection fee virtually every time the tenant touches the pole.

Updated or simplified telecommunications laws:
Louisiana, Minnesota, Connecticut, Rhode Island and Ohio are examining their current legislation.

The Digital Divide:
Lobbyists note that telcos — especially SBC Communications Inc. — have racheted up their anti-regulatory rhetoric. The telcos are under attack in several states for their slow pace of digital subscriber line delployments.

The companies have bought full-page newspaper ads in state capitols, attributing the delay to regulatory hurdles. SBC has set up the Web site Connect USA (www.connectusa.org
) to urge consumers to "stop the takeover of the Internet by cable companies" by voicing support for federal deregulation.

Not all of the associations will be on the defensive next year. The Pennsylvania Cable and Telecommunications Association — under the direction of its new executive, utilities veteran Dan Tunnell — will reach out to regulators in a way that mimicks the traditionally strong presence of the telephone companies.

The group will reinforce the value of telecommunications companies to the economic health of the state by asking the governor's office what the industry can do to further broadband deployments. One plan is sure to endear the association to freshmen in the Pennsylvania General Assembly: The PCTA has offered to host freshmen lawmakers for media training classes.

Tunnell said the association will use public-access studios to hold classes in which outside experts will school the officials in press contact and crisis-message management. All four state caucus leaders have reacted positively to the plan.

The group is also aiding members in their pursuit of state contracts and hopes to form partnerships with the health-care community to foster telemedicine applications.

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