Operators Sing an Anti-Tax Refrain

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Leading cable operators are urging federal regulators to refrain from applying new taxes to cable-modem service.

The MSOs — including Comcast Corp. and Charter Communications Inc. — are worried that for the first time, the Federal Communications Commission is going to take a piece of cable-modem revenue, then shift it to a program designed to ensure that local dial-tone service remains affordable for the poor and for residents in high-cost areas.

Comcast and Charter made their views known in comments filed with the FCC on May 3. Charter said it was especially troubled that the agency would tax cable-modem revenue, then provide the collected monies to phone companies that might use it to fund their rollout of digital subscriber line (DSL) service in rural and high-cost areas.

"By imposing new assessments on the current leaders in deploying consumer-level broadband, the FCC would reward the industry idlers for their inaction in broadband deployment," Charter said.

RULEMAKING IS ON

The FCC is conducting a rulemaking to determine whether facilities-based providers of high-speed data, when classified as information service providers, should contribute to the phone subsidy program, also called the universal-service fund (USF). The FCC is concerned that if data revenue is excluded, the migration to broadband could drain USF funding.

Comcast told the FCC that extending the USF to cable data would be premature, because the agency is studying broadband regulation in several proceedings that are many months from completion. The Philadelphia-based MSO also warned that the FCC might run into legal trouble extending in USF to cable operators, but not to other broadband or narrowband providers of Internet access.

Unless a cable operator provides traditional circuit-switched telephone service, it does not contribute to the USF. Cable operators that wire schools and libraries to the Internet are eligible to receive USF funding.

When the FCC classified cable-modem service an information service in March, many cable operators discontinued collecting franchise fees from their data subscribers.

The USF issue is a subset of the FCC's rulemaking on the classification of DSL provided by phone companies.

The agency has tentatively concluded that phone-provided DSL service is a lightly regulated information service, like cable-modem service, and not a heavily regulated telecommunications service.

Verizon Communications Inc. filed comment urging the FCC to create regulatory parity between cable and DSL.

"Cable companies will remain unchecked and consumers will suffer if there is no regulatory relief to free telecommunications providers to further invest in broadband technology," Verizon senior vice president for public policy Tom Tauke said in a statement.

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