SBCA Bucks Time Warner DBS-Tax Plan


Washington -- Alleging anti-competitive motives, the
direct-broadcast satellite industry's trade association last week urged rejection of
a 5 percent gross-receipts tax that Time Warner Cable recommended.

In a May 20 filing with the Federal Communications
Commission, the Satellite Broadcasting and Communications Association said neither federal
law nor DBS' market share justified the additional regulatory burden favored by one
of the nation's largest MSOs.

"The demands of Time Warner … are not based on a
reasonable reading of the [Cable Act]. Rather, they appear to be a desperate effort to
protect the cable monopoly from effective competition," the SBCA said in an
eight-page response.

In March, Time Warner Inc.'s cable-systems arm asked
the FCC to require DBS carriers to commit 5 percent of gross revenue to fund PBS

Time Warner's proposal was a request for the FCC to
reconsider the commission's November 1998 decision requiring DBS carriers to set
aside 4 percent of channel capacity for "noncommercial programming of an educational
or informational nature."

Time Warner said the DBS industry had reached a level where
it was ready to begin shouldering some of the same regulatory burdens imposed on cable

The company noted that cable operators have to pay 5
percent franchise fees and provide numerous channels for public-access and leased-access
programmers. Operators with programming arms must allow competitors to carry their
networks, and they are barred from occupying all available channels with affiliated

As of April 30, the DBS industry had 11.4 million
subscribers (including 1.8 million C-band subscribers), compared with about 66 million
cable subscribers.

Time Warner said DBS was adding subscribers at such a
robust clip that it could not plausibly rely on a "nascent industry rationale"
to avoid a 5 percent revenue contribution to public programmers.

In calling on the FCC to reject Time Warner's request,
the SBCA appeared to validate Time Warner's argument by saying cable operators were
"beginning to feel competitive pressure … especially from DBS providers."

Nevertheless, the SBCA said, the FCC was justified in
imposing a disproportionate amount of regulation on cable operators due to "their
unique, privileged position in the marketplace." Unlike cable operators, DBS carriers
do not occupy public rights of way or require property easements, the association noted.

"The DBS industry," the SBCA added, "also
differs competitively from cable in that in addition to competing with cable operators,
DBS providers compete with each other."

DBS analyst Jimmy Schaeffler, chairman of The Carmel Group,
said it was "highly unlikely" that the FCC would adopt Time Warner's
proposal because the agency could not move forward with support from Republicans on
Capitol Hill.

"The Republicans would fight it. [The FCC] would get a
lot of flak," Schaeffler said.

In addition to the public-programming tax, Time Warner
said, the FCC should forbid DBS carriers from using cable-funded networks like C-SPAN to
fulfill the 4 percent channel commitment, especially if C-SPAN was being carried before
the mandate was adopted.

"This is simply another attempt to increase the burden
on DBS providers and to use this proceeding to make competition to cable from DBS more
difficult to achieve," the SBCA said. "It would require a provider to continue
to carry a qualified public-service programmer, in addition to the 4 percent mandated by
the rules."