Texas Ops Are Vulnerable to Tax Hit in ’04

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Operators in the Lone Star State have two reasons to closely monitor a special legislative session this spring, according to a state lawmaker.

Cable could become the target of a business tax as part of plans to reform the state’s school financing system — and legislators will also take time to work out telecommunications issues in advance of a state law’s 2005 sunset.

“You should be terrified when we get back in session,” warned Rep. Phil King, chairman of the state House Regulated Industries Committee during a panel at the recent Cable Connects 2004 convention here.

At present, the Texas education system is 70% supported by property taxes. Legislators want to change that, and possible remedies include adding a business income tax or expanding the sales-tax base.

“We’ve got to shift it off [property taxpayers],” said King, a Republican. “Right now, there’s zero consensus how to do that.

“Everyone gets utility bills. You’re an easy target that way,” King continued, adding, “The whole tax code’s on the table.”

He advised cable representatives to closely track tax-reform efforts after the special session opens in April.

Because the legislature is meeting anyway this year — the Texas Legislature is biennial — King advised using the session to gather information in advance of the 2005 sunset of the state Public Utilities Regulatory Act.

“This is the best time to gain control of what will happen to you,” he told operators, advising them to also reach out to such competitors as telephone companies.

“You can either find an agreed settlement or turn the issue to people who don’t know your business,” he said.

He added: “Telecommunications companies don’t talk together very well, and that’s to your detriment. Try to take down the barriers and come to us with as much consensus as possible.”

Treatment of voice-over-Internet protocol telephony is likely to be a hot topic in the reform talks.

Time Warner Cable has already been certified to deliver telephone services over its cable plant.

To avoid a long debate over the product, the operator agreed to telco-like requirements even though the service is not delivered over the public Internet, said Time Warner assistant general counsel Julie Patterson.

One issue the MSO is likely to raise during the review of state regulation is the fairness of access fees.

Because an operator pays for rights-of-way with cable franchise fees, it seems unfair to pay again to deliver telephone services over the same plant, she said.

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