The Truth on Telecom Reform: Questions and Answers

Congress gave the vital role of video franchising to local officials, fully aware that they would ensure that video services are made available to all community residents.  Local control guarantees that taxpayers receive reasonable compensation for the use of public property and that communications policies protect their citizens, particularly as it relates to build-out requirements, community interests, taxation, rights-of-way management and consumer protection.

 

But the FCC has recently adopted new video franchising rules that would severely restrict local governments’ role in the franchising process.  This is a mistake.  Locally elected officials, unlike federal bureaucrats at the FCC, must be responsive to the communications needs of their constituents or face adverse consequences at the ballot box.  

 

Telecom companies claim that when it comes to video franchising, local governments are a barrier to competition. Is that true?

 

Local governments want and encourage competition.  There is no credible evidence or concrete examples that Local Franchising Authorities (LFAs) are a “barrier” to competition.  The telecom industry has yet to provide empirical data or specific examples proving that the local franchising process slows or deters competitive entry.  In fact, Verizon has recently publicly stated that cities were “eager to bring competition to market,” “franchising is not an issue for us,” and “franchising is not holding us back.”  And for its part, AT&T doesn’t even seek video franchises.

 

Are reasonable build-out requirements really necessary?

 

Absolutely.  Reasonable build-out requirements, tailored to each community’s unique needs, are necessary to ensure competition and lower consumer prices for all residents and are allowed under the Cable Act.  But the FCC’s new rules that would prevent local governments from imposing reasonable build-out requirements.  Without such requirements, providers will be able to discriminate and “cherry pick” the areas they want to serve.  In fact, AT&T has publicly stated that its new video service - Project Lightspeed - will be available to 90% of its “high-value” customers, but to less than 5% of its “low-value” neighborhoods. 

 

But the FCC’s new franchising rules will prevent local governments from requiring new competitors to provide badly needed funds to help support PEG channels and Institutional Networks.  The FCC wrongly believes that these funds should count as part of the 5% cap on franchise fees that private companies must now pay local communities for their private use of public property.  These costs have always been separate from these fees paid for the use of streets and sidewalks.

 

Telecommunications industry players have been aggressively lobbying to limit local governments’ taxing authority.  Have they succeeded?

 

Last year, local government associations successfully thwarted legislative efforts pushed by the telecom industry that would have forced local governments to raise taxes, cut services, or both.  But similar legislation has been and will continue to be introduced in the 110th Congress, including bills that will adversely affect local government taxing authority and budgets. 

 

What is at stake for local governments if they lose revenue from telecom taxes?

 

If telecom taxes were reduced to the levels requested by industry it would be difficult for local governments to make up the difference.  It has been estimated that local governments nationwide could lose $8 billion a year in revenues.  Local governments have limited revenue sources.  And, unlike the federal government, local governments are obligated to balance their budgets.  Any reduction in telecom taxes would require government services to be slashed, or other taxes to be raised to offset the lost telecom tax revenue.     

 

Are local governments against changes to the telecom tax structure?

 

Local governments recognize that, because of the changing nature of the communications industry, it will be necessary to review and revise their tax policies.  But those changes must be made in light of each community’s own unique fiscal needs and tax base.  Most local tax policy is governed by the authority granted by the state, and since state laws vary, it is difficult to make generalizations.  That is what our system of federalism is all about.  And, we believe that it is important to keep local tax decisions local.

  

What is the Telecommunications Advocacy Coalition and why was it formed?

 

The Telecommunications Advocacy Coalition (TAC) is a non-partisan coalition of local government associations representing virtually all elected and appointed local officials in the U.S.  TAC was founded on the principle that local governments support a balanced approach to communications policies that encourage innovation, competition and new technology.  The coalition includes the National League of Cities (NLC), the National Association of Counties (NACo), the Government Finance Officers Association (GFOA), and the National Association of Telecommunications Officers and Advisors (NATOA).