HR 3679 Prohibits Discriminatory Taxation and Levels the Competitive Landscape in the Multichannel Video Industry

The Issue: Discrimination. Satellite TV and cable should compete for subscribers on a level playing field, based on what consumers want—lower prices, higher quality, and better service. Congress has long made it a priority to spur competition in TV service, by promoting satellite and leveling the playing field. But, at cable's behest, states have begun enacting creative tax laws that tilt the playing field in cable's favor by penalizing satellite TV subscribers for their choice with higher taxes. HR 3679 seeks only to right this wrong by announcing a policy that is as simple as it is unobjectionable—no discrimination.

The Impact: If enacted, HR 3679 would return the competitive landscape of the multichannel video industry back to what Congress intended it to be—in a word, fair. It would allow market competition to spur innovation and increase the quality and level of service while driving prices down, all to the benefit of the nearly 100 million American households who subscribe to such services. If Congress refuses to act, however, these discriminatory taxes will proliferate, competition will diminish, prices will rise, and consumers will suffer.

Cable says it is for "tax parity," but what it wants is a subsidy:

• Cable is hawking bills in state legislatures that effectively offset cable's franchise fees—a cable-specific cost of doing business—with money from the pockets of satellite consumers.
• These tax bills and laws unjustifiably increase the tax burden on satellite consumers relative to cable.

In 1996, Congress prohibited local governments from charging franchise fees to satellite TV, while upholding franchise fees for cable—and for good reason:

• Franchise fees are NOT taxes; they are rents for valuable rights-of-way: for digging up roads, hanging cables on utility poles, etc.
• Franchise fees are an inherent cost of doing business for cable—NOT for satellite.
• Satellite does not use municipal property for its transmissions; it has its own costs of business—building, launching, and maintaining satellites in outer space.
• Cable customers don't pay for satellites; so satellite customers should not have to pay cable's rent.

In an effort to preserve its dominant market position, cable is exploiting a loophole in federal law to circumvent Congress's prohibition and enact discriminatory state tax laws:

• Florida, Kentucky, North Carolina, Ohio, Tennessee, and Utah have all enacted tax laws that essentially offset cable's costs (franchise fees) with increased taxes on satellite consumers.
• Cable has introduced such bills in several other state legislatures, many of which are pending.

Discriminatory taxes hurt everyone—except cable:

• Discriminatory taxes increase satellite's costs—competition suffers.
• Discriminatory taxes decrease state revenue—state budgets suffer.
• Discriminatory taxes stifle competition—consumers suffer.
• Discriminatory taxes subsidize cable's franchise fees and give it an unfair competitive advantage—cable prospers.

There is only one reason why cable opposes HR 3679: because it favors discriminatory taxes on satellite.

Level the playing field. Support Innovation. Support real tax parity.