Federal Telecommunications Law: Threats and Opportunities for Texas Cities October 17, 2014

Transcription

1 Federal : Threats and Opportunities for Texas Cities October 17, 2014 PRESENTED TO TEXAS COALITION OF CITIES FOR UTILITY ISSUES Joseph Van Eaton, Partner, Best Best & Krieger 2014 Best Best & Krieger LLP

2 Topics Wireless rulemaking Mega-mergers Net neutrality Tax issues FirstNet - public safety issues Defining multichannel video service and cable service in an IP world

3 Wireless Rulemaking Rules interpreting Section 6409 (47 U.S.C. 1455) expected to be adopted today Has Order issued? We may know at conference Will likely be a mixed bag (protecting stealth, protecting against violation of height limits imposed on initial siting, but requiring action in 90 days combined with deemed granted remedy) Will likely require amendment to many wireless siting ordinances/processes, but may also become effective immediately upon publication BB&K will hold free webinar on 11/5 to discuss rules

4 Wireless Rulemaking Threats and Opportunities Most immediate risk: applications deemed granted because locality can t adopt procedures to respond to new rules Opportunities: may provide some certainty as to what is permitted under Section 6409, and remove problems created by staff guidance issued in January 2013 There will be opportunities to appeal and to seek reconsideration but localities must be in a position to take those steps within two-three months

5 Mergers What s Going On Comcast-Time Warner Charter (merger of 1 st and 2d largest providers of cable and broadband; spin-offs and consolidations to Charter to create regionally concentrated dominance for Charter- Comcast) AT&T Acquisition of DIRECTV Both pending federal approval

6 FCC Communications Act Jurisdiction -- Communications Act poses a separate and some feel higher standard for approval of the transfer of the hundreds of licenses (e.g. microwave, satellite and other licenses,) from Time Warner to Comcast. Standard: Comcast bears the burden of proving that the deal is in the public interest, convenience and necessity. Public interest standard offers FCC greater latitude than the DOJ has. FCC can base its actions on a determination of what the deal s approval might do to affect the diversity in the marketplace of ideas, competition or localism. Commission decision is afforded considerable deference.

7 FCC MB is docket for AT&T DIRECTV merger Application materials available for public review on FCC website Initial comments/petitions filed September 16, response Oct. 16, replies November 5

8 FCC MB is docket for Comcast-TWC-Charter merger. Application materials available for public review on FCC website Initial comments/petitions were due August 25. Nearly 12,000 comments/petitions filed Responses to comments/petitions filed Sept. 23; Reply comments due Oct. 29

9 FCC Seeking conditions if approved: Cities of New York, Boston, Dallas, Chicago, Los Angeles, Montgomery County, Maryland, Portland, NATOA, SEATOA, Public Telecomm Institute (PTI), and others, including groups supporting public, educational and government access (Alliance for Community Media and Alliance for Community Democracy (ACD). Several technology groups and edge providers including Netflix are in this category Seeking approval: Coalition of 50 mayors in support of the merger, Philadelphia, amongst others. Full Denials: Consumers Union, Public Knowledge, Open Technology Institute, Free Press

10 FCC Major conditions proposed by local gov/peg Conditions to close digital divide Enhance Internet Essentials program System expansions to underserved areas Conditions to preserve open Internet Conditions to protect consumers/availability of alternative end user equipment Conditions to protect local programming Allow use of PEG support for PEG operations Ensure PEG providers (and local governments) are able to take advantage of capabilities of cable system Conditions to maximize competitive entry potential Extension of conditions to Charter/GreatLand

11 Post-Merger National Picture 1.53% 0.85% 4.56% 1.93% 10.84% 8.66% 9.22% 13.45% 48.96% Comcast Charter U-Verse Verizon Cablevision Suddenlink Mediacom Cable ONE All others

12 Description of the Merger Effectively consolidates systems and clusters: Comcast gains in California, New England, Tennessee, Georgia, North Carolina, Texas, Oregon, Washington and Virginia. Charter gains in Ohio, Kentucky, Wisconsin, Indiana, and Alabama GreatLand in Michigan, Minnesota, Indiana, Alabama, Eastern Tennessee, Kentucky and Wisconsin

13 Mergers In the Context Of: Court decision striking down net neutrality rules; FCC considering rule to allow providers to create Internet fast lanes FCC allows VZ Wireless to sell Comcast services outside FiOS footprint, and Comcast to sell VZ Wireless across its territories Announcement of possible order classifying linear OTT as MVPDs (???)

14 What Does Comcast Say In Response? No one submitted an economic study that rebutted our submittal that the merger is good There is no impact on video competition, because there is none, and there is no impact on broadband competition We deal on a case by case basis with franchise issues, so no need to establish any federal standards to address franchising issues No conditions should be extended to Charter/GreatLand (Internet Essentials dead in Midwest)

15 What Does Comcast Say In Response? No improvements to Internet Essentials required or appropriate unrelated to merger No additional PEG requirements public interest is satisfied by extension of PEG conditions in NBC/Universal to TWC systems; PEG conditions unrelated to transaction No broadband/net neutrality conditions No customer service conditions because no showing customer service will get worse because of merger No local enforcement of federal conditions

16 Mergers Threats and Opportunities Threat: wireline video service competition that justified elimination of local franchising will substantially diminish; Comcast will have substantially increased market power Opportunity: if conditions are imposed, conditions may address some shortcomings of state video franchising law but don t be surprised if the merger is approved without locally important conditions if localities are silent

17 Open Internet In the Matter of Protecting and Promoting the Open Internet, GN Docket No filings reviewable at: Formal comment period ended 9/15 (about 600,000 comments have been filed in last 30 days), but informal comments (ex partes) may be filed, and FCC is conducting series of roundtables on open Internet Proceeding driven by D.C. Circuit finding that FCC net neutrality rules were inconsistent with treatment of Internet access as an information service. Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014) Basic issue: can providers create a fast lane available to those who can afford it, or must they provide nondiscriminatory access (this would require reclassifying Internet access as a Title II (common carrier) service)

18 Open Internet Threats and Opportunities Reclassification may have significant tax implications, implications for RoW use by provider, and implications for municipal entry into market (see, e.g. Texas Utilities Code Sec )(but see petitions by Wilson, N.C. and Chattanooga re: preemption of certain state laws regarding muni entry) Internet fast lane may create challenges for local govs, schools, health care facilities seeking to communicate cost-effectively with public; may affect ability of new content providers to attract users; may affect deployment and investment and may be particularly problematical if control of pathways to homes and businesses is concentrated in a few providers

19 Can Congress Harmonize Electronic Taxation? Internet Tax Freedom Cell Tax Morat m Marketplace Fairness Possible On-Line Tax Reform Digital Goods

20 The Permanent Internet Tax Freedom Act Internet Tax Freedom Forever Act ( ITFFA ) ITFA has been in effect since 1998, currently scheduled to expire in November, 2014 ITFA walls off from state and local taxation broadband communications PITFA passed House on voice vote Senate will only extend for a short term. 20

21 ITFA As what was formerly telecom is supplanted by broadband, states and locals are left with a shrinking communications service tax base Left in place, the ITFA will eventually tax exempt all, or almost all, of the entire telecommunications industry s services [except where tied to RoW authorization] Unless telecom tax reform is coupled with ITFA repeal, industry will have no incentive to ever let ITFA expire.

22 Wireless Tax Fairness Act Last Congress passed the House, went nowhere in the Senate Would impose a 5-year moratorium on any new discriminatory, or any increase in existing, state or local taxes on wireless services; would grandfather existing taxes and exclude taxes imposed by vote of community Returned in 2013, but no action 22

23 The Digital Goods and Services Tax Fairness Act of S.1364 Legislation creates a nationwide tax preference for online goods and services over competing brick-andmortar sales by limiting state and local taxes on digital goods and services. Downloaded music and videos; Pay-per-View (PPV) and video-on-demand (VoD) revenue removed from the cable franchise fee revenue base 23

24 Main Street Fairness Act (S. 743 and H.R. 684) Passed Senate on a strong bi-partisan basis Pending in House Judiciary Allows states and local governments to collect sales and use taxes on remote (typically online) sales to their residents Aims to eliminate the current disadvantage suffered by brick-and-mortar retailers vis-à-vis online retailers Generate funds ($23B) 24

25 Threats and Opportunities There has been significant recognition that existing tax structure is unsustainable Issue for localities is there a solution that protects, as opposed to diminishing local revenues? Can any solution pass both Houses of Congress in any reasonable time frame? Will result be driven by moderates or by a Tea Party approach? 25

26 Public Safety FirstNet is issuing a series of public notices and requests for information that will result in defining capabilities, uses, and limitations on uses of proposed national, interoperable public safety network and relationship of that network to state networks Most immediately comments are due on 10/27 on certain proposed interpretations of its enabling legislation that will inform, among other things, forthcoming requests for proposals, interpretive rules, and network policies. With the benefit of the comments received from this Notice, FirstNet may proceed to implement these or other interpretations with or without further administrative procedure Issue for localities FirstNet is seeking (for example) definition of term rural and also seeks to define permissible public safety uses of network (beyond traditional first responders) Localities may have an interest in participating rather than relying on states to address key policy issues, NTIA Docket Number , 79 Fed. Reg

27 Rethinking regulatory Rules in an IP World FCC asked to classify OTT providers as multichannel video service providers to enable them to obtain access to video content on same basis as cable operators Interpretation of the Terms Multichannel Video Programming Distributor and Channel, MB Docket No ; Aereo ex parte Providers likely to roll out their own OTT products as part of Internet package, separate from video services What happens to franchise fees and to bundling allocations as OTT services roll out? Are they subject to fees? Or not? What triggers obligation to obtain a video service franchise? How do we deal with competitive equity (and should we?) Threat: localities will see revenues drop without developing response to changing regulatory landscape. Opportunity: localities can begin to shape a response to a world where services are provided via the public Internet and private Intranets

28 Questions? Joseph Van Eaton Best Best & Krieger LLP 2000 Pennsylvania Avenue N.W. Suite 4300 Washington, DC (202)