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ACA Urges FCC To Require DBS To Pay Fair Share Of FCC Regulatory Fees

Trade Group Calls Forcing Small Cable To Subsidize DBS Giants Irrational

PITTSBURGH,  July 9, 2014 - The American Cable Association urged the Federal Communications Commission to build on its decision regarding Internet Protocol TV (IPTV) providers last year by requiring Direct Broadcast Satellite providers (DBS) DirecTV and Dish Network to pay per-subscriber regulatory fees equal to the level paid by the vast majority of cable operators, saying such a move would inject even greater fairness into the system for funding the agency's annual budget.

"The current fee assessment system is irrational and unfair, and the agency needs to amend its fee assessment process to eliminate burdens on smaller operators that serve smaller and rural markets and compete head-to-head with DirecTV and Dish, two of the largest multichannel video programming distributors (MVPDs) in the country, with about 34 million customers combined," ACA President and CEO Matthew M. Polka said.

ACA set forth its views in comments filed with the FCC on July 7 in response to an agency notice with regard to funding its $339 million budget -- nearly all of which is derived from fees assessed on cable operators, broadcasters, telephone companies, and other regulated entities pursuant to Section 9 of the Communications Act.

In the current fiscal year, cable operators will pay $1.00 per-subscriber while DBS providers will contribute far less owing to the agency's less financially burdensome per-satellite fee structure for DirecTV and DISH. The FCC estimates that if the DBS giants contributed on a per-subscriber basis, the cable fee would plunge to about $0.68 per-subscriber.

ACA's effort to see a fairer regulatory fee system adopted made progress last year, when the FCC agreed that IPTV providers should contribute on a per-subscriber basis. By placing cable and IPTV providers in the same fee category, the FCC disclosed that cable operators' per-subscriber fee amount would drop from $1.02 to $1.00. 

ACA called on the FCC to add DBS operators that offer MVPD services to the cable television and IPTV category, or create a new MVPD fee category that includes all MVPDs, regardless of the technology used to deliver the video programming.

Such a move is justified, ACA said, because DBS services are similar to cable services and because both services offer multichannel video programming to end users. Like cable operators, IPTV providers, and other MVPDs, DBS providers receive numerous direct regulatory benefits from the activities of the FCC's Media Bureau governing the provision of MVPD services, including the ability to file program access complaints and complaints seeking relief under the retransmission consent good faith rules.

"The fact that DBS providers pay no regulatory fees to cover Media Bureau activities governing their provision of MVPD services, their primary economic activity, is contrary to Section 9 of the Act, which requires that the benefits provided by the bureau's activities be taken into account in the FCC's fee assessments. The FCC's fee reforms should recognize and correct this fundamental problem," Polka said.

ACA said that despite DirecTV's assertions to the contrary, the FCC has ample authority to assess regulatory fees on DBS providers in their capacity as MVPDs given regulatory and marketplace changes that have altered the relationship between the regulatory fees paid by the regulated entity, the cost it generates, and the benefits it receives.

ACA stressed that the regulatory fee assessment disparity can have market-distorting effects, underscoring ACA's view that the fact that DBS providers do not shoulder their fair share of the Media Bureau fee burden is more than simply a matter of equity. The Government Accountability Office (GAO) noted in a report that small cable operators are effectively cross-subsidizing their DBS competitors.

ACA said the FCC should provide more relief for a subset of smaller entities by exempting cable operators and IPTV providers serving fewer than 1,000 subscribers from paying regulatory fees. Providing relief for small cable operators and IPTV providers could be accomplished without material impact on the revenue generated by the FCC through the regulatory fee program, and is well within the agency's authority.

At the current regulatory fee of $1.00 per subscriber, exempting small operators with fewer than 1,000 subscribers would account for less than $190,000 of the fees collected by the FCC, ACA said.

The FCC currently exempts entities with regulatory fees amounting to less than $10. Although ACA said it supported raising the so-called de minimis exemption to $1,000, it warned that the relief would be limited because cable operators would bump into the cap fairly quickly as a result of regulatory fee payments to hold CARS licenses and to offer interconnected VoIP service.

About the American Cable Association: Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 850 smaller and medium-sized, independent cable companies who provide broadband services for nearly 7 million cable subscribers primarily located in rural and smaller suburban markets across America.  Through active participation in the regulatory and legislative process in Washington, D.C., ACA's members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business.  For more information, visit http://www.americancable.org/

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