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ACA Calls On FCC To Require DBS Providers To Pay Fair Share Of Regulatory Fees

With NCTA, ACA Favors Inclusion Of DBS In Same Fee Category As Cable And IPTV

PITTSBURGH, December 1, 2014 - The American Cable Association called on the Federal Communications Commission to embrace competitive and technological neutrality by requiring Direct Broadcast Satellite Providers (DBS) DirecTV and DISH Network to pay their fair share of regulatory fees to support the oversight of multichannel video programming distributors (MVPDs) by the agency's Media Bureau.

DirecTV and DISH today pay no FCC regulatory fees in support of the activities of the Media Bureau, the agency division assigned to develop rules that govern the video services provided by these DBS operators and other MVPDs, and also to help in the review of mergers involving MVPDs, such as AT&T's proposed $48.5 billion merger with DirecTV.

"That DBS, cable operators and IPTV providers all benefit from the same Media Bureau activities but only cable and IPTV are assessed fees for MVPD regulation while their direct DBS competitors pay nothing demonstrates that the fees as currently structured fail to be competitively neutral," ACA President and CEO Matthew M. Polka said.

Polka added, "Similarly, the current fee structure fails to be technologically neutral by favoring providers choosing satellite technology, who pay no fees for MVPD regulation, over the terrestrial technology used by cable and IPTV providers who must pay fees for MVPD regulatory support."

ACA set forth its views to the FCC in Nov. 26 comments filed jointly with the National Cable & Telecommunications Association, in an effort to persuade the FCC that changes in FCC rulemaking proceedings or changes in law since 1996 justify ending the exemption from paying regulatory fees supporting MVPD regulation long enjoyed by DirecTV and DISH.

Under current law, Congress requires the FCC to fund its budget almost entirely from fees assessed on regulated entities.  In fiscal 2014, cable and IPTV providers, based on a $1.00 per subscriber regulatory fee, will pay $65.4 million, or approximately 20%, of the FCC's $340.5 million budget.  Meanwhile, although DirecTV and DISH pay about $2 million in fees supporting the FCC's International Bureau, they pay nothing to compensate the FCC for Media Bureau regulatory actions involving the second and third largest pay-TV providers in the nation.

Because of the highly competitive nature of today's market for MVPD services, continuing to require only cable and IPTV providers to support Media Bureau MVPD regulation places cable and IPTV providers at a serious competitive disadvantage.  DBS providers benefit from the regulatory services of the Media Bureau, yet pay nothing for those services, leaving their direct competitors - cable and IPTV providers - to foot the difference.

The burdens that DirecTV and DISH place on Media Bureau staff are not trivial.  Over the past twelve months alone, DBS operators made 113 filings in Media Bureau dockets.  Thirty of these were DirecTV filings in support of its proposed merger with AT&T, but DirecTV and DISH also filed 83 times in the past year in other regulatory dockets like the Comcast/Time Warner Cable merger review, retransmission consent reform, media ownership review, television closed captioning quality rules, and implementation of the Twenty-First Century Video Accessibility Act (CVAA).

In the filing, the cable trade groups said last year's decision of adding IPTV providers to the Cable Fee category should be repeated for DirecTV and DISH if the agency is unwilling at this time to create a new MVPD Fee category.  The creation of a stand-alone DBS Fee category, which the FCC suggested as an option in a proposal released earlier in the year, should be rejected because it would be unnecessarily complicated and clash with FCC precedent of creating fee categories that include broadly similar services. A separate DBS FCC category would also erode the principle that those entities that share in causing regulatory costs and receiving regulatory benefits of an entity like the Media Bureau should share equitably in paying the fees that support the Media Bureau.

ACA and NCTA urged the FCC to reject the DBS providers' suggestions that requiring them to pay regulatory fees now would harm their competitive standing or increase their customers' bills.  The two DBS operators are multibillion dollar corporations as the nation's second and third largest MVPDs and are financially capable of absorbing the increased costs with minimal disruption to their operations and no threat to their operational viability.

"Concerns about ‘rate shock' for DBS subscribers should be put into context.  Even if the increased fee assessment is fully passed through to subscribers by DBS operators, it should amount to only 6 cents ($0.06) per month, per subscriber," Polka said, adding that a bump in DBS regulatory fees would be an offsetting benefit for the two-thirds of MVPD customers bearing the full cost burden of the Media Bureau's oversight of MVPDs.

Nevertheless, the cable trade groups said it would be reasonable if the FCC opted to phase in DBS fees in equal installments over three consecutive years.

Finally, the trade groups said the FCC should not offset the fees DirecTV and DISH pay to support International Bureau satellite-related activities from their fee amount owed to support Media Bureau MVPD-related work. The regulatory fees paid to the International Bureau relate only to satellite operations, not the post-launch DBS MVPD service, which is not regulated by the International Bureau.  The fees DBS operators pay for satellite regulation support International Bureau employees and do not reduce the number of Media Bureau employees required for MVPD regulatory services provided to DBS operators.

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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