Featured, Gold Dome, Peter Blake, Taxes, Uncategorized

Blake: Not even new technologies can make an old tax go away

The Colorado legislature is working on an overhaul of the increasingly competitive telecommunications industry.

But that doesn’t mean the historic subsidies for monopoly rural service are going away; they are mostly being “repurposed.”

Specifically, the High Cost Support Mechanism (HCSM), a variable (currently 2.6 percent) state levy on your basic telephone bill.

A “mechanism” seems to be the latest euphemism for tax or fee. The HCSM was authorized by the legislature in 1995, in order to help local telephone companies provide service in rural areas, where customers are few and far between. No, you didn’t get to vote on it.

Historically, more than 90 percent of the subsidy has gone to CenturyLink and its ancestors, Qwest and US West. The amount pulled in last year was about $54 million, according to Doug Dean, director of the Public Utilities Commission. The PUC makes small adjustments in the levy rate annually.

But the advent of cell phones has eliminated the landline monopoly and a few years ago some lawmakers tried to get rid of both subsidies and PUC regulation on grounds that 1) many of the so-called rural areas are no longer rural, like Parker, and don’t need public help and 2) competition keeps prices down better than regulation.

Omnibus bills failed, and so the “stakeholders,” which is legispeak for all economic interests except the ultimate consumer, are back with a package of five bills on which they seem to agree. All five breezed through the House Business and Labor Committee this week and none got more than one “no” vote.

HB 1330 merely updates the language in old telecom statutes to account for the new technology; HB 1327 eliminates the sales and use taxes that broadband providers have to pay on equipment they install in homes and businesses. Other manufacturers already enjoy such a tax exemption.

HB 1331 would deregulate basic telephone service but lets incumbent carriers still dip into the HCSM if they don’t have effective competition and provide emergency services like 911. HB 1329 deregulates premium telephone services like call waiting and three-way calling, and prohibits the PUC from regulating voice-over-internet protocol services, which it has so far left alone.

But the major bill is HB 1328, which creates the 13-member Broadband Deployment Board. It will subsidize broadband in “unserved” areas of the state by dipping into the HCSM. How much money will broadband get? Nobody seems to know, although estimates of $5 million or more a year were thrown around by insiders. It depends on how much of the current HCSM funds will still be needed to support universal basic service — a figure to be determined by the PUC.

There is a bone thrown to telephone users in that the bill specifies small biennial reductions — 5 percent or so — in the HCSM levy between 2016 and 2023. But that won’t take it down very far.

According to Rep. Carole Murray, R-Castle Rock, the Democrats wanted to shift the entire HCSM fund to broadband subsidies, without any reductions to benefit the telephone consumer. But Republicans, particularly Sen. Mark Scheffel of Parker, wanted at least some specified reductions.

Those looking for some flint-on-steel debate on telecom policy during Tuesday’s committee hearing were doomed to disappointment. Few witnesses testified against the bills. One who did was Bill Levis, the retired head of the state’s Office of Consumer Counsel, now a volunteer lobbyist for the AARP. He questioned the need for further state broadband subsidies since there are already three federal programs to expand rural broadband: The recently enacted farm bill, Eagle-Net and the Connect America Fund, which is redirecting the Federal Universal Service Fund (another item on your monthly phone bill) into broadband.

Levis maintained that landlines aren’t just for senior citizens and broadband-lacking rural areas. They are also needed in some urban office buildings where cell service doesn’t work.

He also noted that although the AARP, a consumer group, participated in early “stakeholder” discussions on the telecom reform package, it wasn’t invited once “serious negotiations” began. Those apparently were limited to CenturyLink,Verizon, Sprint, TW Telecom and a few other producers.

Deregulation will be helpful now that there are so many options for communicating. PUC control isn’t needed. But deregulation should be accompanied by elimination of the taxes/fees/mechanisms that always seem to be imposed on monopoly services. Instead the legislature finds ways to redirect the money. It never wants to give up revenue-raising devices since they are so hard to reestablish once abolished. Now the money will go to broadband, which doesn’t need further subsidies.

Longtime Rocky Mountain News political columnist Peter Blake now writes Thursdays for CompleteColorado.com. Contact him at pblake0705@comcast.net You may re-publish his work at no charge and without further permission; please give full credit to Peter Blake and www.CompleteColorado.com


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