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Satellite, Cable Spar Over New Tax Bill

Rep. James Sensenbrenner (R-Wis.) and two co-sponsors have
introduced the State Video Fairness Act of 2011, which is being celebrated
by DISH and DirecTV as a bill to
"protect consumers and promote competition by preventing the imposition of discriminatory
taxes on satellite television and other innovative competitors to cable

The cable industry has been successful in getting a number
of states to change their tax laws to take into account local fees they pay
that are not paid by satellite operators, laws Dish and DirecTV argue are

"Turning a blind eye to the fact that American families
are grappling with a struggling economy and a heavy tax burden, the cable
industry continues to lobby aggressively for raising taxes on satellite
households," said DISH and DirecTV in a

NCTA responded to the bill Wednesday in a statement
calling it satellite operators' attempt to block their efforts to "simplify
and modernize state and local tax systems."

"In 44 states and D.C. today, multichannel video
customers today face anything but an 'economically neutral'  choice: 
all other multichannel video customers (traditional cable, Verizon FIOS,
U-Verse) pay significantly more in taxes than DBS customers because the
DBS industry benefits from the real loophole in the 1996 Telecommunications
Act, the one that preempts any local taxation of the DBS industry. 
This gaping loophole has allowed DirecTV and DISH
- the second and third largest multichannel video providers with a
combined 34 million customers - with a significant competitive advantage which they
seek to set in stone through federal preemptive legislation. 

But DISH and DirecTV made
their own loophole arguments in praising the bill.

"State lawmakers who are sponsoring discriminatory tax
bills have accepted a specious argument that asserts that the franchise fees
cable companies pay to local governments for the use of public rights-of-way
are really taxes, and that state taxes on satellite television are necessary to
achieve 'tax parity,' the companies said. "But the 1996
Telecommunication Act recognized that franchise fees are a cost inherent to the
cable industry's business model and that they do not apply to the satellite
television industry because it does not use public rights of way.

Consequently, Congress prohibited the imposition of franchise fees on satellite
television. However, the 1996 Act left one loophole, which cable has
exploited: It did not specifically prohibit states from imposing discriminatory
taxes on satellite television to "make up for" the fact that satellite TV
companies don't pay fees for rights-of-way which they do not use."

NCTA says the satellite operators are simply
trying to "lock in" their tax advantage by preempting legislatures.