10/29/2008

AT&T Yields On Video Regulatory Fees

By: Ted Hearn, Multichannel News

Washington -- As a provider of a start-up Internet  Protocol video service, AT&T has been exempt from paying regulatory  fees used to help fund the Federal Communications Commission's $313 million budget, much to the displeasure of incumbent cable operators.

In a concession Monday, AT&T said it should begin to pay video-based fees -- not necessarily at the same rate as cable incumbents but more likely at a level that represents the actual burdens imposed by its nascent video service on FCC staff  resources.

"AT&T fully agrees that, as a [pay-TV] provider, it should pay an equitable share of the [FCC's] regulatory costs," the company said  in an Oct. 27 FCC filing.

On Oct. 22, AT&T reported 781,000 U-verse TV subscribers, a gain of 232,000 in the third quarter. The company  expects to serve 1 million IPTV customers by the end of year.

With so few pay-TV subscribers, AT&T doesn't have much at risk in the regulatory fee dispute at the FCC.

Nevertheless, it did step into the middle of a fierce debate between the incumbent cable operators and Verizon  on the one side and DirecTV and Dish Network on the other about how much cable  and satellite carriers should pay in FCC regulatory fees. AT&T's exemption has only added to the intensity to a fight that has been going on for several years.

The National Cable & Telecommunications Association, the American Cable Association and Verizon insist that cable operators are not being treated fairly, while DirecTV and Dish assert that cable MSOs pay at a rate commensurate with the level of regulatory activity they generate at the FCC.

In an attempt to document the disparity, Verizon told the FCC in September that based on current policy, it will need to pay more in regulatory fees than Dish Network in 2008, even though Dish  has 20 times the number of Verizon subscribers.

Under current FCC rules, cable operators need to pay 80 cents per subscriber, contributing  $51.8 million total. Direct broadcast satellite carriers pay $119,000  per-satellite basis, putting their FCC tab at $2.3 million.

If DBS paid at cable's 80-cent per-subscriber rate, it would owe the FCC about $24.5 million, 10 times what is it paying now.

ACA  noted that in 2006 cable paid 77 cents per-subscriber, while satellite TV  providers paid an effective rate of 6.7 cents.

"There is no rational policy or any other justification for imposing regulatory fees on cable  operators that are more than 11 times than those paid by the two national DBS  providers. The [FCC] should impose per-subscriber fees on all [pay-TV providers], including DBS," ACA said in an Oct. 27 FCC filing.

DirecTV and Dish Network want the FCC to keep the status quo, saying they do not require FCC oversight on as broad a scale as cable operators.

"Unlike DirecTV  and Dish Network, most cable operators are the dominant incumbent video  providers in their service areas, and as such are subject to rules and  regulatory proceedings that apply only to them," the DBS providers told the  FCC on Oct. 27.

AT&T didn't volunteer how much IPTV providers should pay in regulatory fees. It did say, however, that the FCC should turn to the IPTV question only after it had settled the cable-DBS dispute.

"As this  dispute makes clear, there is substantial controversy over whether the  present assessment methodology is equitable," AT&T  said.

Source: http://www.multichannel.com/article/CA6609729.html?nid=3407