New FCC DBS Fees Have Numerous Critics

The FCC has repeatedly said the way it levies fees on the companies it regulates needs to change, but the new fee structures proposed for FY 2015 had plenty of critics. In the proposed fee structure in the FY 2015 rulemaking notice on docket 15-121 released May 21 (see 1505220050), the FCC said it expects to raise nearly $340 million in regulatory fees for the fiscal year. The agency proposed charging direct broadcast satellite (DBS) operators 12 cents a year per subscriber, while simultaneously cutting what cable and IPTV operators pay from $1.01 per subscriber to 95 cents. That was opposed by DBS operators, who argued in filings that the cost of regulating them is far less than the cost of regulating cable operators, and the FCC lacks the regulatory power to suddenly institute new regulatory fees.

"There are certain rules that both DBS providers and cable operations including IPTV are subject to, and [the Media Bureau] provide[s] the oversight and regulation of the DBS industry as required by these rules. Circumstances have changed in the almost 20 years since the Commission first addressed the issue of DBS regulatory fees," said the order and NPRM. "We have decided to phase in the DBS fee and introduce it initially as a subcategory of the cable television and IPTV category," the FCC said, saying the phase-in was aimed at avoiding "sudden and large changes in the amount of fees." It's "the camel's nose under the tent," said broadcast and telecom lawyer Peter Gutmann of Womble Carlyle. The satellite industry's chief focus "is trying to ensure the fees are assessed fairly," said Satellite Industry Association President Tom Stroup. "It's a meaningful cost of doing business." DirecTV and Dish Network didn't comment.

A cable lawyer sees the DBS fees as "an important, first and necessary step to fixing things." Given there's still a discrepancy between what DBS and cable operators pay, "There's still work to be done," said the attorney, Barbara Esbin, of Cinnamon Mueller, counsel for the American Cable Association. "You do the math." The regulatory fees on DBS operators are "a positive step," said Micah Caldwell, ITTA vice president-regulatory affairs. The next step is to increase the fees on DBS "to achieve full parity for all video providers," she said. The FCC's regulatory fee system is long overdue for overhaul, as wireline and cable officials said their industries are disadvantaged over others, said a 2012 GAO study.

The FCC brought up changes in DBS fees in FY 2013 and again in 2014, though it didn't act on them. “It takes the commission a while, but they do respond to GAO reports," Esbin said. "It's like a fine wine, its time finally has come." The NPRM didn't say why the agency chose now to institute a DBS fee, and officials didn't comment when asked directly. Satellite companies repeatedly told the FCC that parity is unfair because DBS companies cost far less to regulate than more highly regulated cable and broadband.

Another industry now facing fees is toll-free numbers, with toll-free service providers paying a penny a month on the number of toll-free numbers they reserved. The FCC said it previously didn't charge regulatory fees on toll-free numbers on the assumption the toll-free subscribers, such as wireless and wireline common carriers, were paying their own regulatory fees. "We observed this was no longer the case" because many toll-free numbers are now run instead by responsible organizations, a company that handles the registration of toll-free numbers, said the order and NPRM. The FCC decided to expand its fees to such responsible organizations in FY 2014, but didn't do it then.

A concern is that the fees could go up over time, especially as the FCC gets busier with such issues as opening up an eighth toll-free area code, 833, in 2017, said a toll-free industry official.

Absent from the fees is something the FCC has talked about in the past -- combining wireless and wireline services into one category, and charging regulatory fees based on voice revenue. Wireless carriers pay based on handsets, while wireless pays based on revenue. The idea of one fee structure for both was mentioned in the FY 2013 and FY 2014 NPRMs, with the FCC saying it sought comment on the idea. "Wirelines carriers are bearing a disproportionate burden of regulatory fees," said Caldwell. "We've asked the FCC repeatedly to make adjustments. Not seeing any mention [in the FY 2015 NPRM] was not only a surprise but disappointing." The FCC declined to comment. Along with fee changes, the FCC proposes tightening of the screws on any organization delinquent on paying those fees by turning over to the Treasury Department accounts 120 days overdue, instead of the current 180 days.