Make Verizon Pay for Statewide Franchising

In today's Boston Globe, Nolan Bowie, a senior fellow of the Shorenstein Center, has a guest column calling for the defeat of the cable franchising bill that is before the state legislature. Bowie argues, in part, that the bill would unfairly allow Verizon to become a statewide player in the cable business without having to go through the same process that current cable providers had to complete in each municipality. Local control of cable franchising, Bowie says, doesn't take more than a year to complete, and allows cities and towns to extract concessions, usually in the form of cable access channels. Without that leverage, it would cost municipalities more to produce local content.

In addition, Bowie notes that even with new statewide franchising rules, Verizon still only plans to serve 16% of Massachusetts' 351 cities and towns. The majority of municipalities in the state will see no benefits from this bill. And in fact, those communities further from Boston would suffer because complaints would now have to be registered with a state agency located there, and not at town hall.

Am I just being hopelessly naive in thinking that there's potential for compromise here? If Verizon wants easier, statewide licensing, why shouldn't we tell them that the price tag is for them to pay their property taxes? I suppose if Verizon thinks that they can get what they want without having to give up anything in return, there's no incentive for them to compromise. I'd hate, however, to see our legislature change the rules for Verizon's benefit and have most consumers get little or nothing in return.

Update: Dan Kennedy has much more at Media Nation. He's against the bill, and has a great amount of detail on the coalition working to stop it.

Telecoms Want to Change "Outdated" Laws

I saw a web-ad today for the Massachusetts Consumers for Technology and Cable Choice, a nonprofit set up by Verizon and rest of the telecom industry to shill for their "Massachusetts Cable Choice and Competition Act", a bill that would take cable permitting power away from cities and towns and hand it to the state. The ad asks:

How come 21st century Massachusetts is stuck with cable tv franchise laws from the 1970s?

That's a good question. Also a good question is: why is Massachusetts stuck with telecommunications property tax exemptions from 1915? If old regulations for new technologies are bad just because they're old, then let's get rid of that outdated exemption. For some reason, I'm not so sure that Verizon would agree.

I'm neutral on the Cable bill -- I'm lucky enough to live someplace where I can choose between two Cable companies. I've said it before, though, if they want this expedited permitting so bad, let's see if they'll give up their exemption for it. They're taking the power to regulate cable away from cities and towns, the least they can do is start paying their property taxes.

Potential for a Telecom Deal?

They want something.

We want something.

Is statewide permitting worth enough to Verizon that they'll agree to pay the property taxes on telephone poles and switches? Is the increased property tax revenue worth the reduction in barganing power that cities and towns have with their cable companies? Has anyone asked?

Pipe dream bonus question: What if the state allowed utility companies to use flaggers instead of police details when doing work? Sure, it probably won't happen, but perhaps we can make the bitter pill of removing the telecom property tax loophole easier to swallow by giving these companies what they want in other areas. The state has bargaining chips. Is anyone at the bargaining table?

Telecom Tax Exemption's Time is Up

The regional president of Verizon in Massachusetts and Rhode Island, Donna Cupelo has an opinion piece in today's Boston Globe arguing against closing the tax loopholes for telecommunications companies. The way it works now is telephone companies are exempt from paying property taxes on machinery they own and telephone polls, even though cable, electric and other utilities have to pay taxes on their machinery. The exemptions were set up in 1915 to encourage widespread adoption of the telephone and now lawmakers have recently been looking at whether they make sense. In her defense of the exemption, Cupelo does not mention some of the absurdities of the current law. For example, electric companies are paying taxes on their half of the very same poles that they share with the exempt telecoms. Wires that run over private ways are taxable, while wires that run over public ways are not.

All of this comes after a June 2005 report that said Massachusetts telecommunications companies removed $1.3 billion worth of property off of the tax rolls between 2003 and 2005. That added a total of $31 million onto the burden of other local taxpayers during that time. Overall, the telecom industry was found to be avoiding $140 million worth of property taxes annually. That's money that falls not only on homeowners to pay, but also other local businesses, including other utility companies. That $140 million matches closely with the $180 million that Cupelo claims that telcom companies have "generated" for state and local economies (she declines to state exactly how). In any case, that number is much more modest once you net out the amount that telcoms are avoiding.

In Cupelo's piece, she details all the recent investment that Verizon has done and implies that closing the loopholes will but a halt to expansion. When meeting with telecom representatives, however, Governor Deval Patrick asked them about their plans to expand broadband service in Western Massachusetts. He indicated that he would be willing to make allowances in the tax code for that sort of thing. The telecom executives were then forced to admit that they had no specific plans to expand.

Cupelo also suggests that removing the telecom exemption would only help Boston at the expense of the rest of Massachusetts. The fact is, companies like Verizon have been working in recent years to get as much property off the tax rolls as possible in every community. Here are other examples from a 2005 Globe article:

In suburban Westborough, $67.6 million worth of telecom property went off the tax rolls in the last year, representing potentially $2 million in annual tax revenue, and more than $50 million in Billerica and Taunton was removed from the tax rolls.

Cupelo is also being disingenuous when she asks "where's the incentive to stay and grow in Massachusetts?" Is she honestly suggesting that telephone companies will give up and leave Massachusetts if this loophole is closed? Electric companies already pay taxes on their equipment and that has not seemed to stop them from continuing to bringing electricity to all of Massachusetts. As long as there are people in Massachusetts, there will be demand for telecommunication services. As long as there's enough demand, some company will step up to supply it. That's the magic of capitalism.

Leaving that aside, telecoms drastically reduced their taxes over the past five years with no corresponding reduction in consumer rates. They were paying much of these taxes no less than five years ago. Are we to believe that taxes they were paying as recently as 2002 are going to drive them from the state? Here's what that 2005 report said about Verizon, in particular:

Verizon Wireless, for example, shifted legal ownership of assets to a Bermuda-based corporation to get more favorable tax treatment and cut its Boston tax bill by 99 percent, to $9,307 this year [2005] from over $3 million two years ago, according to city figures.

That explains why Verizon is so upset. They can't offshore a telephone poll to Bermuda.

Cupelo also tries to scare consumers with promises of higher rates. Let's leave aside the fact that other states that have removed this loophole have not experienced a subsequent jump in rates and just note again that while the law that exempts telecom equipment from property taxes is nearly 100 years old, the exploitation of these loopholes is a relatively new phenomenon. Have you experienced a reduction in rates as phone companies saved millions in taxes over the past five years? I have not. Were telecoms suffering terribly under their tax burden before they started saving all this money? No, they were not. What we're witnessing is that telecoms have overplayed their hand. If they had not started to aggressively avoid taxes in the last five years, no one would have even heard about the telecom exemption. Instead, they have begun to exploit it at the cost to taxpayers. It's time to take it away.

Update: Mass. Liberal has more.

Update 2: I found 50 State telecom excise tax data from 2004. While this is different than property taxes, the chart shows that we are 36th out of 51 in combined state and local excise taxes on telecom. Our local excise taxes are a big fat 0%, whereas almost every other state levies some sort of local excise tax -- North Carolina's, for example is 12.36%.

Also, Blue Mass Group has the text of an ad that Verizon took out today. It largely echos the sentiments put forth in the op/ed, but the discussion that follows is worth reading.

The Fight For Net Neutrality

There's a fight brewing in Congress right now that affects all of us who provide content over the Internet and those of us who depend on that content. Telecommunications companies are trying to destroy the principle of "network neutrality" -- the idea that all network packets are created equal. The SavetheInternet.com Coalition launched their website this weekend and is making an effort to turn net neutrality from idea to law.

The concept of network neutrality is explained in this two-minute video. The concept is simple -- supporters of net neutrality want all content that's sent over the Internet treated the same. Telecom companies are against this because they want to be able to sell access to the Internet above and beyond bandwidth charges and connection fees. They want to be able to charge extra for faster service, and to be allowed to choke off their competitors' products by slowing them down to the point where they're unusable. Put another way, if telecom companies are able to pick and choose who is able to connect to what services, they will effectively own the Internet and be able to dictate who uses it and for what.

Matt Stoller over at MyDD has a great rundown this morning of the various players in the fight and the stakes we're facing.

Our own Congressman Ed Markey (D-Malden) has been out front on this issue. His amendment to the telecom bill that would codify net neutrality was voted down earlier this month. Salon also had a featured article on net neutrality last week that is worth reading, even if you have to view an ad first.

We can't let Congress give the Internet away to the telecommunications companies. It's too important to let Comcast, Verizon and AT&T dictate how we all can communicate with each other.

Update: Dan Kennedy also has a detailed post on the threat to the Internet.