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Cable Technology Feature Article

April 04, 2013

Texas Mulls Tax Code Revision for Cable; Satellite Fights Back

By Tara Seals, TMCnet Contributor

Texas is addressing a perceived tax disparity between cable and satellite providers with the introduction of House Bill 1900, authored by Craig Eiland, D-Galveston. The bill would eliminate sales taxes on the first $75 of the monthly TV bills for the state’s 5.3 million cable TV customers—a move that satellite operators say would place them at a significant competitive disadvantage.

Consumers pay a 6.25 percent tax on cable bills in the Lone Star State, plus two percent more for local taxes. But cablecos also pay franchise fees to use public rights of way for cables and poles in order to serve the public with physical infrastructure—a burden that satellite companies, thanks to wireless delivery, don’t incur the cost for. Eiland argued that as a result, satellite companies can afford to be more competitive with how much they charge consumers than cable MSOs can be.

Satellite providers however say that they spend money that cablecos don’t, in the form of satellite launches and transmission architecture—and that the supposed pro-competitive effect of the bill passing would actually be a burden for the sector. “It is a difference in business choices — cable vs. satellite — and not a tax difference that should be solved by the state, they argue,” reported the Texas Tribune. “Giving cable customers a tax break would encourage the switch from satellite to cable, creating a new advantage for the cable companies.”

“Why should our customers not receive the benefit of technological innovation?” Damon Stewart, vice president for state government affairs at DirecTV (News - Alert), said at a House Ways and Means Committee hearing on the subject.

Eiland disagreed, saying that franchise fees for rights of way and space-related satellite costs should not be characterized as similar costs of doing business. “If the government gave a competitive business advantage to me by the way they taxed my competitors, I would fight like hell to keep it,” said Eiland. “And I think you can see by the number of lobbyists in this room that satellite is doing exactly that.”

The change would take $440.6 million in sales tax revenue out of the state coffers over the next two years, the Tribune noted—an important amount of cash for a state facing funding challenges for education and police and fire, some Congress people pointed out during the hearing.

Edited by Brooke Neuman

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