Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C

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1 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C In the Matter of ) ) Procedures for Assessment and Collection of ) MD Docket No Regulatory Fees ) ) Assessment and Collection of Regulatory ) MD Docket No Fees for Fiscal Year 2013 ) ) Assessment and Collection of Regulatory ) MD Docket No Fees for Fiscal Year 2008 ) REPLY COMMENTS OF THE NATIONAL CABLE & TELECOMMUNICATIONS ASSOCIATION The National Cable & Telecommunications Association ( NCTA ) encourages the Commission to move toward a regulatory fee structure that is more technology neutral. Specifically, NCTA supports those comments that advocate assessment of regulatory fees on all multichannel video programming distributors (MVPDs) regardless of technology. The Commission also should use a subscriber-based assessment, rather than a revenue-based assessment, for all MVPD and voice service providers, regardless of technology, and it should not establish a new category for broadband services. INTRODUCTION AND SUMMARY The Notice seeks comment on proposals related to the collection of regulatory fees in Fiscal Year (FY) 2013 and on more long-range proposals that will apply for FY 2014 and beyond. 1 In particular, the Notice seeks comment on whether Internet Protocol television (IPTV) providers and Direct Broadcast Satellite (DBS) providers should be subject to the same 1 In re Procedures for Assessment and Collection of Regulatory Fees, MD Docket Nos , 13-58, 08-65, Notice of Proposed Rulemaking and Further Notice of Proposed Rulemaking, FCC No (rel. May 23, 2013) (Notice).

2 regulatory fees as traditional cable operators. 2 It also raises a variety of additional issues, including whether to use revenues or subscribers as the basis of certain assessments and whether a new category should be created for broadband service providers. In today s highly competitive environment, where companies using different technologies compete in the provision of multiple services, the Commission should strive for an approach that is technology neutral yet still recovers the agency s costs from the industry segments to which those costs are attributable. As explained in these reply comments, the Commission can achieve this objective by adding a category of fees for MVPDs that are not considered part of the existing Cable TV System category. In addition, fees on all MVPDs and all voice service providers regardless of technology should be assessed on the basis of subscribers, rather than revenues. Finally, the record makes clear that the Commission should not establish a new category for broadband service providers. I. THE COMMISSION SHOULD ESTABLISH A REGULATORY FEE CATEGORY FOR MVPDs THAT ARE NOT CABLE OPERATORS NCTA strongly agrees with the American Cable Association (ACA) and others that support the creation of a new category for MVPDs that may not meet the current definition of Cable Television System for purposes of assessing regulatory fees. 3 The policy benefits of subjecting all MVPDs to the regulatory fee regime are clear. All MVPDs are subject to some level of regulation administered by the Media Bureau and they all benefit from the Bureau s regulation of other entities. 4 Accordingly, broadening the base of entities paying fees to support Id. at 37, 52. ACA Comments at 17 ( The Commission can and should craft a regulatory fee structure that results in all providers of MVPD services paying their fair share of the Commission s costs associated with regulating these services. ). NCTA previously has explained that online video service providers should not be considered MVPDs and consequently this proposal would not apply to those entities. 2

3 the Media Bureau s work to include all video providers benefitting from its activities will help ensure that regulatory fee reform results in fair and equitable regulatory fee assessments. 5 The need to assess all MVPDs a portion of the costs attributable to the Media Bureau is even more important if the Commission adopts its proposal to treat a significant portion of the costs attributable to the International Bureau as indirect costs that would be recovered from all regulated companies, rather than direct costs that would be recovered only from companies regulated by the International Bureau. 6 That proposal would limit the assessment on one subset of MVPDs DBS providers to a relatively minimal fee that covers the portion of the International Bureau responsible for regulation of satellite services. If the Commission decides that this sort of granular analysis of the functions performed by the International Bureau and the beneficiaries of those functions makes sense, then it should also conduct a more granular analysis with respect to the Media Bureau instead of giving a free pass to DBS providers and any other MVPDs that may not meet the current definition of Cable Television System for purposes of assessing regulatory fees. DBS providers raise a variety of arguments against the concept of assessing regulatory fees on non-cable MVPDs, but none is compelling. First, the argument that the Commission has no authority under Section 9 of the Act to change the classification of DBS providers from satellite providers to MVPDs takes far too narrow a view of the Commission s discretion under the statute. DIRECTV argues that any changes in the manner in which DBS providers are regulated are insufficient to amend the geostationary orbit (GSO) satellite category and require DBS providers to contribute to the costs attributable to the Media Bureau. 7 But ACA has ACA Comments at 3. Notice at 28. DIRECTV Comments at 6-11; see also EchoStar Comments at 19. 3

4 explained that there is no need to modify the GSO category. Rather, Section 9 gives the Commission authority to add a new category for MVPDs, which would include DBS providers and any other entity that is an MVPD but does not meet the current definition of Cable Television System for purposes of assessing regulatory fees. 8 Second, DBS providers assert that they should not have to pay any portion of the costs attributable to the Media Bureau because there is no parity between the regulatory burdens they place on the Media Bureau and the burdens placed on the Bureau by traditional cable operators. 9 The all-or-nothing approach suggested by the DBS providers is not required by the statute, nor does it make sense as a policy matter. As described by ACA, the Commission can and should pursue options that require all parties that benefit from Media Bureau activities to pay fees that support those activities, while at the same time establishing a fee structure that reflects any meaningful differences between the burdens and benefits attributable to traditional cable operators and the burdens and benefits attributable to other MVPDs. 10 For similar reasons, requiring DBS providers to pay both the GSO fee to recover International Bureau costs and a new MVPD fee to recover Media Bureau costs does not raise the fairness concerns that DBS providers suggest. 11 Particularly if the Commission adopts its proposal to treat a significant portion of the costs attributable to the International Bureau as indirect costs (which are recovered from all companies and not just those regulated by the Bureau), the fee assessed on GSO providers recovers the costs of International Bureau staff that work on satellite matters while the MVPD fee would cover the costs of Media Bureau staff that ACA Comments at (explaining that incremental changes in regulation of MVPDs over the last few years constitute sufficient change to justify an amendment of regulatory fee categories pursuant to section 9(b)(3)). DIRECTV Comments at 12-17; EchoStar Comments at ACA Comments at 17. DIRECTV Comments at

5 work on MVPD matters. The DBS providers offer no legitimate reason why they should not be responsible for both of these assessments. II. THE COMMISSION SHOULD USE SUBSCRIBER-BASED REGULATORY FEES RATHER THAN REVENUE-BASED FEES. The Commission asks whether it should use revenues instead of number of subscribers in determining the regulatory fee for the cable industry and [c]onversely... whether it would be fairer and more sustainable to assess more fee categories on some other basis, such as subscribers. 12 The Commission also solicits comment on whether to combine wireline and wireless service providers into a single category, and if so, whether to use revenues as the basis for assessment or some other basis. 13 NCTA agrees with commenters who support collection of regulatory fees from all MVPDs on a per-subscriber basis. 14 NCTA has explained previously that a subscriber-based approach is superior to a revenue-based approach because it eliminates the need for arbitrary allocations of revenue among services, which is important in a marketplace where customers buy bundled packages of services. 15 In addition, as ACA explains, [u]sing revenues instead of the number of cable subscribers to determine regulatory fees for cable operators would be more complex, inevitably imprecise, and require extensive recordkeeping, as well as likely cause significant new administrative burdens for both the Commission and fee payors without evidence of any corresponding benefits from adopting this approach. 16 Without evidence of a need to Notice at 33. Id. at See AT&T Comments at 5; ACA Comments at See, e.g., NCTA Comments, MD Docket. No at 4-5 (filed Sept. 25, 2008); NCTA Reply Comments, WC Docket No at 2 (filed May 11, 2007). ACA Comments at

6 change course, the Commission should continue its existing approach of collecting regulatory fees based on the number of subscribers. For similar reasons, the Commission should use a subscriber-based assessment for voice service providers, whether wireline or wireless. As in the MVPD context, a subscriber-based approach is superior to a revenue-based approach because it is simpler from an administrative perspective and eliminates the need for arbitrary allocations of revenue across bundles of services. 17 III. THE COMMISSION SHOULD NOT ASSESS REGULATORY FEES ON BROADBAND SERVICES The Notice also asks whether a regulatory fee category should be added for broadband services. 18 As noted by CTIA, the Commission previously solicited comment on this question and there was wide agreement across multiple industries that the regulatory fee scheduled should not be amended to include broadband services. Nothing has changed that would warrant a different conclusion only eight months later. 19 NCTA agrees with that assessment of the situation. As NCTA previously has explained, there would be no way for the Commission to develop a new regulatory fee category for broadband without doing a comprehensive review of how much time each staff member in the four core bureaus devotes to broadband services. 20 CTIA describes such a task as herculean See NCTA Comments, MD Docket. No at 5-6 (filed Sept. 25, 2008). See Notice at 53, n.106. CTIA Comments at 12 (citing to comments filed in 2012 by CTIA, AT&T, Verizon, Clearwire, NCTA, and USTelecom). NCTA Comments, MD Docket. Nos & at 6-7 (filed Oct. 23, 2012). 6

7 and notes the lack of assurances that an appropriate standard could be developed to ensure the fair and equitable division of payments among regulatees. 21 In addition, as NCTA has previously explained in both this docket and in the context of universal service contributions, the Commission should proceed with caution in considering whether to assess fees of any kind on broadband services. 22 As US Telecom notes, such fees would only increase the already substantial costs associated with broadband deployment and further hamper broadband deployment efforts, particularly in rural areas. 23 The Commission has made significant efforts to promote broadband adoption among the millions of consumers without broadband services. For those non-adopters that are particularly price-sensitive, adding a new mandatory fee to broadband services could have the effect of undermining the Commission s adoption efforts CTIA Comments at 13. See NCTA Comments, MD Docket. No at 7-8 (filed Oct. 23, 2012); NCTA Comments, WC Docket No (filed July 9, 2012). USTelecom Comments at 8. In addition to the policy concerns raised by this proposal, a number of parties raise the threshold question of whether the Commission has authority under Section 9 of the Act to include broadband as a new regulatory fee category. CTIA Comments at 13; USTelecom Comments at 7 ( Section 9 of the Act limits the Commission s regulatory fee program to the recovery of costs associated with its regulatory activities, and Congress has repeatedly made clear that the Commission is not to extend its regulatory activities to Internet services. ); Competitive Carriers Ass n ( CCA ) Comments at 8 ( The Commission s authority under the Communications Act to regulate broadband, both in the case of the Commission s open-access rules and its universal service reforms (including support mechanisms for broadband deployment) is currently pending appellate review. ). 7

8 CONCLUSION The Commission should update its regulatory fee structure to reflect the highly competitive nature of today s communications marketplace by moving to an approach that imposes a subscriber-based regulatory fee on all MVPDs and all voice service providers. For the reasons explained above, the Commission should not create a new category for broadband service providers. Respectfully submitted, /s/ Rick Chessen Rick Chessen Steven F. Morris Stephanie L. Podey National Cable & Telecommunications Association 25 Massachusetts Avenue, NW Suite 100 June 26, 2013 Washington, DC