Congressional Testimony in Opposition to
H.R. 5429 The Satellite Services Act of 2002
and
H.R. 4869 The Satellite Radio Freedom Act

presented by
Nicholas P. Miller, Esq. Legal Counsel for TeleCommUnity

on behalf of the
National League of Cities
United States Conference of Mayors
and
TeleCommUnity Alliance

September 25, 2002 | Washington, D.C.

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EXECUTIVE SUMMARY

Section 602 of the Telecommunications Act of 1996, 47 U.S.C. § 152 nt, preempted local government taxation of direct-to-home satellite service, but preserved the right of states to tax such services and the right of local governments to receive portions of such state taxes. H.R. 5429, the Satellite Services Act of 2002, would expand the preemption of local taxation authority to all direct-to-subscriber satellite service. H.R. 4869, the Satellite Radio Freedom Act, would preemption local taxation of satellite digital radio service, but preserve local government authority to tax or require fees for terrestrial transmitters physically located within their jurisdictions.

TeleCommUnity, the National League of Cities, and the United States Conference of Mayors urge the Subcommittee to reject these bills on the basis that they violate the principles of good tax policy, good federal policy, and good broadband policy.

• Good Tax Policy:

  • allows jurisdictions that must deliver services to be responsible for, and held accountable for, imposing the taxes necessary to fund such services;

  • recognizes that removing elements from the tax base increases the tax burden on all other taxpayers; and

  • does not confuse tax efficiency with tax eradication.
    

• Good Federal Policy:

  • respects the sovereignty of other state and local elected governments;

  • places tax and spending decisions at the lowest level of government where voters have the greatest impact; and

  • avoids creating unfunded mandates.

• Good Broadband Policy:

  • does not use tax subsidizes to favor one form of technology over others; and

  • recognizes that tax subsidies are the least efficient form of subsidies to promote broadband deployment.

The Satellite Services Act in particular would have the unintended consequence of creating disparate taxation schemes for similarly situated providers. Competition in the satellite service market is robust, and there is no evidence at this time to support creation of federal tax subsidy that would provide satellite service providers with a competitive advantage over fiber optic, wireless terrestrial, ultrawideband, and other forms of broadband technology.

H.R. 5429 and H.R. 4869 contain ambiguous definitions and fail to define key terms. As drafted, satellite service providers that have a strong local presence and almost no national presence, could unintentionally be exempted from paying almost all local taxes and regulatory fees, including tax and fees of generally applicability. Compliance and enforcement of either bill would be difficult, and a reviewing court would likely find either bill void for vagueness.

For these reasons, we urge Congress to forgo the temptation to provide special tax breaks to small pockets of industry at the expense of local governments and competing industry technologies.

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