Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Assessment and Collection of Regulatory Fees for Fiscal Year 2017 ) ) ) ) COMMENTS I. INTRODUCTION The American Cable Association ( ACA ) submits these comments in response to the Notice of Proposed Rulemaking ( NPRM ) issued by the Commission in the above-captioned proceeding. 1 Specifically, ACA urges the Commission to rectify the regulatory fee disparity between cable television and IPTV providers ( Cable/IPTV ) and Direct Broadcast Satellite ( DBS ) providers by raising the DBS subcategory fee to achieve full parity with the Cable/IPTV fee category in FY 2017. Moreover, to address the Commission s concerns that its operational costs associated with processing and collecting regulatory fees from smaller entities outweighs the benefits of collecting such fees, and to ease regulatory burdens on the smallest entities regulated by the Commission, ACA urges the Commission to exempt regulatees whose sum 1 In the Matter of Assessment and Collection of Regulatory Fees for Fiscal Year 2017, Notice of Proposed Rulemaking, (rel. May 23, 2017) ( NPRM ). June 22, 2017 1
total of all of its regulatory fee liabilities fall below a de minimis threshold amount greater than $1,000. II. ALL MVPDS, INCLUDING DBS, SHOULD BE ASSESSED THE SAME LEVEL OF FEES SUPPORTING MEDIA BUREAU MVPD REGULATORY ACTIVITIES The Commission established the DBS subcategory two years ago based upon its finding that Media Bureau full-time equivalent employees ( FTEs ) were working on issues and proceedings that affected all multichannel video programming distributors ( MVPDs ), including DBS providers, and that Media Bureau FTEs were increasingly exercising regulatory oversight over DBS s provision of MVPD services through rulemakings and adjudicatory proceedings. 2 For the second consecutive year, the Commission has found that Media Bureau resources devoted to MVPD proceedings, including DBS, supports revising the DBS regulatory fee rate. 3 Yet, despite this finding and the Commission s prior commitment to updating the regulatory fee rate... [to ensure] an appropriate level of regulatory parity with cable television and IPTV, 4 the NPRM proposes to assess Cable/IPTV $0.96 per subscriber per year in regulatory fees for FY 2017 while only proposing to assess DBS providers $0.38 per subscriber per year. 5 This increase brings cable and IPTV and DBS providers closer to regulatory parity, and while appreciated, still results in Cable/IPTV providers paying $0.58 per subscriber more than DBS providers a fee that is more than 150% higher. 6 There is no reason to further delay 2 Assessment and Collection of Regulatory Fees, Assessment and Collection of Regulatory Fees for the Fiscal Year 2015, Report and Order and Further Notice of Proposed Rulemaking, 30 FCC Rcd 10268, 19-20 (2015) ( FY 2015 Order and FNPRM ). 3 NPRM, 17 (citations omitted). 4 Id., 15. 5 Id., 10. The FY 2017 $0.38 per subscriber fee includes a baseline fee of $0.36 per subscriber, plus a two cent per subscriber facility relocation fee. 6 The modest increases in the DBS regulatory fee leaves cable and IPTV providers paying the same rate that it paid two years ago when the Commission first established the DBS fee subcategory. See FY 2015 Order and FNPRM, Appendix C (establishing $0.96 per subscriber per year regulatory fee for cable operators and IPTV providers). June 22, 2017 2
bringing DBS into full parity with cable/iptv for FY 2017. Cable, IPTV and DBS providers impose similar burdens on the Media Bureau. It is inequitable to continue to assess fees in a manner that does not equitably distribute the regulatory fee burden among all MVPD payors that impose regulatory oversight burdens on Media Bureau FTEs. The Commission should rectify this regulatory disparity and raise the DBS subcategory fee to achieve full parity with the Cable/IPTV fee category rate in FY 2017. The Commission has recognized that entities that share in imposing regulatory costs and receiving regulatory benefits from a Commission subdivision like the Media Bureau should share equitably in paying the fees that support the Bureau. 7 Over the years, ACA has urged the Commission to establish regulatory fee parity between cable, IPTV and DBS providers, and was pleased when the Commission first established the Cable/IPTV fee category in FY 2013 and DBS subcategory fee in FY 2015. However, when the Commission first established the DBS subcategory fee level, it set the amount at $0.12 per subscriber per year, well below the Cable/IPTV fee category. Nonetheless, ACA was encouraged that the Commission committed to update[ing] this rate for future years, based on relevant information, as necessary for ensuring an appropriate level of regulatory parity and considering resources dedicated to this new regulatory fee subcategory. 8 Despite this commitment to update the DBS fee levels, the Commission only increased the DBS fee rate for FY 2016 upward to $0.24 per subscriber per 7 See Assessment and Collection of Regulatory Fees, Assessment and Collection of Regulatory Fees for the Fiscal Year 2016, MD Docket No. 16-166, Comments of the American Cable Association at 3 (filed June 20, 2016) ( ACA FY 2016 Comments ), citing Procedures for Collection and Assessment of Regulatory Fees, Notice of Proposed Rulemaking, 27 FCC Rcd 8458, 3 (2012); Assessment and Collection of Regulatory Fees for Fiscal Year 2016, 31 FCC Rcd 5757, 6 (2016) (noting the Commission s intent to continue[] to improve the regulatory fee process by ensuring a more equitable distribution of the regulatory fee burden ). The NPRM acknowledges that [b]ased on our updated analysis of the cable television/iptv category, we find Media Bureau resources devoted to MVPD proceedings, including DBS, supports revising the DBS regulatory fee rate again. NPRM, 17. 8 FY 2015 Order and FNPRM, 31. June 22, 2017 3
year (plus a $0.03 per subscriber facility relocation fee). 9 The Commission took this limited action despite ACA and other commenters noting in the FY 2016 regulatory fee proceeding that cable, IPTV and DBS providers imposed roughly the same burden on Media Bureau resources, and that Media Bureau FTEs increasingly devoted time to issues involving the entire MVPD industry. 10 Since FY 2016 ended September 30, 2016, Media Bureau regulatory and oversight activities with respect to MVPDs continues to suggest that regulatory parity among all MVPDs, including DBS, should be adopted. For example, DBS providers have been actively involved in the Media Bureau s proceeding implementing the Satellite Television Extension and Localism Act Reauthorization Act of 2014 ( STELAR ) and in the market modification proceedings that STELAR directed the Commission to expand to satellite DBS carriage. 11 Cable operators have not participated in many of these proceedings. AT&T and DISH have also both participated, in relatively equal measure as cable operators, in additional non-rulemaking proceedings before the Media Bureau, including the Nexstar/Media General broadcast license transfer and 9 Assessment and Collection of Regulatory Fees for Fiscal Year 2016, Report and Order, 31 FCC Rcd 10339, 30 (2016). 10 NPRM, 16, citing ACA FY 2016 Comments at 3-11; Assessment and Collection of Regulatory Fees, Assessment and Collection of Regulatory Fees for the Fiscal Year 2016, MD Docket No. 16-166; Reply Comments of the National Cable Television Association at 3-7 (filed July 5, 2016). See also Reply Comments of the American Cable Association at 5-11 (filed July 5, 2016) ( ACA FY 2016 Reply Comments ). See also ACA FY 2016 Comments at 4-7 and ACA FY 2016 Reply Comments, Attachments A-C for proceedings that DBS providers were involved in the past few years. Attachment A to these Comments lists the proceedings that DBS providers are involved in during FY 2017. 11 The STELA Reauthorization Act of 2014 (STELAR), Pub. L. No. 113-200, 128 Stat. 2059 (2014); Amendment to the Commission s Rules Concerning Market Modification, Implementation of Section 102 of the STELA Reauthorization Act of 2014, Report and Order, 30 FCC Rcd 10406 (2015) (adopting satellite television market modification rules). See, e.g., Gray Television Licensee, LLC, Petition for Modification of the Satellite Televisions Market for WSAW-TV, Wausau, Wisconsin, MB Docket No. 16-293, DirecTV, LLC Response to Petition for Special Relief (filed Oct. 6, 2016); Amendment to the Commission s Rules Concerning Market Modification, Implementation of Section 102 of the STELA Reauthorization Act of 2014, MB Docket No. 15-71, DISH Network LLC Market Modification Pre-Filing Coordination Letter for Monongalia County, West Virginia (filed May 23, 2017). June 22, 2017 4
assignment proceeding. 12 In rulemaking proceedings, AT&T and DISH have been repeatedly engaged in the Commission s ATSC 3.0 rulemaking, launched this spring, requiring oversight and involvement from Media Bureau FTEs. 13 Finally, DBS providers, like cable and IPTV providers, are also eligible for reimbursement from costs related to the broadcast incentive auction. 14 The Media Bureau has been involved with the administration of the auction and will administer the reimbursement program for broadcasters and MVPDs alike in FY 2017 and the next two years. 15 And even if the DBS providers claim, as they have previously, that participation in Media Bureau proceedings has not been at an equal level between all MVPDs, the Commission has found that: Section 9 does not require the Commission to engage in a company-by-company assessment of relative regulatory costs. In any given year, companies grouped in the [telecommunications] category, or other regulatory fee categories, might be the subject of more regulation than others, e.g., merger proceedings. As a result, our responsibility here is to identify the category of regulatory fee payees with which interconnected VoIP providers most closely relate. 16 12 See, e.g., Applications of Nexstar Broadcasting Group, Inc., and Media General, Inc. for Consent to Transfer Control of Licenses, MB Docket No. 16-57, Ex Parte Presentation of the American Cable Association, DISH Network, LLC and ITTA (filed Nov. 1, 2016). 13 See, e.g., Authorizing Permissive Use of the Next Generation Broadcast Television Standard, GN Docket No. 16-142, Comments of DISH Network LLC (filed May 9, 2017); Reply Comments of AT&T (filed June 8, 2017). In its Reply Comments, AT&T specifically notes that it is filing these reply comments on behalf of its affiliates that are multichannel video programming distributors ( MVPDs ), including DIRECTV. Id. at 1, n.1. AT&T/DirecTV and DISH Network were also active participants in the Media Bureau s 2016 public notice proceeding. See, e.g., Media Bureau Seeks Comment on Joint Petition for Rulemaking of America s Public Television Stations, the AWARN Alliance, the Consumer Technology Association, and the National Association of Broadcasters Seeking to Authorize Permissive Use of the Next Generation TV Broadcast Television Standard, GN Docket No. 16-142, Comments of DISH Network, LLC (filed May 26, 2016); Comments of AT&T (filed May 26, 2016). 14 Expanding the Economic and Innovation Opportunities of Spectrum Through Incentive Auctions, Report and Order, 29 FCC Rcd 6567, 84 (2014), aff d, Nat l Assoc. of Broadcasters, et al v. FCC, 789 F.3d 165 (D.C. Cir. 2015) (noting that the Spectrum Act requires the Commission to reimburse MVPDs for costs reasonably incurred in order to continue to carry the signals of stations relocating to new channels as a result of the repacking process or a winning reverse auction bid). 15 See Incentive Auction Closing and Channel Reassignment Public Notice; The Broadcast Television Incentive Auction Closes; Reverse Auction and Forward Auction Results Announced; Final Television Band Channel Assignments Announced; Post-Auction Deadlines Announced; Reverse Auction Winning Bidders; Forward Auction Winning Bidders, Eligible Broadcasters and MVPDs, Public Notice, AU Docket No. 14-252; GN Docket No. 12-268; WT Docket No. 12-269; MB Docket No. 16-306 (rel. Apr. 13, 2017). 16 Assessment and Collection of Regulatory Fees for Fiscal Year 2007, Report and Order and Further Notice of Proposed Rulemaking, 22 FCC Rcd 15712, 19 (2007). June 22, 2017 5
This is a sound principle and there is no reason for the Commission to fail to follow it in this case. According to ACA s calculations, based on the expected revenue figure in the NPRM, fee levels assessed at full parity for FY 2017 would result in all MVPD entities owing $0.76 per subscriber for FY 2017. 17 At $0.76 per subscriber, the increase for the DBS providers would amount to only $0.032 per subscriber per month. An amount this small would cause no harm to the provider or the consumer, and would likely be unnoticed by most consumers. Cable and IPTV providers, in contrast, would finally see elimination of the unfair regulatory fee burden they and their subscribers have been carrying for decades while they cross-subsidized their competitors Media Bureau fee burden. As discussed above, ACA has repeatedly shown that the resources utilized by DBS providers are roughly similar to those used by Cable/IPTV. 18 Cable, IPTV and DBS providers impose similar burdens on the Media Bureau and they should be assessed similar regulatory fees to support Media Bureau MVPD regulation. There is simply no doctrinal reason for further delay in achieving parity for all payors to the Cable/IPTV fee category. It is inequitable to once again require the smaller cable and IPTV providers that comprise ACA s membership to crosssubsidize the regulatory fees of their far larger and better-capitalized direct competitors. 17 ACA calculated this figure based on the NPRM s expected revenue of $71,870,000 from 94,500,000 MVPD subscribers (59,520,000 from 62,000,000 cable/iptv subscribers and $12,350,000 from 32,500,000 DBS subscribers). See NPRM, Appendix A. 18 See Procedures for Assessment and Collection of Regulatory Fees, Notice of Proposed Rulemaking, Second Notice of Proposed Rulemaking, and Order, MD Docket Nos. 14-92, 13-140, 12-201, Comments of the American Cable Association at 2-9 (filed Jul. 7, 2014) ( ACA FY 2014 Comments ); ACA FY 2016 Comments at 3-11. June 22, 2017 6
III. THE COMMISSION SHOULD PROVIDE RELIEF FROM REGULATORY FEES FOR SMALL CABLE OPERATORS BY INCREASING ITS DE MINIMIS LEVEL The NPRM seeks comment on whether the Commission should raise the de minimis threshold (for exemption from paying regulatory fees) from $500 to $1,000, 19 and whether to adopt a de minimis threshold based on a cable operator s number of cable television subscribers. 20 ACA strongly supports greater regulatory fee relief for small entities, particularly the smallest cable operators. As the NPRM notes, the administrative burden on small regulatees, and the Commission s operational costs associated with processing and collecting these smaller fees, likely outweigh the benefits of such payments. 21 Moreover, in previously raising the de minimis threshold from $10 to $500 in FY 2014, the Commission stated that it was taking action, in part, to provide financial relief to small entities. 22 This is a fair approach for entities who are often disproportionately burdened by regulations and regulatory fees, 23 particularly when these entities also use the fewest administrative resources among those in a fee category. This is especially true of the smallest cable operators. Not only are they disproportionately burdened 19 NPRM, 31. 20 Id., 32. As the NPRM notes, ACA had previously suggested this change to the calculation of the exemption. See ACA FY 2014 Comments at 9-13; Assessment and Collection of Regulatory Fees, Assessment and Collection of Regulatory Fees for the Fiscal Year 2016, MD Docket No. 16-166, Letter from Barbara Esbin, Cinnamon Mueller, attorney for ACA, to Marlene H. Dortch, Secretary, Federal Communications Commission at 4 (filed Dec. 16, 2016) ( ACA Dec. 16, 2016 Ex Parte ). 21 NPRM, 31. 22 See Assessment and Collection of Regulatory Fees for Fiscal Year 2014; Assessment and Collection of Regulatory Fees for Fiscal Year 2013; Procedures for Assessment and Collection of Regulatory Fees, Report and Order and Further Notice of Proposed Rulemaking, 29 FCC Rcd 10767, 20 (2014) (stating that raising the de minimis threshold from $10 to $500 will provide financial relief to small entities, in addition to reducing the administrative burden on the Commission. ). 23 Small Business Administration studies also show that regulatory compliance costs per employee are 42 percent higher in small companies (defined as those with fewer than 20 employees) compared with midsized firms (defined as those with between 20 and 499 employees), and 36 percent higher in small firms than in large firms (defined as those with 500 or more employees). See Nicole V. Crain, W. Mark Crain, Lafayette College, The Impact of Regulatory Costs on Small Firms, Small Business Administration, Office of Advocacy, pp. 54-55 (rel. Sept. 2010); see also ACA FY 2014 Comments at 11-12. June 22, 2017 7
by regulatory fees, but within the MVPD industry, cable operators serving fewer than 1,000 subscribers generate the lowest administrative burdens for the Media Bureau. 24 Because of the wide variety of exemptions that apply to systems of cable operators serving fewer than 1,000 subscribers, these operators impose fewer burdens on, and receive fewer benefits from, the Media Bureau. 25 These very small operators also rarely directly participate in proceedings administered by the Media Bureau. For the reasons stated above, ACA supports extending relief from payment of regulatory fees to small regulatees including small operators whose sum total of all of its regulatory fee liabilities for annual payments is greater than the existing $500 de minimis threshold. First, based on the data presented in the NPRM, it would have a truly de minimis impact on collections for the Commission, and second, although it may not contribute to the difference between staying in business or shuttering a system, it is nonetheless an important contribution to the preservation of the overall vitality of these systems. Raising the de minimis threshold will provide targeted relief to those small entities that most need it and are deserving and help the Commission keep its administrative costs related to recovering regulatory fees low. In raising the de minimis threshold, the Commission should fully consider whether raising the benefit to $1,000, as proposed in the NPRM, would be sufficient or whether the 24 See ACA Dec. 16, 2016 Ex Parte at 4. 25 See, e.g., 47 C.F.R. 76.95(a), 76.106(b) (network non-duplication and syndicated exclusivity rules do not apply to cable systems serving fewer than 1,000 subscribers); 47 C.F.R. 76.601(d) (proof-ofperformance testing exception for cable systems having fewer than 1,000 subscribers); 47 C.F.R. 76.605 NOTE 1 (local franchise authorities of cable systems serving fewer than 1,000 subscribers may adopt less stringent technical standards); 47 C.F.R. 76.1111 (cable systems serving fewer than 1,000 subscribers are exempt from the requirement to keep a record of each test and activation of the Emergency Alert System procedures for three years); 47 C.F.R. 1700(a) (the operator of every cable system having fewer than 1,000 subscribers is exempt from the public inspection requirements contained in sections 76.1701 (political file), 76.1702 (EEO records), 76.1703 (commercial records for children s programming), 76.1704 (proof-of-performance test data), 76.1706 (signal leakage logs and repair records), and 76.1715 (sponsorship identification); 47 C.F.R. 76.1714(b) (cable systems serving fewer than 1,000 subscribers do not have to keep a current copy of the part 76 rules or an EAS Operating Handbook). June 22, 2017 8
Commission should set the threshold higher. Because the Commission s de minimis exemption applies only if the sum total of the regulatee s regulatory fee liability falls below the fee cap, setting the exemption at $1,000 may not provide sufficient relief for regulatees, especially for small cable operators and IPTV providers, who serve 1,000 or fewer subscribers, and who would most benefit and are most deserving. Because most of these very small cable operators and IPTV providers are subject to multiple regulatory fee categories, such as those with CARS licenses, which the Commission has proposed a $940 per license fee for FY 2017, 26 or those who provide interconnected VoIP service, their total fee burden may fall above $1,000 despite serving a very small number of subscribers. 27 In previous filings, ACA has suggested the Commission exempt very small cable and IPTV providers from paying Cable/IPTV regulatory fees, including setting the exemption level at 1,000 video subscribers. 28 Today, ACA is comprised of 764 member companies serving over 6.1 million video subscribers. Of these 764 member companies, 384 have less than 1,000 video subscribers, serving a total of 156,000 MVPD subscribers. 38 of these operators are municipal providers and therefore exempt from paying regulatory fees, leaving 356 operators serving a total of 142,000 MVPD subscribers. At the proposed regulatory fee of $0.96 per subscriber, these small operators account for about $136,000 of the fees collected by the Commission, under 0.04% of the $356,710,992 million that the Commission proposes to collect 26 See NPRM, Appendix B. At the level of year-over-year regulatory fee increases per CARS license that the Commission has implemented over the last few years, a regulatee in FY 2018 will not qualify for a $1,000 de minimis exemption solely by having one CARS license. 27 At $0.96 per-subscriber, a cable operator with 999 subscribers that only provides cable service in FY 2014 would owe $959. If the cable operator also offers any voice service or uses a CARS license, these services would put the small operator s total fee liability over a $1,000 de minimis threshold. 28 See ACA FY 2014 Comments at 9-13; ACA Dec. 16, 2016 Ex Parte at 4. In addition to raising the de minimis threshold, ACA supports exempting operators that serve fewer than 1,000 MVPD subscribers from the Cable/IPTV fee obligation. June 22, 2017 9
for FY 2017. 29 However, of the 356 ACA member companies that have less than 1,000 video subscribers, 225 of those companies serve more than 250 video subscribers. 30 Most of these companies also pay ITSP regulatory fees based on their interconnected VoIP service and some pay CARS fees. As such, many of these very small companies likely would not qualify for a $1,000 de minimis threshold. By ensuring that the de minimis threshold exemption is set at an appropriate level, all of these 225 very small operators can obtain needed and warranted relief and the Commission would reduce its expenditures associated with fee collection, particularly costs attributed to collecting late payments. Accordingly, ACA supports an increased de minimis threshold exemption of at least $1,000 and encourages the Commission to consider raising the de minimis threshold even higher. IV. CONCLUSION In the smaller markets served by ACA s members, independent cable operators are the main competitive check on the two national DBS operators, AT&T and DISH. Notwithstanding this, ACA members continue to bear a far heavier regulatory burden than the two DBS giants. The NPRM s proposed regulatory fee regime for FY 2017 only adds to this disparity. Without regulatory parity among all MVPDs and increased relief through the de minimis exemption, some smaller cable operators will be increasingly unable to compete with DBS, and smaller market consumers will suffer. To relieve smaller operators from this inequitable burden, the Commission should adopt ACA s proposals presented in these comments. 29 NPRM, 18. Many of ACA s members are also subject to other exemption categories, such as those that are municipal operators. 30 Since some of the 131 operators with fewer than 250 video subscribers already are exempt from paying regulatory fees because their fee total is below the current $500 de minimis threshold, the overall benefit for very small MVPDs of raising the threshold to $1,000 will be limited. June 22, 2017 10
Respectfully submitted, AMERICAN CABLE ASSOCIATION By: Matthew M. Polka President and CEO American Cable Association 875 Greentree Road 7 Parkway Center, Suite 755 Pittsburgh, Pennsylvania 15220-3704 (412) 922-8300 Ross J. Lieberman Senior Vice President of Government Affairs American Cable Association 2415 39 th Place, NW Washington, DC 20007 (202) 494-5661 Barbara S. Esbin Scott C. Friedman Elizabeth M. Cuttner Cinnamon Mueller 1875 Eye Street, NW Suite 700 Washington, DC 20006 (202) 872-6811 Attorneys for American Cable Association June 22, 2017 June 22, 2017 11
ATTACHMENT A Total DISH and AT&T (DirecTV) Filings 1 Since October 1, 2016 Filings MB 15-71: Amendment to the Commission s Rules Concerning Market Modification; Implementation of Section 102 of the STELA Reauthorization Act of 2014 DISH AT&T (DirecTV) 9 5 MB 14-258: Optical Telecommunications, Inc. Complaint Concerning Retransmission of WXCW(TV), Naples, FL 2 0 MB 16-293: Gray Television Licensee, LLC, Petition for Modification of the Satellite Televisions Market for WSAW-TV, Wausau, Wisconsin MB 16-57: Ex Parte Presentation; Applications of Nexstar Broadcasting Group, Inc., and Media General, Inc. for Consent to Transfer Control of Licenses MB 16-416: Victory Television Network, Inc. MB 16-366, 16-367, 16-368, 16-369: In the Petition of La Plata County, Colorado for the Modification of the Television Markets of Stations KDVR-TV (FOX), KCNC- TV (CBS), KMGH-TV (ABC), KUSA-TV (NBC) MB 14-90: Applications of AT&T Inc. and DIRECTV for Consent To Assign or Transfer Control of Licenses and Authorizations MB 16-246: SJL Broadcasting Complaint Against Campus Televideo, Inc. Concerning Retransmission of WSEE-TV and WICU-TV, Erie, PA 4 2 1 0 0 2 0 1 0 32 0 1 MB 16-306: Incentive Auction Task Force and Media Bureau 0 1 GN 16-142: Authorizing Permissive Use of the Next Generation Broadcast Television Standard 1 3 Total 17 47 1 Includes all filings in Media Bureau dockets, ex parte meetings with Media Bureau staff, and filings in the Commission s ATSC 3.0 rulemaking proceeding.