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An Open Letter to the United States Congress: Encourage Taxpayer-Friendly Competition in the Telecommunications Marketplace
October 26, 2005
Dear Member of Congress:
On behalf of the 350,000 members of the National Taxpayers Union (NTU), I write to offer our suggestions on tax reforms associated with current telecommunications policy. As an advocate for American taxpayers, NTU is encouraged that Congress is developing new proposals for updating and streamlining telecom regulations. In particular, we encourage you to foster competition in the video-services marketplace so that consumers may have access to additional products at a faster "development-to-market" rate than the current, sluggish tempo with which Americans have access to new technology.
The United States prides itself on being a leader in technological advancements, but 15 other countries currently have a greater percentage of homes with broadband service than us. South Korea and Japan have better coverage than we do! Why? The answer is simple. One of the main obstacles preventing extensive broadband deployment consists of hefty taxes - often described as "fees" and "tariffs" -- as well as a plethora of regulatory hurdles new competitors in the communications services industry face on the local, state, and federal levels.
For instance, in the video-services market, new entrants (like companies offering IPTV-Internet Protocol Television) are forced to negotiate franchise fees with over 33,000 local boards across the country. That unreasonable burden is a perfect example of a regulatory scheme that drains resources from businesses, drives up prices, and ultimately deprives consumers of a competitive choice.
Lowering the tax and regulatory liability these companies face in today's global economy will lead to greater competition in the telecommunications industry. Fortunately, consumer-friendly legislation is being considered in Congress that will reduce some of these hurdles and finally allow more participants in the telecommunications market.
For example, Senator John Ensign has introduced the "Broadband Investment and Consumer Choice Act" that, among other things, will permit new video providers to enter the marketplace without having to obtain thousands of approvals from municipalities across the country. Despite what you may hear from local elected officials and the big cable companies, this legislation ensures that city and county governments will continue to be compensated for rights-of-way and guaranteed public education and government access channels.
If the cable companies don't like this legislation, it is probably because they have been able to raise prices on captive customers at will. In fact, cable rates have increased 45 percent since the 1996 Telecommunications Act was passed, or more than three times the rate of inflation! The market is ripe for some healthy competition.
It has been almost a decade since comprehensive reform of the telecom industry was enacted. Today, new technologies in the video, high speed Internet, and phone markets are advancing so quickly that established rules and fees are outdated or do not apply. Consumers should not have to wait years to utilize these products because the taxes and fees are so expensive - and regulatory burdens so great -- that companies are unable to deliver new products in a timely, cost effective, and competitive manner.
We support the principles of regulatory reform, such as those in the Broadband Investment and Consumer Choice Act, and urge you to lend your voice to a growing chorus of consumers who want choices among video-service providers.