The Honorable Dade Phelan
Chair, House Committee on State Affairs
Texas State House
Austin, TX 78701
Dear Chair Phelan,
My name is Thomas Aiello, and I am the Policy and Government Affairs Associate for National Taxpayers Union (NTU). On behalf of NTU, I am pleased to submit written testimony in support of HB 3535, a common sense proposal to modernize Texas’s antiquated Right-of-Way (ROW) laws. HB 3535 would reduce significant cost barriers telecommunications providers face when deploying and operating lines used for both video and voice services in localities across the Lone Star State. If enacted, this legislation would eliminate the threat of double taxation, spur new capital investments, and help bridge the digital divide many Texans face. We proudly support HB 3535 and strongly urge you to support this important legislation.
Founded in 1969, NTU is the oldest non-partisan taxpayer advocacy group in the United States. Every one of our fifty years of existence has prioritized policies to lessen burdensome taxation, streamline inefficiencies in government, promote private markets, and so much more. Our work has culminated in victories across the United States, from stopping property tax hikes at the local level, advocating for responsible budgets in state capitols, and bringing to fruition historic tax cuts in Congress. All this has been made possible by our dedication to taxpayers and the free market.
Thousands of lobbyists work for special interests for their clients, but at NTU we are the “Taxpayers’ Lobbyist;” we fight to ensure all Americans are able to pursue their dreams without the heavy hand of government holding them back.
Taxpayers and consumers have a direct interest in the telecommunications sector, as taxes and regulations create new burdens in the market, thereby raising costs which are passed onto consumers. As such, NTU regularly supports efforts to cut or eliminate telecommunication taxes and fees. We have also advocated in favor of state franchising reforms that allow the entry of new competitors to the video, voice, and data delivery markets. At the federal level, we have endorsed efforts to prevent discriminatory taxation of internet and wireless services and heavy-handed government regulation of providers.
Deploying underground broadband and video cable infrastructure is not as easy as simply digging up dirt and laying wires below ground. Telecommunication providers face significant pre-deployment barriers from local governments and public utilities that make the process more expensive from both a capital and time perspective. In most cases, providers must negotiate with local governments for access to government owned “rights of way” so they can place their wires on publicly or privately owned properties. Unfortunately, some localities make it purposefully difficult to access these rights of way by charging providers more than the ROWs actually cost, which in some cases can double the cost of network construction and delay implementation. According to the National Cable and Telecommunications Association, “in some cases, cable companies have encountered significant delays in obtaining permission to access rights of way, including delays that can last for more than a year before requests for access are approved.”
Unnecessary delays and unanticipated incurred costs not only make it more difficult for more consumers to access the internet or enjoy video services, but can ultimately increase their monthly service bill once these networks become operational.
While many municipalities make it difficult to deploy cables, localities in Texas are in a unique position as they are lawfully permitted to charge providers twice on the same line for both video and voice services. For example, in jurisdictions such as Houston, Dallas, San Antonio, and others, providers are hit with a duplicative charge for usage of the same line - once for traditional cable and once for telephone service- even though their services share a single coil. We believe such a scheme is a deterrent to investment, as well as a harmful policy that taxes businesses twice for operating a single service line. Providers should be encouraged to dedicate resources to invest in new lines or reduce prices for consumers, instead of diverting capital out of operations to fund the coffers of local governments.
This misguided arrangement is estimated to boost local coffers by more than $56 million annually, which is by no means a small sum of capital. However, Texas should prioritize long term economic growth over short-sighted revenue grabs by supporting policies which enable greater innovation, expand coverage, and lower costs on providers and consumers. Duplicative taxes, fees, and regulations make it more costly and complicated for telecommunications providers to operate in the state, which in turn could hinder the deployment of increasingly essential communications and information services for Texans.
The Solution: HB 3535
Thankfully, HB 3535 is a sensible approach to modernize long-outdated ROW laws and correct inefficiencies in the Texas code. This legislation rightly proposes to bring more neutrality, simplicity, and transparency to the tax treatment of telecommunications providers, all of which would ultimately benefit consumers and taxpayers.
HB 3535 creates an exemption for the telecommunications fee in Section 283.051 of the Local Government Code, and the cable franchise fee in Section 66.005 of the Utilities Code. This results in the requirement that a provider pay the larger of the two fees, but would exempt the provider from the smaller of the two. Permitting an exemption of the smaller of the two fees would allow providers to do what they know best: use their capital to provide and deploy high quality service at the lowest possible price.
NTU understands that the vast majority of municipalities do want video and voice services brought into their communities, but at the same time these localities also want to raise revenue to fund priorities in their budget without having to raise taxes on their constituents. However, dipping into the same pot of revenue twice is both economically damaging and inefficient tax policy . By making much-needed reforms to ROW laws, Texas legislators are making a concerted effort to prioritize innovation and investment over the short-sighted goal of filling the state’s coffers through bad tax policy.
We strongly believe state and local governments must do more to encourage video and voice service deployment while also refraining from the urge to levy duplicative taxes on telecommunications providers. Passing HB 3535 would be a strong step in the right direction. Consumers and taxpayers win when businesses and innovators operate in a low tax and light-touch regulatory environment. Texas has a proud history of promoting these principles and we hope that this trend will continue with HB 3535 becoming law.
NTU appreciates the opportunity to submit these comments and hope to serve as a resource as you move forward with proposals that will benefit taxpayers, consumers, and providers.
Policy and Government Affairs Associate