Vt. House Panel Weighs Per-Line USF Fees, $15 Pole Attachment Tax

The telecom industry pushed back on a Vermont state bill that could shake up state USF contribution and telecom taxation. At a House Ways and Means Committee hearing streamed Wednesday, a wireless industry lobbyist said a proposed shift to connections-based USF contribution mechanism unfairly shifted costs to wireless customers. A New England Connectivity and Telecommunications Association (NECTA) lobbyist, representing the region’s cable industry, condemned a possible $15 annual tax on each pole attachment owned by private communications providers. Community media representatives supported the proposed tax for supporting public, educational and governmental (PEG) channels.

The Vermont House panel heard testimony on a second draft of H-657. Rather than the current 2.4% revenue-based state USF mechanism, the bill would assess 70 cents monthly per retail access line, including VoIP and postpaid wireless. Carriers would continue to pay 2.4% of monthly prepaid wireless retail sales and Vermont Lifeline subscribers wouldn’t have to pay the fee. Also, the bill would add the 988 mental health hotline to a list of what may be supported by state USF. The fresh version of H-657 incorporated H-575, which originally proposed the $15 pole attachment tax to fund community media. The bill would exempt publicly owned communications attachments, such as those belonging to the state’s communications union districts, groups of two or more municipalities that build infrastructure in rural areas. It would allow cable companies to deduct any amounts paid to PEG channels through their state franchise fee, which is capped at 5% of revenue. Among other provisions, H-657 would repeal Vermont’s telephone personal property tax.

"We're feeling a little picked on in this bill,” said Scott Mackey of Leonine Public Affairs, representing wireless carriers AT&T, T-Mobile, U.S. Cellular and Verizon. Per-line USF fees shift costs to wireless, and overall, the bill raises industry’s costs for investing in Vermont, he said. "You want to tax the infrastructure of people who are spending their own money and putting infrastructure into the state of Vermont to solve a problem that's really being caused" by people using networks "to stream and sell services directly to consumers."

It would be a logistical “nightmare” to implement the $15 pole attachments tax, protested Anna Lucey, NECTA executive vice president-legislative and external affairs. “Just the mechanics of implementing a pole attachment fee alone have our members very concerned, specifically with how the poles and attachments are inventoried." With multiple pole owners in Vermont and many poles jointly owned, errors could be made that might lead to double or triple counting of attachments when the state assesses the tax, said Lucey. To ensure accuracy, Vermont would need an "unbiased pole-by-pole database or a full audit of all attachments conducted by the state,” she said.

The $15 charge may be federally preempted, added the NECTA official. The federal Cable Act caps franchise fees at 5% of a provider's revenue, but even with the deduction allowed by the bill, Vermont could exceed that cap in violation of the act, Lucey said. Second, the federal Communications Act bars states from increasing the cost of deploying and maintaining telecom networks, she said. Adding a $15 pole attachment fee could mean NECTA members have to pay double or triple what they’re currently paying to pole owners, she said.

The proposed pole attachment charge would violate federal law, agreed Wilkinson Barker attorney John Scott for CTIA. “Federal law prohibits states and localities from charging this type of fee on wireless providers to raise revenues for other programs,” he said. “These must instead be limited to the actual and reasonable costs” that state and localities incur “to oversee permitting and the use of wireless facilities.” However, Ways and Means Committee Chair Emilie Kornheiser (D) responded that the bill proposes a tax, not a fee. According to the FCC, it doesn’t matter what the state calls the charge, said Scott. “What matters is how it’s applied.”

Paying for PEG with the proposed pole-attachment fee would be "entirely consistent with federal law,” said Bradley Werner attorney Nancy Werner, representing the Vermont Access Network. The state has authority to impose taxes unless federal law clearly preempts it, and no federal law preempts the excise taxes proposed by the bill, said Werner, a former NATOA general counsel. It wouldn’t be a fee for using the right of way or a tax on a particular service, she said. "It is an excise tax on pole attachments.”

PEG needs an alternative funding source because cable TV is losing revenue to streaming TV companies that don’t pay franchise fees, said Lauren-Glenn Davitian, public policy director for CCTV Center for Media and Democracy. Comcast revenue in Burlington, Vermont, declined by 19% between 2016 and 2019, while Burlington Telecom revenue declined 28%, she said. "A new funding stream is what we're seeking."

Community media is important, but the proposed $15 pole attachment fee isn’t an appropriate way to fund it, said Hunter Thompson, Vermont Department of Public Service director-telecom and connectivity. Broadband construction costs are already high, he noted. The department supports proposed changes to USF contribution and using the fund to support 988, he said. With many cutting their telephone cords in favor of wireless, a connections-based fee would increase contributions in a more equitable way, he said. However, Thompson recommended moving the effective date for the USF change to July 1, 2025, from Jan. 1 of that year, to align with the fiscal year.

Legislators should be careful not to raise broadband deployment costs, said Vermont Community Broadband Board Executive Director Christine Hallquist. "We have very challenging business cases in the rural areas,” she said. "I want to encourage you to not add any burden to serving these rural areas.”

Adding fees will increase rates that customers pay, making service less affordable, warned Roger Nishi, Waitsfield & Champlain Valley Telecom vice president-industry relations. And it will take away from money that small rural companies like his can use to upgrade networks to fiber, he said.

Vermont Department of Taxes Commissioner Craig Bolio doesn’t “love” the pole attachment fee. It won’t work for the department to start that this July as the bill proposes, he said. “Seems like a lot of work for not a lot of money." Repealing the telephone personal property tax is "an intriguing idea” if it’s revenue neutral, he said.