Broadband Cable Association of Pennsylvania

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April 17, 2014

A small surcharge on phone bills might get a little bigger if lawmakers pass a package of five House bills aimed at reforming Colorado's telecommunications regulations and spurring rural broadband investment. After zipping through the House, the bipartisan-backed measures were approved unanimously Wednesday by the seven-member Senate Business, Labor and Technology Committee.

House Bill 1328 would redirect a $54 million program that subsidizes traditional landline service in high-cost areas toward rural broadband development. A 2.6 percent surcharge on all phone bills - copper lines, wireless and Voice-over-Internet-Protocol - funds the program. Providers of VoIP services, which haven't faced regulation in Colorado, collect the surcharge voluntarily. A sister measure, HB 1329, would stamp into law that Colorado can't regulate VoIP and other Internet-based services. Some lawmakers believe VoIP providers such as Comcast would stop collecting the surcharge if HB 1329 passes, creating a $4.5 million shortfall in the high-cost program.

Two Democratic members of the committee - Sen. John Kefalas of Fort Collins and Sen. Gail Schwartz of Snowmass Village - raised questions Wednesday about that scenario. Schwartz asked whether the surcharge would need to be increased to 2.9 percent to make up the gap. Pete Kirchhof, who represents Colorado's rural telephone companies, said the Public Utilities Commission annually determines the size of the high-cost program and amount of the surcharge. The PUC capped the program at $54 million in 2012. "If we have to raise the surcharges ... who's going to pay for that?" Kefalas asked. The answer is landline and wireless subscribers in Colorado.

HB 1327 would eliminate state sales tax on broadband equipment and enable carriers to more easily access public rights of way and utility-trenching projects for network build-outs. HB 1330 would update certain telecommunications terms and HB 1331 would deregulate basic phone service. The measures have broad support from industry. "It is very difficult for us to continue to serve our customers if we have mandates and requirements that our competitors do not," Kirchhof said.

Bill Levis, former director of the Colorado Office of Consumer Counsel, testified against HB 1328, 1329 and 1331 on behalf of AARP of Colorado. He raised concerns about consumers' inability to lodge complaints if the PUC loses regulatory authority over phone service. "You're throwing consumers under the bus," he said. The measures are headed to the Senate State, Veterans and Military Affairs committee. - Denver Post

On April 22, the Supreme Court will hear a case that could alter the way Americans have used and benefited from broadcast airwaves since the dawn of radio and television. The case, American Broadcasting Companies v. Aereo, aims to shut down the startup Aereo's two-year-old video streaming service and claim ownership of the airwaves as the sole right of broadcasters like ABC, NBC and CBS.

This, quite simply, goes against everything the broadcast industry has agreed to over the past 100 years. When radio and television entered American life in the 1920s, the government made a bargain with the nation's broadcasters: They would receive free use of the nation's airwaves in exchange for providing free, advertising-supported programming in return.

The deal has paid off handsomely for both broadcasters and citizens. Americans have enjoyed the ability to watch all sorts of programming from the comfort of home, beamed through the air free and delivered into the living room by an antenna. Broadcasters, meanwhile, built large enterprises, earned billions, and became even richer after convincing Congress in the 1990s to empower them to extract additional fees from cable and satellite companies.

Then, two years ago, a little company I've invested in called Aereo came up with an idea: Why not harness the power of modern technology and the Internet to build a smarter, more versatile antenna that would make programming accessible to consumers on the device of their choice. It has done just that. An "antenna in the cloud" records broadcast signals and sends them to users over the Web for viewing then or later on various devices. This has made an old analog technology relevant again, available to customers for only $8 a month. It's not a piracy trick, as broadcasters have alleged, but a genuine innovation that consumers should be able to choose.

Yet broadcasters claim Aereo is "stealing" their content. Why is the industry pushing to punish those who wish to receive their television through airwaves, which are not owned by broadcasters? The answer is obvious: Broadcasters make more money when consumers are steered away from over-the-air program delivery and toward cable and satellite systems that pay the broadcasters retransmission fees. There's nothing wrong with that. But it seems rich for them to forget the agreement they made to provide television to the consumer in return for the spectrum that enables their business.

A consumer who uses a remotely-located antenna or DVR rather than home-based equipment is benefiting from innovation spurred by cloud-computing technology. The type of antenna should not matter. To argue that it does threatens the future viability of both antenna access to over-the-air television and cloud computing.

Broadcasters have now corralled the White House into joining their efforts to crush any innovation that challenges the status quo and the industry's lucrative business model. In March, the Obama administration submitted a "friend of the court" brief in ABC v. Aereo. The brief claims that the retransmission infringes on the broadcasters exclusive right to public transmission. But this ignores the government's own previous legal positions and threatens to outlaw the entire cloud-computing industry. It also puts the Obama administration at odds with technological innovation and the interests of consumers.

Why, given this administration's oft-stated support for innovation, would it take such a position? In siding with the broadcasters, the administration has signaled that the preservation of legacy business models takes precedence over lawful technological innovation. It also sends a message to those consumers who can't afford the ever-increasing fees of closed television distribution systems: Sorry, you can't have access to modern technology to watch television that is broadcast on the spectrum that you own.

As the U.S. Court of Appeals in New York recognized in 2013, when it rejected the broadcasters' bid to drive Aereo out of business, no one has offered any coherent factual or legal basis that justifies the broadcasters'-and now the administration's-attempts to condemn consumers to the use of an antenna from a bygone era. It is unfortunate that the broadcasters and the administration have aligned themselves against competition, choice and the consumer. The Supreme Court should set them straight. - Wall Street Journal op-ed from Barry Diller, chairman of IAC and Expedia-IAC. IAC has a minority interest in Aereo.

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