Submarine coalition opposes cable tax

12 Jul 2012

A coalition of submarine cable operators, including Level 3, Southern Cross, OPT French Polynesia and PPC-1, has filed an objection to the proposal by the Federal Communications Commission (FCC) to eliminate the exemption for providers of exclusively or predominately international services from having to contribute to the Universal Service Fund (USF). Eliminating these exemptions would require operators of international submarine cables landing in the US to make a quarterly contribution to the USF, currently set at 15.7% of assessable end-user revenues.

In their filing, submitted by attorney Kent Bressie, of Wilshire & Grannis, they argue that, unlike retail service providers, submarine cable operators cannot readily pass through costs to end-users, many of which are located outside of the US and take the position that they have already negotiated the economic bases of their Indefeasible Rights of Use (IRUs) and leases in long-term agreements. Cable operators could thus suffer a significant loss of revenue, and be forced to try renegotiating hundreds of IRU and lease agreements with content and application providers, financial institutions, and other end-users. Moreover, given the intensely competitive nature of the capacity market, levying a fee on cable revenues would encourage some providers to find means of avoiding compliance, placing carriers that incorporated USF fees into their prices at a significant competitive disadvantage.

Further comments to the FCC are due by 6 August. The FCC’s notice of proposed rulemaking can be found at http://www.fcc.gov/document/commission-adopts-nprm-reform-and-modernize-contribution-system.

United States