Saturday, June 7, 2003

Stay tuned: Cable, satellite TV wrestle on taxes

By Shelley Davis
Enquirer Columbus Bureau

COLUMBUS - The war between the cable TV and satellite industries in Ohio is heating up, and both sides say they won't back down until they're certain the state won't tax their customers.

The satellite industry has threatened to file a lawsuit against Ohio if satellite services aren't taken off the list of items subject to a sales tax meant to balance the state budget. The threat comes on top of television and radio ads run by both industries trying to fire up customers to fight the tax.

"It's going on all across the country," said Tom Green, Ohio's lobbyist for DirecTV, the nation's largest satellite TV provider. "It'll take a major step one way or another to end these battles."

Competition between the industries is fierce, and if only one is taxed, each side believes the other will have the upper hand with customers. Robert Mercer, spokesman for DirecTV, called the battle "a blatant attempt by cable to gain a competitive advantage."

The satellite industry, in an attempt to call attention to what it calls unfair taxation, commissioned law firms in Ohio and Washington D.C. to examine the legality of the tax proposal.

"We were frustrated by our inability to get much attention with our argument - that either we needed to be out of the bill or cable needed to be in with us," Green said. "(The law firms) suggested we had a very legitimate argument. You can't treat two businesses that do the same services differently for taxation purposes."

The satellite industry will sue the state if lawmakers don't take satellite services out of the budget, or don't put cable in, Green said.

The claims of unconstitutionality are groundless, said Ed Kozelek, executive vice president of the Ohio Cable Telecommunications Association. He said the cable industry, not the satellite industry, is being subjected to discriminatory tax treatment.

Kozelek emphasized his group is not actively lobbying for satellite services to be taxed, but rather against cable customers being taxed twice.

Ohio cable customers pay a 5 percent local franchise fee, which helps pay for things like providing free cable to more than 9,100 local schools, libraries and public buildings, Kozelek said.

Satellite lobbyists are adamant that these local fees shouldn't be treated the same as taxes.

"Equating a franchise fee to a sales tax is an apples to oranges comparison. The fee pays for their need to tear up the streets and highways to lay cable," Mercer said. "Satellite customers should not be punished because of cable's business model."

"Satellite doesn't need franchises, we're selling light waves from satellites directly to the customer's property," Green said.

Lawmakers seem to agree with the cable lobbyists, and are trying to avoid taxing cable customers twice.

"I'm not looking at where the tax is coming from, I'm just looking at cable is already taxed, and satellite isn't," said Sen. Mark Mallory, D-Cincinnati. "They're competitors, and they each want to have the advantage, so they're going to duke it out."

Both cable and satellite TV were on a long list of services, like massages and baseball tickets, that Gov. Bob Taft wanted to subject to a 5 percent sales tax. Heavy lobbying on behalf of the cable industry persuaded legislators to take cable TV off, but satellite services were left on the list.

The cable and satellite industries have even taken their battle to the airwaves with television and radio ads in Ohio, where 656,881 homes subscribed to satellite TV at the end of 2002, compared to the 3.08 million cable subscribers, according to Media Business Corp., an independent media research firm. Until recently, lobbyists for cable were much more visible in the State House than lobbyists for satellite. But groups like the Ohio Council of Retail Merchants are starting to reverse that trend by speaking up for satellite.

Council President John Mahaney said taxing satellite subscribers could hurt the local businesses that sell satellite equipment.

"How much do we need in terms of taxes? There's no point in taxing customers twice - we're already getting them once with the sales tax," Mahaney said.

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