And They're Off

You gotta love a state legislature that has a “Committee on Committees.”

Kentucky just passed a comprehensive tax overhaul bill favored by Governor Ernie Fletcher. He must have stayed up nights working on the legislation; it is long and involved and leaves no sector untouched by his reform efforts. Buried deep was a provision to impose a tax on all video providers, even DBS, something that has been discussed in various circles in and outside the beltway and something whose time has come. However the bill eliminates the ability of local governments to collect a franchise fee meaning the revenue collected will sink into the deep morass of state coffers ne’er to be suitably distributed to local government or correctly accounted for again. Ask the municipalities in Florida about how that works.

I still can’t get my brain around state legislatures being able to trump the current Telecommunications and Cable Acts, but we’ll leave that for another day.

Meanwhile what is correct in the legislation is finally, once and for all, making DBS step up to the plate. I’ve always thought it would be so simple to have a point-of-sale tax on DBS equal to the 5% that cable operators have to pay. Additionally, it would be a no-brainer to require DBS to carry local PEG channels at least on a regional basis now that they are required to do local-into-local. I even sat down with the satellite guys at one point and they liked the idea because it would help them meet their 4% public interest obligation. They were really interested in whether or not PEG had “news, weather and sports.” “Sure,” said I, “It’s not your news, weather and sports, but we have it.” The sticking point was satellite’s insistence that PEG should pay to be up on the bird and various franchise agreements that prevent PEG programming from being shown anywhere but the cable system it was created in.

Getting back to who pays what when and how it should be collected and distributed, the bill correctly imposes the same obligations on all video programmers but gives cable a huge money order. See it’s the 3% on “video service” that’s the problem. Currently municipalities in Kentucky can collect up to 5% on gross receipts which are a far cry from just collecting on video service. Gross receipts include advertising, sale or rent of equipment, charges for installation, etc. and even this is not really “gross receipts” because the FCC took out cable modem and telephone is up for grabs. Still, 3% on video services does not equal 5% on gross receipts. There is a provision for an additional 2.4% on gross receipts, but you do the math.

Then there's the elimination of being able to require a "pass-through" for PEG support. The bill gleefully says it will not prevent operators from making "donations" to the municipality. Can you visualize franchise negotiations where the city says to the operator "Make an appropriate donation and we'll renew," Tony Soprano style? Eeek!

These are exactly the issues that must be addressed in the Telecom rewrite. There must be strong language that prevents states from thwarting local government and undercutting franchise agreements.

It is reported the Kentucky Cable Telecommunications Association was pleased. I’ll bet they were. I can hear bourbon pouring now.

Dancing In The Dark

Sometimes I have a hard time keeping my mouth shut. Okay, ALL the time I have a hard time keeping my mouth shut.

My husband and I were at Best Buy looking for new stereo speakers when we happened to stroll over toward the televisions. We stood transfixed in front of a huge HDTV screen, oooohing and aaaahing at the crystal clear images of colorful fish swimming in bright blue water. I backed up a few feet to get a different perspective without realizing that I was now at the entrance of the analog television aisle.

A salesman was telling a potential customer about all the advantages of a 39” color T.V. and that the price of just $339 was an incredible steal. Overhearing the conversation I turned to the two men and said to the customer “Don’t buy that set.” The salesman gave me a dirty look. “Why not?” asked the customer. “Because next year it’s not going to work,” I said.

The salesman jumped in “Ma’am, we guarantee all our products with an extended warranty.”

“Yes, but you also know that the digital deadline is coming and if he buys this set he’ll have to get an expensive converter box to make it work.”

I felt it my civic duty to explain to this man the plan for digital transition and was doing pretty good at it until my husband sidled up to me with that “It’s time to go” look on his face.

I don’t necessarily mind the transition to digital, although truthfully I only watch home improvement shows and Law and Order re-runs, but what I do mind is that the majority of the American public has no idea what is headed their way. Large and small analog sets are being blown out as fast as you can print a Sunday circular and none of these sets come with a warning to inform the public that they will go black in a year and a half. That should be criminal, in fact I’d call it fraud, but the manufacturers and retail outlets are still selling these products, 30 million of them in 2004.

Jonathan Adelstein told reporters “I think if there is a cutoff of analog service, we’re going to have an amazing uproar from the public if there is not really a lot of effort made to prepare the public and give them the tools they need to be able to receive television signals in their homes.”

Ya think?

Adelstein was right that it is up to Congress to figure this one out. Joe Barton (R-Texas) has introduced legislation to provide a hard-date for analog cutoff and to provide subsidies for low income families that can’t afford the converter boxes. The legislation also contains a provision for fairy dust that will bring the price of the boxes down from their current $300 to $1,200 price range to just $50 per in the next year. Barton says the subsidy will cost less than $1 billion dollars, but the Government Accounting Office gives an estimated price range of $460 million to as much as $10.6 billion. The broad price discrepancy in the GAO study leads me to believe that nobody (not a single living soul, especially not those beltway bandits) know what they are talking about!

Meanwhile have you seen one PSA on digital transition? I haven’t. Have you heard radio PSA’s on the subject or seen a note slipped into your tax forms or car registrations or Social Security updates? How about billboards? Or newspaper ads or bus signs?

What’s the plan for handing out these boxes? Will people have to line up “cheese give-away” style in church parking lots to get their converters? And what if they can’t figure out how to hook them up, will there be a special squad of “digital transition” first responders roaming neighborhoods for on-call assistance?

What if they underestimate the demand and the box guys can’t pump them out fast enough? I saw gentle housewives turn into vicious animals when Toys R Us ran out of Tickle-Me-Elmo, can you imagine what a few million men will do in January 2007 when they discover they can’t get the SuperBowl?

I believe God gives people brains to use, not to sit on, but even when the guys on Capitol Hill are standing it seems their elevators don’t run all the way to the top. Now, not next year, is the time for Congress to figure this mess out. And any time in the next twenty or so months they might want to make even a half-hearted attempt to inform the American public.