Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554

In the Matter of Procedures for Assessment and Collection of Regulatory Fees for Fiscal Year 2015

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MD Docket No. 15-121

REPLY COMMENTS OF THE NATIONAL CABLE & TELECOMMUNICATIONS ASSOCIATION AND THE AMERICAN CABLE ASSOCIATION The National Cable & Telecommunications Association (“NCTA”) and the American Cable Association (“ACA”) submit these reply comments in the above-captioned proceeding, addressing the assessment and collection of regulatory fees for Direct Broadcast Satellite (“DBS”) services.1/ In the Order accompanying the NPRM, the Commission recognized that DBS providers, as MVPDs regulated by the Media Bureau, “should share in the Media Bureau FTE burden attributed to MVPDs” through assessment of per-subscriber regulatory fees in the same fee category as cable and IPTV providers.2/ In the NPRM, however, the Commission proposes to set the initial rate for DBS providers at the rate of 12 cents per year per subscriber – only approximately one-eighth the level of the 95 cent per subscriber rate proposed for cable and IPTV providers in the same fee category – with no support in the record or reasoned explanation for proposing to set the DBS rate so disproportionately low.3/

1/

Assessment and Collection of Regulatory Fees for Fiscal Year 2015, Notice of Proposed Rulemaking, Report and Order, and Order, FCC 15-59, ¶¶ 7-9 (rel. May 21, 2015) (“NPRM” or “Order,” as appropriate). 2/

Order ¶ 28.

3/

NPRM ¶ 9.

Nothing in the initial comments offers support for such a low DBS rate, nor does any such support exist. As NCTA and ACA have explained, Commission precedent establishes that DBS providers, now appropriately included in the “Cable TV System, Including IPTV and DBS” fee category, should pay regulatory fees at the same rate as cable and IPTV providers.4/ And as ITTA observes, “[t]here is no reasonable basis for wireline video providers to continue to operate at a competitive disadvantage vis-à-vis their satellite competitors, which are the second and third largest MVPDs in the nation.”5/ Commenters also agree with NCTA and ACA that while neither Commission precedent nor the size and success of DBS providers suggest a phase-in of the fee is required to prevent “rate shock,” if the Commission determines that a phase-in period should nonetheless be applied, it should be limited to three years, so that DBS providers’ fees approximate or equal the fee paid by cable operators and IPTV providers by FY2017.6/ A longer phase-in period implicit in the proposed 12 cent per subscriber DBS rate would not be consistent with Commission precedent and is far beyond the length of any reasonable phase-in period that might be needed to prevent any “rate shock” that DBS subscribers may experience. A reasonable three-year phase-in would set FY 2015 fees at 24 cents per subscriber (two cents per subscriber per month), with projected DBS FY 2016 fees at 48 cents per subscriber (four cents per subscriber per month) and DBS FY 4/

Assessment and Collection of Regulatory Fees for Fiscal Year 2015, MD Docket No. 15-121, Comments of the National Cable & Telecommunications Association and the American Cable Association, at 2-5 (June 22, 2015) (“NCTA and ACA Comments”). See also Assessment and Collection of Regulatory Fees for Fiscal Year 2015, MD Docket No. 15-121, Comments of ITTA – The Voice of Mid-Size Communications Companies, at 5-7 (June 22, 2015) (“ITTA Comments”). 5/

ITTA Comments at 6.

6/

NCTA and ACA Comments at 5-8; ITTA Comments at 6-7. See also Assessment and Collection of Regulatory Fees for Fiscal Year 2015, MD Docket No. 15-121, Comments of EchoStar Satellite Operating Corporation and Hughes Network Systems, LLC, at 7-8 (June 22, 2015) (“EchoStar Comments”) (proposing that a three-year phase-in “consistent with the Commission’s actions with respect to new DBS fees” would be sufficient to address concerns about rate shock in escalation of rates applicable to EchoStar).

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2017 fees at 72 cents (six cents per subscriber per month), which (subject to further adjustment) should reasonably approximate the projected rate paid by cable operators and IPTV providers in that year. Such amounts cannot reasonably be characterized as likely to cause “rate shock,” and no initial comments prove otherwise. Finally, by including DBS in the “Cable TV System, Including IPTV and DBS” fee category, while retaining DBS responsibility to also support the International Bureau through fees paid for satellite regulation, the Commission appropriately took a “nuanced approach of recognizing that the work of both the International Bureau FTEs and the Media Bureau FTEs provide oversight and regulation of DBS.”7/ The Commission should reject DIRECTV’s attempt to undercut the logic of that conclusion by seeking reduction in the level of expected DBS support for the Media Bureau in recognition of the fact that DIRECTV also pays fees to support International Bureau FTEs.8/ Contrary to DIRECTV’s suggestion, assessing DBS regulatory fee payments to support both the International Bureau and the Media Bureau is neither unfair nor unique; it is not uncommon for providers that are regulated by multiple Commission bureaus to pay fees to support the differing services and benefits they receive from each. Because Commission precedent and the initial comments in this proceeding support assessment of DBS regulatory fees for the Media Bureau at the same rate as cable and IPTV providers, with no adjustment for fees paid by DBS to support the International Bureau and with any phase-in to prevent “rate shock” limited to no more than three years, the DBS proposed rate is, in fact, too low. The FY2015 rate for DBS providers in the “Cable TV System, Including

7/

Order ¶ 36.

8/

Assessment and Collection of Regulatory Fees for Fiscal Year 2015, MD Docket No. 15-121, Comments of DIRECTV, LLC, at 4 (June 22, 2015) (“DIRECTV Comments”).

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IPTV and DBS” fee category should be set at 24 cents per subscriber, with additional increases of 24 cents per subscriber tentatively planned for both FY2016 and FY2017. I.

THE RATE FOR DBS FEES TO SUPPORT THE MEDIA BUREAU SHOULD BE THE SAME AS THE RATE FOR CABLE AND IPTV Ignoring the implication of the Commission that the 12 cent per subscriber rate proposed

in the NPRM is intended only to be the starting point for a phase-in to a more appropriate longer term DBS rate,9/ DIRECTV and DISH assert that the 12 cent rate is the appropriate standard base rate for DBS, and DISH argues that the same rate should apply going forward “absent changes in future years regarding the nature of DBS regulation.”10/ This argument ignores longstanding Commission precedent and the record of this proceeding revealing that the regulatory fee rate for DBS providers as part of the “Cable TV System, Including IPTV and DBS” fee category should be the same rate as that assessed to cable and IPTV providers. After an appropriate phase-in period, to the extent one is required, the Commission should set the DBS fee at the same level as cable and IPTV. When the Commission included IPTV in the same fee category as cable operators, it concluded that both should pay for Media Bureau regulation at the same rate because there is a “relatively small difference from a regulatory perspective” between the two types of MVPDs.11/ The Commission has now appropriately and similarly concluded that DBS should be included in the same fee category and pay fees to support the Media Bureau because “although DBS is not identical to cable television and IPTV, the services all receive oversight and regulation as a result of the work of Media Bureau FTEs on MVPD issues” and “[t]he burden imposed on the 9/

See NPRM ¶ 9.

10/

DISH Comments at 2-3; DIRECTV Comments at 3.

11/

Assessment and Collection of Regulatory Fees for Fiscal Year 2013, Report and Order, 28 FCC Rcd. 12351, ¶ 32 & n.81 (2013) (“2013 Fee Order”).

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Commission is therefore similar.”12/ Consequently, the Commission has established that DBS imposes a similar burden on the Media Bureau as cable and IPTV, and that strongly suggests that DBS should pay fees to support the Media Bureau at the same rate as cable and IPTV.13/ In proposing a 12 cent per subscriber FY2015 rate for DBS in the NPRM, the Commission did not claim that the rate was based on any calculation of costs DBS providers cause to the Media Bureau or that the difference between the 12 cent rate for DBS and the 95 cent rate for cable was based on any cost calculations or other reasoned method.14/ In fact, data and information in the record presented by NCTA and ACA,15/ as well as data presented by the Commission in the Order,16/ suggest that the regulatory burden imposed on the Media Bureau by DBS is reasonably similar to that imposed by cable operators and IPTV providers, supporting application of Commission precedent for assessing the same rate for DBS as for the other services in the same rate category. The Commission has long recognized that it is infeasible to particularize regulatory fee assessments to the specific entity-to-entity use that may be made of the Commission’s resources and instead applies rates to broad categories of similar providers.17/ This is a sound principle and

12/

Order ¶ 33.

13/

Similarly, when the Commission included VoIP service providers in the same rate category as interstate telecommunications service providers (“ITSPs”), it did not create a unique rate for VoIP, despite the recognized differences in the level of regulation between VoIP service providers and telecommunications services in the same fee category. See Assessment and Collection of Regulatory Fees for Fiscal Year 2007, Report and Order and Further Notice of Proposed Rulemaking, 22 FCC Rcd. 15712, ¶ 20 (2007). 14/

See NPRM ¶ 9.

15/

See Assessment and Collection of Regulatory Fees for Fiscal Year 2014, MD Docket No. 14-92, Comments of NCTA and ACA, at 7 (Nov. 26, 2014) (“NCTA and ACA 2014 Comments”); Assessment and Collection of Regulatory Fees for Fiscal Year 2014, MD Docket No. 14-92, Reply Comments of NCTA and ACA, at 6-7, 11-12 (Dec. 26, 2014). 16/

See Order n.111, n.127.

17/

See Order ¶ 33.

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there is no reason to reject it now in support of DBS operator suggestions to calculate specific numbers of Media Bureau FTEs that work on DBS matters versus those that work on cable matters.18/ As NCTA and ACA have explained, any attempt to do so would be unnecessarily complicated or even infeasible, due to the overlap of Media Bureau functions that regulate both DBS and cable and IPTV operations.19/ The precedent set by undertaking such calculations within a single fee category could also lead to other types of providers also demanding individually calculated fee rates – for example, rather than a single ITSP rate, VoIP service providers could demand a separate rate, while CLECs could demand to be rated separately from ILECs. II.

A THREE-YEAR PHASE-IN FOR DBS FEES IS SUFFICIENT TO PREVENT “RATE SHOCK” The DBS providers did not directly respond to the request in the NPRM for comment on

“whether setting the initial rate for DBS at one cent per customer per month would address DIRECTV and DISH’s contention that a ‘fee increase will cause rate shock.’”20/ DIRECTV merely noted that immediately assessing DBS the same rate as cable would be, “by any definition, ‘rate shock;’”21/ DISH argued that the 12 cent per subscriber rate should be made

18/

See DIRECTV Comments at 3; Assessment and Collection of Regulatory Fees for Fiscal Year 2015, MD Docket No. 15-121, Comments of DISH Network, LLC, at 7-8 (June 22, 2015) (“DISH Comments”). 19/

NCTA and ACA 2014 Comments at 11 (“Most regulatory functions occur independently of the technology used to deliver the service and span several Divisions within the Bureau, including overall management personnel. It would be nearly impossible to evaluate, for example, when a Media Bureau FTE working on retransmission consent reform or closed captioning issues is doing so for ‘cable’ or ‘DBS’ purposes. This frequent functional overlap would make it both difficult and unproductive to attempt to assess on an FTE-by-FTE basis how many Media Bureau FTEs are devoted to DBS issues as opposed to other MVPD issues . . . .”). 20/

NPRM ¶ 9.

21/

DIRECTV Comments at 3-4.

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permanent because an “open-ended approach” that would allow increases beyond the 12 cent rate would “fail[ ] to address the potential for ‘rate shock.’”22/ Neither argument holds water. In the Order, the Commission said that to address DBS providers’ concern that immediately implementing the new fee at the same rate paid by cable and IPTV providers would “cause rate shock” for DBS customers, the Commission had “decided to phase in the DBS fee,” noting the proposal made by NCTA and ACA for a three-year phase-in process.23/ This proposal for a three-year phase-in is now also supported by other commenters.24/ As the commenters argue, large and successful providers such as the two DBS providers – the second and third largest MVPDs in the nation, each with annual profits measured in the billions of dollars – are not in need of any phase-in to address potential “rate shock” to their customers.25/ Certainly, if the DBS providers are concerned that a rate increase of 6 cents per month (the estimated amount for DBS if the full fee were instituted immediately with no phasein), or approximately three-tenths of one percent (0.3%) for DBS’s lowest priced customers,26/ would constitute “rate shock” for those customers, they can easily absorb the estimated $25 million annual cost of the fee in their combined annual $6.9 billion of profits.27/ 22/

DISH Comments at 2.

23/

Id.

24/

ITTA Comments at 6-7. See also EchoStar Comments at 7-8 (proposing a three-year phase-in for rate increases applicable to its own services). 25/

NCTA and ACA Comments at 6-7; ITTA Comments at 7.

26/

See NCTA and ACA Comments at 7-8.

27/

Profit figures are drawn from each operator’s 2014 annual report. DIRECTV Annual Report 2014 at 41 (reporting 2014 revenues of $33.3 billion and operating profit of $5.1 billion); DISH Network Annual Report 2014 at 55 (reporting 2014 revenues of $14.6 billion and operating profit of $1.8 billion). DIRCTV’s suggestion that the total cost of the full fee to DBS providers would approximate $35 million annually appears to be based on applying a rate of somewhat over $1.00 per subscriber to the 34.5 million DBS subscriber figure they cite. DIRECTV Comments at 3-4. The more realistic $25 million figure used here assumes, as the Commission did, that the overall rate for the “Cable TV System, Including IPTV and DBS” fee category will decline to approximately 72 cents per subscriber as the number of DBS subscribers is included in the overall fee calculation.

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Nevertheless, if the Commission remains convinced that a phase-in is required for DBS providers to avoid rate shock to their customers, NCTA and ACA have amply demonstrated that a three-year phase-in – beginning with 24 cents per subscriber in FY2015 and increasing by 24 cents per subscriber in each of the next two years – would increase rates for even the lowest priced DBS subscriber by only one-tenth of one percent (0.1%) per year and by only two hundredths of a percent (0.02%) per year for an average DBS subscriber. In other words, a DBS customer enjoying the lowest priced $19.99 per month introductory rate would (if the fee increase is fully passed through) pay $20.01 per month in the first year and $20.05 per month when the fee is fully phased-in. The per-month cost for an average DIRECTV subscriber would (if the fee is fully passed through) increase from $107.27 to $107.29 in the first year and to $107.33 when the fee is fully phased-in.28/ It seems unlikely that most DBS subscribers would consider such relatively minor increases as creating “rate shock” for them. In any event, a threeyear phase-in is more than adequate to address any “rate shock” concerns. III.

PAYMENTS TO SUPPORT INTERNATIONAL BUREAU REGULATION OF DBS SATELLITE INFRASTRUCTURE DO NOT JUSTIFY REDUCED RATES FOR MEDIA BUREAU REGULATION OF DBS MVPD OPERATIONS DIRECTV argues that the Commission should set a lower rate for DBS because “DBS

providers must now pay two sets of fees – one to the Media Bureau, and the other to their licensing bureau, the International Bureau.”29/ DIRECTV also considers it “unfair that, alone among all FCC regulatees, DBS providers must pay two regulatory fees for a single service.”30/ DIRECTV is wrong on both counts.

28/

See NCTA and ACA Comments at 7-8.

29/

DIRECTV Comments at 4.

30/

Id.

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In the Order, the Commission explained “that the work of both the International Bureau FTEs and the Media Bureau FTEs provide oversight and regulation of DBS,” justifying separate support for each bureau for which DBS creates regulatory costs.31/ The fact that DBS is paying to defray the costs it causes the International Bureau does not reduce the cost to the Media Bureau for its MVPD regulation, and DIRECTV does not suggest any logical explanation for why DBS Media Bureau support should be reduced due to its International Bureau payments. In fact, and despite DIRECTV’s claims to the contrary, DBS is not the only service that is required to pay fees to support more than one bureau where it creates regulatory costs. For example, in addition to per-subscriber fee payments to support the Media Bureau, cable operators also pay fees to support the Wireless Bureau for regulation of their registered antenna licenses or for the International Bureau for regulation of any satellite earth stations they may maintain as part of the infrastructure supporting their cable operations. Telecommunications service providers that maintain International Bearer Circuits (terrestrial/satellite/submarine cable) must pay fees to support the International Bureau for those circuits in addition to paying basic ITSP fees to support the Wireline Competition Bureau. These examples demonstrate that, contrary to DIRECTV’s unsupported assertion, it is a basic principle and common practice that providers should pay regulatory fees to support Commission bureaus that regulate each of the various facets of a provider’s operation. If that regulation encompasses multiple bureaus to a meaningful extent, then those providers are routinely assessed multiple regulatory fees. There is nothing unique about DBS providers paying to defray the costs of both of the two bureaus that provide them with regulatory support, and no

31/

Order ¶ 36.

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reason the extent of DBS fee payments for the International Bureau should be considered when determining the appropriate fee for DBS to pay for the Media Bureau’s regulatory efforts. CONCLUSION In adopting its FY 2015 regulatory fee schedule, the Commission should set the initial fees for DBS providers at the reasonable level of 24 cents per subscriber (or 2 cents per subscriber per month), and make explicit that the Commission intends to phase in fees for DBS providers as part of the “Cable TV System, Including IPTV and DBS” fee category with additional increases over a period of three years to reach a level by FY2017 reasonably comparable to the regulatory fees assessed to cable and IPTV providers as part of the same fee category.

Respectfully submitted,

_______________/s/_______________ Rick Chessen Neal M. Goldberg National Cable & Telecommunications Association 25 Massachusetts Avenue, NW – Suite 100 Washington, DC 20001-1431

Ross J. Lieberman Senior Vice President of Government Affairs American Cable Association 2415 39th Place, NW Washington, DC 20007 (202) 494-5661

July 6, 2015

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