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Unfair Advantage
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Business New Haven
7/7/2003
By:
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As a business, what do you do when your revenues decline? Do you come up with better services, a more innovative product, or more competitive prices? Or do you ask the government to step in and squash your competitors?
It's clear that the cable television industry subscribes to the latter approach, as they have asked the state of Connecticut to nearly double taxes on their competitors. The legislature and the governor seem poised to follow their lead, apparently unaware of how unfair their action would be, and the local damage that it would cause.
As a retail business owner, I have great concerns about this new tax plan. Retailers like me across Connecticut sell and service satellite equipment for the state's 100,000-odd satellite TV subscribers. We have to compete against entrenched local cable monopolies that have significant political clout and a built-in customer base which totals over a million households in the state.
For years, Connecticut retailers have seen pay-TV subscribers flow from cable to satellite, as cable prices rose and cable service remained awful. Last year, Cablevision raised its rates five percent. In 2001, Cox Cable increased its prices as much as 20 percent for 150,000 families in communities around Hartford. The year before that, Cox raised rates 7.5 percent.
As prices for cable have soared 50 percent across the country since 1996, consumers have been pouring into local retailers to explore satellite service. In just the past year new cable subscriptions have declined nearly three-quarters to around 250,000 annually. Meanwhile, satellite TV operators added more than two million new subscribers in the same period.
To stop consumers from going to a lower-cost competitor, cable could improve its service, or cable could drop its prices back in line with satellite.
Instead, the cable monopolies in Connecticut chose adding new taxes to satellite. That would allow them to keep their poor service, and continue to raise prices at the same time - which means both cable and satellite subscribers would lose.
The proposal aims to levy fees on Connecticut satellite television companies based on how much they earn from subscribers, which of course would be directly passed on to subscribers, my customers. Cable currently pays the five-percent "gross earnings" tax because it is an "infrastructure" tax (also paid by railroads, for instance).
(In what conceivable way does a satellite impose on the infrastructure of Connecticut? Installing a pizza-size dish on a back porch hardly requires digging up as many streets, roads and bridges as does laying cable - or railroad track.)
Since satellite customers already pay a six-percent sales tax (which is going up), this proposal would nearly double the taxes on satellite.
Adding this tax on satellite runs counter to the principles of our free-enterprise system. It is an attempt to use government to [favor] one competitor over another. Moreover, satellite customers already pay taxes on the equipment they purchase from Connecticut retailers in the form of sales taxes, and the retailers pay taxes, like all small businesses, on employees and property and everything else.
The cable industry is pushing for satellite tax increases nationwide in an effort to make their up for its collapsing revenues. In California and Arizona a [similar] tax was rightly rejected last year, and this year in Nevada, Oregon, South Carolina, and Arkansas the idea has gone down in flames. Connecticut should reject it as well.
If you subscribe to either cable or satellite, call the legislature and the governor today. Tell them not to vote this unfair tax increase into law. Tell them a new tax on satellite television subscribers is wrong for Connecticut.
John Gladysz
Orbitech Satellite Services, LLC
New Britain
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