WASHINGTON-Neither federal regulators nor lawmakers are likely to approve sweeping pre-emption of local-state taxation of wireless licenses, according to sources, but policymakers could strike down discriminatory levies on a case-by-case basis or make technical changes in the law to accomplish the same on a broader scale.
The wireless telecom industry is not winning the war against wireless taxation, but may be poised to win a key battle-which could carry some precedential weight-involving Oregon’s tax on Western Wireless PCS I Corp.’s Portland personal communications services license.
Western Wireless paid $34 million for the license in a Federal Communications Commission auction last year. Overall, the firm shelled out about $200 million for seven markets, and has interest in another carrier.
The Oregon Department of Revenue, viewing the permit as tangible personal property, is forcing Western to pay $500,000 a year while forgoing assessments on other communications companies.
Cellular carriers, which received licenses for free, are exempt from the Oregon tax.
That has caused some friction within the industry over how to frame the issue before policymakers without inviting trouble for cellular firms.
“The Oregon tax, which is assessed even before a company commences operations and begins generating revenue, acts as a barrier to entry in the Oregon telecommunications market against wireless carriers who buy their licenses at auction or on the secondary market,” Western Wireless told the FCC in a recent pleading.
An FCC official said a decision is expected early next year, preceded likely by a ruling on a Roseville, Minn., franchise wireless tax issue. But even a victory in the Oregon case will not address the broader issue. The industry said there are 90,000 taxing entities in the United States.
“The Oregon tax scheme,” added Western Wireless, “may create a gap between the cost of a license and its value on the secondary market, which may impair geographic partioning, spectral disaggregation, and resale.”
The Cellular Telecommunications Industry Association in September petitioned the FCC to pre-empt excessive and discriminatory taxation of wireless carriers.
The request was dead on arrival, according to agency officials and lobbyists, with the FCC realizing it doesn’t have the manpower to tackle such a sweeping initiative and probably lacks the authority to do it.
Indeed, the commission is feeling the backlash from states and local telephone companies over the federal-weighted interconnection order under appeal.
Still, CTIA and Western Wireless’ petitions have helped industry to build a record that could be useful in the legislative arena.
But it won’t be easy.
The returning Republican-led Congress, which came to power in 1995 with a program advocating a New Federalism that would return power to the states, is also unlikely to embrace a sweeping pre-emption mandate.
Sen. Byron Dorgan (D-N.D.), a member of the Commerce Committee and a former state tax commissioner warned FCC Chairman Reed Hundt in a Sept. 25 letter “to reject the requests of Western PCS and respect state sovereignty as the statute [1993 budget act] specifies and as Congress intended.”
House and Senate budget bills alluded to by Dorgan forbid property taxation of FCC licenses, the prohibition was struck in conference committee.
In addition to the policy challenge, the industry faces a powerful states tax lobby.
“The FCC may not proceed in this matter by virtue of the Tenth and Eleventh Amendments of the U.S. Constitution, other guarantees of federalism that are `tacit postulates’ of the Constitution, the Tax Injunction Act … and other considerations of federalism that are reflected in the doctrines of comity and abstention,” stated the Multistate Tax Commission.
The Clinton administration, on the other hand, said it does not want to tax new communications technologies, like the Internet.
“Many governmental bodies are currently examining the potential impact of taxation of electronic commerce,” said Jonas Neihardt, head of congressional affairs at CTIA. “Many of those issues are similar to CMRS [commercial mobile radio service] because of the multi-jurisdictional nature of our services.”
