WASHINGTON-Rather than simply depending on high-powered lawyers to do battle with the Federal Communications Commission or the California Public Utilities Commission or the City of Baltimore, the cell-phone industry soon will be looking for a few good men and women from its 173 million subscriber base to help it protest taxes and regulations that carriers believe are inappropriate.
“We know there are millions of consumers who like their innovative wireless products and services and don’t want unnecessary laws and regulations or excessive taxes and fees to slow down their development,” said Steve Largent, president of CTIA, a trade group for U.S. mobile-phone operators. “We’re going to help those consumers voice their positive feelings as well as their concerns so that policy-makers and regulators know where the wireless consumer stands.”
Largent said the anti-tax/anti-regulation campaign will kick into gear next spring. The association did not provide details on the initiative.
Separately, four of the nation’s largest mobile-phone operators petitioned state and local officials in Maryland for refunds of taxes they’ve had to pay.
The requests were delivered to the City of Baltimore and Montgomery County by T-Mobile USA Inc., Sprint PCS, Cingular Wireless L.L.C. and Verizon Wireless.
Since July 2003, according to industry lawyers, wireless taxes have resulted in additional charges to cellular-phone users totaling more than $14.8 million. They said the total amount paid to Baltimore by the carriers has been $2 million, with wireless operators paying $12.8 million to Montgomery County during the past 18 months.
Industry lawyers said the refund requests represent the first step in challenging the taxes. The requests must be submitted before industry can mount court challenges. The Maryland tax fight likely will end up in court.
Industry argues the taxes are illegal because they apply to any wireless telecom lines that have billing addresses within the city and county, without regard for whether that service was actually used within or outside those jurisdictions.
The carriers claim Montgomery County and Baltimore violated their authority by taxing activities that occur-and value that exists-outside city and county boundaries.
In addition, the four mobile-phone operators said the city and county exceeded taxing powers granted to them by Maryland because the levies are sales taxes. Baltimore and Montgomery County are prohibited by Maryland law from imposing sales taxes.
“This is an issue with national implications for the wireless industry,” said Kenneth Silverberg, a lawyer at the Nixon Peabody L.L.P. firm that represents the four wireless carriers.
“Local taxing authorities around the country should not view wireless-phone companies as easy targets for raising revenues,” said Silverberg. “They are not going to sit idly by and allow the wireless industry and its customers to unfairly be charged for all the government services provided to all citizens. Everyone should pay their fair share, whether or not they use wireless telephones. If localities seek to impose one of these narrow wireless taxes, we are going to be looking at it very carefully, and if there are grounds, we will seek to overturn it.”
At the FCC and in Congress, mobile-phone carriers are reviving a push for stronger federal pre-emption of state wireless regulations.
The effort is not new. Industry made strides in 1993 legislation prohibiting states from regulating wireless rates and market entry. But lawmakers left terms and conditions of wireless services to states. That savings clause has found its greatest expression in the CPUC bill of rights for telecom consumers, a rule approved in May that created a slew of new state regulations affecting wireless business activities across the board.
Other states could decide to follow California’s lead. In the meantime, states are chipping away by filing lawsuits, levying fines and initiating rulemakings addressing wireless billing, contracts, advertising and service quality.
The state regulatory push has become a huge challenge for the fast-growing and rapidly evolving cell-phone industry. Wildly successful in its first two decades, the $100 billion cell-phone industry believes it has become a prime shakedown target of financially strapped cities and states.
Getting the FCC and Congress to strengthen federal pre-emption is tricky political business. Take, for example, the mostly pro-business Republicans who control the House and Senate. Many of those lawmakers tend to be sympathetic to states’ rights. Getting them to back industry’s cause is not an automatic.
Moreover, while the cellular industry has considerable lobbying clout, the nation’s mayors, governors and county executives have strong representation in official Washington too. Another factor: Some Democrats-particularly Sens. Patrick Leahy (D-Vt.) and Jim Jeffords (I-Vt.)-have fought in past years to give states more jurisdiction over antenna siting. They could make it difficult to get federal pre-emption legislation through Congress.
Next year, the mobile-phone industry will have a Hummer of a legislative vehicle for federal pre-emption in telecom reform. However, such a colossal, high-profile measure will attract countless other stakeholders with lobbyists and deep pockets-a dynamic that virtually guarantees controversy for a bill whose passage likely will be every bit as difficult as the 1996 telecom act it seeks to replace.
Industry, however, is not pinning all its hopes on Congress. Wireless carriers have been busy working the FCC.
The FCC recently said a Minnesota law requiring wireless carriers to give customers advance written notice of proposed contract changes is pre-empted by federal law.
Last week, Nextel Communications and T-Mobile USA used a billing proceeding as a springboard to tell the FCC it has the power reign in states.
“The commission should recognize that is has the authority to pre-empt state regulation of wireless carriers beyond matters Congress has chosen to pre-empt,” the carriers stated. In approving the 1993 legislation, Nextel and T-Mobile stated, “Congress did not preserve state authority over `other terms and conditions’ of wireless service, but merely made clear that by pre-empting rate and entry regulation it was not prohibiting state regulation of other matters. Congress did not bar the commission from exercising its own authority to pre-empt when warranted.”
The 1993 statute is also a key factor in many consumer suits against the mobile-phone industry. The FCC has ruled that monetary awards in state consumer suits against carriers are not necessarily barred by federal law. Wireless carriers said such awards amount to rate regulation because the costs have to be passed onto consumers in the form of higher monthly charges.
