Sprint Spectrum L.P. said it is facing the same problem in Oregon experienced by its personal communications services competitor, Western Wireless Corp.-an attempt by the state to tax its personal communications services license.
“This tax puts PCS operators at a disadvantage because incumbents aren’t facing that kind of tax right now,” said Sprint Spectrum spokesman Ed Mattix.
Western Wireless has petitioned the Federal Communications Commission to intervene in its conflict with the Oregon Department of Revenue. The FCC is taking comments on the matter until Aug. 30. Reply comments must be filed by Sept. 16.
The idea of taxing the value of wireless licenses is new, said Gene DeJordy, Western’s director of regulatory affairs. And it could potentially catch on in other states.
Prior to the auction of PCS licenses, the federal government issued licenses away at no cost. Portland’s two established cellular operators, AirTouch Communications Inc. and AT&T Wireless Services Inc., don’t pay taxes based on license value, but on the value of the constructed network.
“There are many issues here,” DeJordy said. “Does the state have the legal authority to do this, and the idea of equal protection. Similarly situated parties should be taxed the same way. We’re trying to protect our rights.”
Oregon’s property tax division sent Western a notice in May stating it had assessed the real market value of its property for the 1996-97 tax year at $40.7 million. Western said that means it would have to pay about $610,500 in taxes-about $500,000 more than expected. This doesn’t include tangible property. Western launched its Portland PCS system last week.
The lion’s share of the assessment was based on the $34.2 million Western had paid for its Portland major trading area license. Sprint also paid $34 million for its PCS license.
Western appealed the assessment to the Oregon Department of Revenue and lost. The company’s next option is to take the matter to district court in Salem, Ore. But before doing that, Western has approached the FCC.
The Issaquah, Wash.-based company argues that assessing the market value of the company using the amount paid for the PCS licenses creates a barrier to market entry, and Western wants the FCC to pre-empt the taxation authority of the state of Oregon.
“By including the auction price*…*ODR is requiring Western PCS to pay a $512,361 fee for entering the wireless market in Portland,” Western argues.
“State initiatives to tax the amount paid for radio licenses are simply an attempt by the states to `get a piece of the action’*” Western said.
Beth Daniell, the Oregon appraiser handling Western, said the same central assessment process was applied to Western that is used for all companies doing business in Oregon.
“We didn’t step outside of our common methodologies for this, although this situation may be new. We try to get an entire market valuation any way we can,” Daniell said.
Oregon’s plan is one more stumbling block for PCS entrants, said Mark Golden with the Personal Communications Industry Association.
“The license is a cost of doing business. This has implications for a lot of the wireless industry because it is inherently unfair. PCS is going up against entrenched operators who aren’t facing that hurdle,” Golden said.
The matter could affect all operators that purchase licenses, including paging and specialized mobile radio carriers.
“Despite what we’ve been through over the years, it may turn out that the best friend in our future is the FCC,” said Alan Shark of the American Mobile Telecommunications Association, an SMR organization. “I hope they stand tall on this.”
“State initiatives to tax the amount paid for radio licenses are simply an attempt by the states to `get a piece of the action.’
