 This is Ways and Means on April 22nd. We spent some time this morning and then we went over to House Ed for a joint meeting. And now we are back here in Ways and Means. And we are going to talk about some of the revenue and tax implications of a recent study that the PEGs commissioned that is on our committee website is quite a comprehensive study. But want to sort of guide folks who are about to testify and the committee that we're really gonna be focusing on some of the sort of corners of revenue and tax that are brought up by the study when we have these conversations today. We're not gonna get into sort of an overarching conversation around public access TV because that is not our jurisdiction. So Mr. Blum, if you could start us off and take us through the implications of the study that you completed. Thank you, Madam Vice Chair. I'm Peter Blum. I lived in Vermont for 35 years. I now live in Massachusetts and I was on the principle of Berkshire Telecommunications Consulting and I was hired to do this project and prepare the report. I may know some of you. I know Representative Ansel from many years back more than either of us probably want to admit and a few of your faces are familiar. I have prepared about 20 slides today to talk to with you. I expect that I was asked to limit it to about 20 minutes. And I understand that also that the members have access to the slide deck and I will not be sharing my screen. Is that right? All right. That is right. We like to see each other's faces. Okay. So I will then begin to talk about these slides. The first is a title slide. The second is a summary of the study. You probably already know that Peg means public educational and governmental programming. The task, the main task in the study was to provide options to ensure this future financial stability and viability of Peg channels. We looked at the likely financial future, the possible efficiencies and other forms of organization that are possible. We looked at possible new financing mechanisms and that is going to be the focus of what I talked to your committee about mainly today. Because of the time limitations in your schedule, I excise some of my normal presentation here and I will not be talking today unless you have questions about cable history, Peg history, the multiple roles that Peg organizations are now filling viewership data, efficiency options or changes to business model options. Just as in a very brief summary, Vermont Peg funding comes 92% from cable companies pursuant to a fixed rule of 5% of revenues that was established under delegated authority to the public service board about 20, 30 years ago, almost 30 years ago. Remaining 8% of Peg revenues comes from fees, membership donations and other sources. Oh, I should tell you if you're trying to play the slides as a presentation, you'll find it annoying that I have done these sort of fly-in animations. So probably easier to just look at the file without presenting it. We're actually, because of the way our legislative website works, we can only upload PowerPoints as PDFs or if I need to convert them. And so we are seeing the PDF version of that on our website, Do you see the whole slide? Do you see the whole slide with the, like, I don't remember which ones had the fly-ins, but when I present them, I sort of put in the first paragraph and then I click and the second one flies in. Are you able to see the whole slide or just part of the slide? The slides look full to me. Okay, good. Then let me know if there's a problem. I'll keep going. George, can you pause? George, are you looking for something or are you good? I don't have the slide deck. It's under Mr. Blum's name. What I have under his name is the entire report. Financial viability of Peg Access Television in Vermont. I sent both my report this morning and the slide that I just renewed. Okay, we've got this one out. Okay, everyone good to go? Back to you, sorry about that. Okay, representative Till, we're on slide four. The expenditures of the Peg organizations total about $8 million a year and the size of their budgets is quite variable. The largest being about 800,000, the smallest being about a 10th of that. Federal regulation of cable is substantial and sets a lot of the parameters around which you can't really navigate. The Cable Act of 1984 was a seminal provision. It's been amended a few times since. It's also, if you're reading decisions and such things, you'll see it referred to as Title VI of the Communications Act. It allocates responsibility between the federal government and franchising authorities. In most of the country, the franchising authority is a city, county, or municipal government. Vermont is not unique, but unusual in that the franchising authority in Vermont is a state. And the Cable Act of 84 gives the states a very limited authority over cable rates. Title VI also sets limits on the franchise fees that can be imposed. 5% of cable revenues of the cable companies is the maximum that can be mandated for states, for payment, for peg. Vermont allocates all of that 5% to peg. Capital expenses are an additional category and in some places there's an additional charge for capital expenses of peg organizations. Some places that's standardized in Vermont, it's most of the peg organizations who receive additional payments and these are negotiated periodically when they sit down to negotiate their contracts. General taxes are not within the franchise fee restriction. Next slide, slide virus, I can't tell if it's 5 or 6. State regulation, you have delegated a regular authority to the Public Utilities Commission, which used to be called the Public Service Board. PUC rule 8,000 was adopted in 1991, so it is 30 years old. The peg organizations are certified by their cable companies and not by the state. The cable companies, once they have certified a peg organization, the cable companies must provide channels for AMO programs. I'm sorry about this. AMO is a synonym for a peg organization and I thought I edited it to delete all the AMOs, so you'll have to go with me and recognize it. AMO is synonymous with peg. They must pay for AMO operating expenses. As I mentioned, it's a uniform 5% of gross operating cable revenue. They must pay capital expenses enough so that the peg organizations can operate. The actual payments vary from zero to 1.25% in Vermont. And one nice thing for me was that the AMO's file detailed annual reports with the Department of Public Service about their finances and operations that simplified my study a great deal. Two big things have happened since 1984. One of them is that the digital revolution is allowed for the internet to provide for streaming a video. And this has reduced cable subscription rates and reduces peg revenue. Pegs also have switched to digital technology and internet streaming and they're doing a great deal of this and which increases the convenience of the customer because you don't have to watch. If you're not, you don't wanna watch the APM program and APM, you can watch it another time. And it also expands their service footprint outside the area where the cable service is available. The second big change since 1984 is telecommunications competition. And it sounds like it wouldn't be fundamental but it truly has been. Every medium or delivery of digital data now is in some measure in competition with all of the others. It is no longer the case that cable companies are fundamentally different from telephone companies. They're all just pushing data as fast as they can and as reliably as they can. So this makes some of the old so-called silos and some of the industry taxes that are based on those silos look increasingly dated and unfair. We did a history of the revenue and the forecast on peg revenue. We found that the AMO slash pegs generally had stable revenues over the last five years. Previously, they've been increasing. Last five years, they've been stable with one little blip. Well, one pretty big blip in 2019 because of an accounting change. Our revenue forecast, we produced a low normal estimate for five years out showing that payments would decline to 7.04 million, a loss of about 0.8 million. If you add to that a 1% inflation cost, then the 2026 deficit would be about 1.4 million or 17% of the current spending level. We didn't quantify some risks. One risk is that the FCC would be restricting state fees and charges imposed on cable companies. And I'll talk about more about that in a few minutes. Increasing cable company losses and video subscribers was something that we tried to estimate, but it turns out that more recent information suggests that what we called a low normal estimate was actually pretty optimistic. We thought that the loss of cable subscribers would be likely to be in the range of about 3%. It looks like it might be more like about six. So if bad news is coming for the peg organizations, it is coming more rapidly than we thought in February. And finally, there could be at some point, we're not predicting this, but we recognize that there could be a strategic decision by the cable companies that they'll just simply stop really pushing their cable services and stop supporting them and put all their marketing and other emphasis, financial emphasis on internet, in which case, peg revenues would be declining even faster. So I'm gonna talk now about the Cable Act and other financial constraints on your freedom to act. I see I'm using my time, the time is slipping away, so I'm gonna try to pick it up. I mentioned 5% franchise fee under the Cable Act. The SEC issued something that they call a third order, which has the potential to really erode peg revenues. What they are saying, what they said was that in-kind services can be subtracted from the 5% cap. And in Vermont, the CPGs of the cable companies require them to provide potentially quite a lot of in-kind services, including internet services to schools and public buildings. The third order is still on appeal and the oral argument was in Cincinnati a week or two ago and the accounts of those who watched the oral argument indicated something of a route likely for the FCC. So we may not have to worry a great deal about this third order and the Cable Act. Second financial constraint is universal service. Vermont has had a, what was then a very progressive universal service program enacted in 1994. It was somewhat unusually based upon intrastate and interstate telecommunications revenues. We survived the challenge of that for many, many years, but there are many limitations now on universal service programs that came about in the 1996 Federal Telecommunications Act. And time being so short, I won't go into the details, but there are on the slides, there are four different rather vague prescriptions that any of which could knock out a universal service mechanism that you use to provide for peg funding. Unfortunately litigation since 1996 has not clarified these concepts. And so there's a substantial risk in using universal service concepts and language to solve the peg problem. The third is probably the most serious risk is barriers to entry. Section 253 of the Federal Act says its states cannot enact anything that would serve as a barrier to entry in the telecommunications market. There's also a provision that says that states, it's called the safe harbor provision, which allows states to do, require compensation for management of public rights away. The case decisions have not greatly clarified this. It looks like there have been clear decisions that a municipality or franchising authority that retains unfettered discretion to say no to a new entrant is gonna lose under 253, which is more or less obvious. The more difficult question is how large a burden can be imposed financially on a new entrant before a violation of 253 exists. And the courts and the FCC have different opinions about this. The FCC issued an order a little while ago that mostly in the wireless context shows that they have a very aggressive posture about restricting state charges. The fourth constraint is the Internet Tax Freedom Act. It says that states cannot tax internet access. It's now a permanent provision of federal law and there are exceptions for universal service. Of course, if you meet the FCC's view of what the minimum standards are, which as I've discussed are quite vague, but there's also an exception for 911 and E911, which if I have time, I'll discuss in a minute. Financial constraint number five is FCC broadband policy and time being so short, I will skip ahead and just say that the FCC took a very aggressive stance against states in favor of restricting state charges. And regulation of internet and they were slapped down in the DC circuit in a very important case. However, their authority to object to state programs that are founded on universal service principles, that the FCC still retains broad discretion in that area. So now- Can I interrupt for a second and try to summarize that for myself to make sure I'm following you? Sure. So essentially a few states have tried to tax telecommunications infrastructure as part of a right of way, like with a right of way provision, but that might be federally prohibited because it's considered a barrier to entry into the market. Is that- That I think of the five that I've listed, I think that is the most worrisome. Thank you. And especially given the FCC's attitude as expressed in an order from last year or a year before. And if you wanted to move ahead in that, I could talk with you more about how you could just limit your litigation risk in that area. So Madam Chair, it looks like I've gone 20 minutes or 18 minutes and I've got about five options to present to the committee. Should I go through them or should we stop for questions? Or- It would be great if you could go through them and then we'll- Sure. And after and you and Lauren can, Lauren Glenn can take up which of her time you grabbed from her afterwards. Sorry, Lauren Glenn. Okay. First option is to impose a new 1% charge on cable revenues. This has been done in some of the other states where 6% is the normal payment rate rather than five. Some of the cable companies are actually paying some of their non-peg organizations more than six right now, although I don't know how long that will last. But if you were to do this, you would impose a new 1% on cable revenues. You would have to spend it entirely on capital expenses and there might be some burden to show that it is actually being spent on capital expenses. But this is kind of a loophole in the federal 5% restriction. It's not competitively neutral. It increases the burden on cable companies and it sort of ignores the fact that a lot of the peg programming is going out now through the internet. And it involves a state treasury and a kind of a transaction with very little marginal effect for the pegs. Option two would be a new streaming video charge. This would be a charge on streaming video, which as I understand, the sales tax already applies to the service. It could also be applied to satellite video services if you felt it was unfair to overlook that. The charge has been upheld at least once in the Chicago case against the Commerce Clause Challenge. Other states are considering and acting such charges. Massachusetts has currently a bill in the House and a bill in the Senate that imposes such a charge. And I can talk about that if you have questions about it. It could improve the alignment between the Vermont residents who benefit from the peg service in the modern age, which are not necessarily people living in the footprint of the cable company, but people who are viewing peg content through internet streaming, it would better match those who benefit than those who pay. And of course, the disadvantage would be it's a new tax and there's a lot of cost for new taxes. Any new tax. Third option is to raise the VUSF rate. The VUSF, as I mentioned, was enacted in the 90s. It was a telephone, sort of a canned telephone program that was designed to support all telephone related public benefit programs. And that telephone has, because of digitization and competition, telephone is no longer really a meaningful separate industry. And so peg is sort of the first cousin to telephone and you could expand to the VUSF to cover that. There are complications. Most of the funding goes for E911 now. And there's the disadvantages that the VUSF has funded by telephone surcharges. And it may not be fair to telephone customers to add an additional burden for peg services. And that's both landline and cell phones, right? What's that? That's both landline and cell phones, right? Yes. Yes. And the federal limitations on universal service prevents broadening the base to include internet access payments. This is something where the FCC has been sort of standing defiantly in the doorway, blocking states from doing this. And four is a pole attachment charge. This is a new idea as far as I know. It's the idea is based on the fact that Vermont uses utility poles for almost all of its telecommunications. In the Midwest, they bury cable, but in Vermont and in the whole New England, it's up on utility poles, partly because of soils, partly because of history. But every kind of telecommunications provider uses these poles to get their, even the wireless guys, the so-called wireless providers are really wireless only in the last mile. They use a lot of fiber to get their signals to their antennas. This is more competitively neutral than charges on cable companies or on telephone companies. Again, it's a new tax. You would have to give credit for peg payments that are being charged to the cable companies so that you didn't violate the 5% franchise fee limit. And there's some possible complications with highway rules, which I heard at the end of my study, I ran across some objections from the highway department, but I was not able to make any sense of them. So it's something that you would have to look into. Finally, I present a multipart option which for the purposes of showing how interconnected everything is if nothing else combines a bunch of things. I suggest creating a Vermont telecommunications public benefit fund. This would be sort of the 2021 equivalent of the Vermont Universal Service Fund applying more broadly to more industries. I suggest it'll be funded by an attachment charge. I estimate $10 a year per attachment would allow for a little bit of peg revenue and it could be expanded to the rate could be increased if pegs need more money. I suggest repurposing the Vermont Universal Service Fund solely as an E911 fund. This would allow you to fund it with a charge not only on telephone, but also on broadband access using the internet tax freedom act exemption. And the VUSF is largely a 911 fund already in terms of the percentage of the money. I suggest a new capital fee of 1% on cable companies. This was either my first or my second recommendation repeated here. And I suggest that you repeal a telephone personal property tax, which is a home of the discussion for which I don't have time. But I would suggest you devote some of the proceeds of the pole attachment charge to hold the general fund harmless. And in the slides, I won't take any more time to go over this, but the slides show the puts and takes that all five of these things put together producing a net increase of 0.34 million fruit pegs. But about 90% of the money or 85% of the money generated by the pole attachment charge would basically be used to hold the general fund harmless for repeal of the personal telephone personal property tax. And my recommendations are that you encourage AMOs to continue their efforts to improve efficiencies and seek additional sources of funds. And you treat option five seriously because it modernizes the state's telecommunications tax structure and without all and venture. Thank you. So anyone have any questions? I don't hear any. I don't either. Okay. It was all perfectly clear, eh? It was all perfectly clear. And I think we're all trying to, we're all diving in deep into the PowerPoint here. I know I am. It's a lot to absorb and I provide a social with the report if you want to look at it or call me back if you want. I'll be glad to come back and talk. I just, before we go to questions, I just want to say hello, Peter. I'm sorry that I missed your opening. Hello. Hi, Janet. Nice to see you. Nice to see you. Yeah. Lauren, Glenn, would you like to jump in? Certainly. I'd also say that Peter gave up a fairly extensive presentation at Senate Finance and House Energy and Technology. So I can post the link there if anyone wants to hear his full presentation. This report is very important for us and I'll just go back to the beginning. I'm Lauren Glendividian. I'm the Executive Director of CCTV Center for Media and Democracy. We're based in Burlington. We're celebrating 37 years of public educational and community access television. And we're part of a network of 25 centers that provide PEG services, community media services to all of us here on this call and people across the state. And that group of 25 is known as Vermont Access Network. We're a mutual aid society. We work a lot together on legal cases before the Public Utility Commission. And we have recently put together Vermont Community Television Channel. Comcast gave us a channel statewide that we're now operating. And we have a variety of projects that we do together. So it became clear to me at least in 1990 when the phone companies were getting into the cable business that this question of finding alternatives to cable franchise fees for community media purposes was a pressing question. So that means it has been pressing for 30 years. But it is really in the past couple of years that we're seeing the rubber meet the road on revenue decline. In fact, Comcast gives us a report every year of the amount of revenue they provide to all of the access centers. And last year report was 6.0, 7.4 million. And the report that we just got for FY20 was 6.8 million. So that's a almost 9.8 million that happened of the resources that we... Are others? Is it, sorry, is it my connection or it's Lauren Glenn's connection? Maybe if you turn to your video and talk as a faceless voice. Okay. All right. Thank you. I'm happy to be a faceless voice. Thank you. Is this better? All right. That's much better, thank you. Okay. So we've seen a 9% decline in cable revenue across the state of Vermont, affecting different centers more than others. This is a trend across the country. The reason this is important, why is this important? Because our communities depend on our services. And in particular, during the pandemic, we provided a variety of important services to keep the continuity of community operations going, whether those were government meetings or media education, or as I mentioned before, election coverage. So I don't think we need to make the case to you now that PEG is important. Obviously the state believes it is. We received some COVID CRF funds for this work and also you funded this study. So the question really is this. The regulatory structure of telecommunications and the taxation system needs to be modernized. That's the principal recommendation of this study. The Federal Communications Act puts each different communications method, whether it's telephone or cable or satellite into a different silo. And we know that cable service is running on the same fiber that internet service is running. So these historic regulatory silos are being laid bare as no longer the correct framework for thinking about the commercial use of the public rights of way. And essentially what this report does is it provides a way for A, the state to understand what authority it does have to assess taxes and fees on internet service. Admittedly, it's very narrow. The feds made sure of that. But I think what's really important here is the legal justification for the authority that this state does have to assess and modernize its telecommunications tax structure. So I would really point your attention to those recommendations that Peter has made in this report. The second piece is that all the companies that use the public right of way whether it's a phone company or a cable company provide some kind of public benefit in exchange for that use. And that's the central principle here. Whether that is universal service, whether that is E911 subsidy or whether that is peg access, those are public benefits. So the other key point I would draw your attention here to here is this proposal to create a basket of public benefits and to in a sense integrate 9-1-1 universal service and peg services into one kind of public benefit that serves those purposes, some of which are suffering from the decline of landlines and cable use. I mean, principally 9-1-1, you know we have a problem there. And has us thinking about a basket of public benefits that accrues from the commercial use of the public rights of way. So this idea of pole attachment fee or some kind of way of assessing commercial use of the right of way is really the modernization leap and change and maybe it's not a leap but update that is required at this time. At the end of the testimony I provide are two visuals, one that sums up the sort of financial situation of community media in Vermont and the second that summarizes the policy recommendations. So those are meant to be easy reads but I do wanna urge you for us to spend more time at some point on the authority the state does have to modernize tax structure. I would also say that there are two other states, one at Massachusetts in particular that is looking at an alternative way of funding peg and that is through a streaming programming assessment. And what we're seeing in sort of the other parts of the country now is this interest in taxing program service providers in effect. I'm not so sure that's the way to go. Our conversation with the FCC media lawyer recently, she thinks that that's a kind of vulnerable way to go legally because you're taxing programming services and they're not strictly regulated by the feds or by the state. So I really think that the future is thinking about this, the value that could be extracted from commercial use of the public right of way. And with that, I will pause and see if video works again. Happy to answer any questions. I think we've covered quite a bit in the written testimony as well. And our purpose is to determine if this is something that you're, the legislative community is interested in looking at more deeply next year because we know this session is coming to a close pretty soon. Thanks. And there's no legislation on the table for this and it's an area of tax that we sort of touched on when the broadband bill went through our committee but we really didn't dive into and this is just an opportunity to see if there's something that folks are interested in pursuing longer term. And Clay is gonna join us next up to continue to this sort of conversation about the regulatory environment. Thank you. So if you have any questions for Lauren Glenn and thank you, Lauren Glenn. Thanks. This is a big, we've been like deep in ed finance and so this is a big brand shift for all of us. It's a whole different set of acronyms and corners of the universe. So thank you. Clay, I think the floor is yours. Great, thank you. I'm Clay Purvis for the record, director for telecommunications and connectivity with the department of public service. Thank you for the opportunity to talk today. I wanna thank Peter Blum for his presentation and report. I think it's a good starting point on talking about telecommunications taxes generally and ideas for reform. I provided to the committee an overview or a chart of telecommunication specific taxes that we've identified here in the state of Vermont. I gave that chart to House Energy and Technology last week. It's very high level, very simple, but I'm happy to go over that first and then switch to some commentary on the Peg Access report. Yep, is there a question? Sorry, no. I was just saying that would be great. Thank you. Okay, thank you. As you know, there are two types of taxes, I think that we should look at. A good way to break it down are taxes and fees that are passed through to consumers and then taxes and fees that are paid for directly by a company. So consumers don't see those taxes. Consumers pay all the taxes that a company would pay to the state through the cost of the service they're buying, but some taxes are shown separately on your bill, you pay for them specifically, whereas others are borne by the company. And this chart is only telecommunication specific taxes and fees. So we're not talking about taxes and fees that are generally applicable to any business operating in Vermont. The first chart breaks down taxes by service type. So we have broadband cable and then telecommunication services or voice services. As Peter alluded to, there is no taxation of the internet. This is widely prohibited. There are a few exceptions in the Tax Freedom Act that allow states limited taxation if they were raising USF funds before the act was enacted. Peter talked about the 911 exception, though I don't think that that's quite as widely used as Peter suggests it could be. It is there, but across the board, we do not tax internet services. And this is problematic in that many telecom carriers offer bundled services. So how they attribute revenue between the several services they provide, say internet, television and voice service really has an impact on the revenues that the state collects from taxation. As Peter talked about, cable video services are subject to sales tax. If you look at your Comcast or your charter bill, you'll see that the video is, there's a sales tax applied to that. And then the PEG access fee shows up separately on your bill. It's 5% of the cost of the video service. And in the state, we're raising around 8 million as Lauren said, it fluctuates, but around $8 million a year, that all goes to public access to television. Telecommunication services, we have sales tax, we have the Vermont Universal Service Fund. So this is 2.4%. We could come back and talk specifically about the Universal Service Fund in another time. I think there's a lot to say there. Right now the rate is 2.4%, revenues are about 5.5 million. They are declining steadily. It's a troubling decline, one that we're seeing across the nation. So other states, USF funds are seeing the same or similar decline. And the Federal Universal Service Fund increases its rates quarterly to make up for losses. I believe the Federal Universal Service Charge now is 33%. You'll see that on your bill. It's a very expensive tax on your bill, at least compared to other taxes. And then there's a federal excise tax, which is charged on non-long distance charges. I believe that might be used for TRS, federal TRS, but I'm not sure. In state, we have two other taxes that are specific to telecoms. This is the gross revenue tax, which funds the Public Utility Commission and the Department of Public Service. This tax is levied on other utilities as well, electricity and gas. Any utility that is regulated by the Department of Public Service and the PUC. We raise a significant amount of revenue under these taxes. So a significant portion of the PUC budget is funded through gross receipts tax applied to telecom and cable providers. And then we have the Telephone Personal Property Tax. It's a very small tax, levied on about 16 companies in the state, mostly telephone, the incumbent telephone carriers. And that's been a tax that's been identified as one for possible repeal or reform. What's the MRF? Yes, thank you for that question. Commercial Mobile Radio Service, this is your cell phone. And is it not paid by them because no one told them to pay or because we're federally prohibited from that or what's the? The Telephone Personal Property Tax. I don't know exactly, that might be a good question for the tax department. They're in charge of enforcing and collecting on this tax. It may have something to do with the antiquated nature of the language in the statute. It may have a lot to do with the definitions of personal property as well. And then the way the cellular industry is set up, there are non-cell companies that own most of the infrastructure that is used by the cell carrier. So for instance, the pole structure, the cell tower itself is usually owned by a third party real estate developer. Some of the big names in that industry are American Tower, Crown Castle, International SBA Towers. Those are three that come to mind, but they don't actually provision telecom service. They simply rent space on the pole, two carriers. So the actual amount of facilities that companies like AT&T and Verizon have might be smaller than your traditional telephone company. They may also be paying, I don't know which 16 companies are paying, that's confidential tax information. And I actually pulled the 16 number from Peter's report. So given the number of telecom providers we have in the state, it's obviously not covering everyone, but I would assume that the traditional telephone carriers are paying that tax. The revenue's been declining mostly due to the fact that most telecom carriers' plants are almost fully depreciated. So there's not a whole lot left to tax. So the revenues have been declining steadily. Right now, they're at 3.5 million. House Energy Technologies asked me to kind of put together some history charts showing the revenues for these various taxes over time. And I'm happy to share that with you when we have that put together. So I'll move to... One second. I think Jim has a question for you. Hi, Clay. With regards to a pole attachment charge, could we include telecommunication towers to which there are things attached also? Could that be included in the same bucket or is that too different? I don't know the answer. It may, again, it may be helpful to have the Department of Taxes come in and weigh in on the viability of the pole attachment tax. I think that just as a general policy, and Peter suggests this in his PowerPoint, that there certainly is a concern that taxing pole attachments or other telecommunications infrastructure may be a deterrent to expansion of telecommunication services. Certainly universal service, a broadband and wireless voice service in the state is a state goal. And one that I think we're gearing up is spend a lot of public money trying to solve and we'll have to look carefully at what the financial implications of doing that would be, how much money we would raise and what the cost of enforcement is. There are over 250,000 telephone poles in the state with at least one telecom attachment. In many cases, as many as two and three, sometimes four attachments on a pole. And so how are we going to enforce that? How are we going to ensure that carriers are being accurately taxed on their attachments? Would be something of interest to me as we pursue that that recommendation and more detail. But in addition to that, I think Peter rightly pointed out that they would have to be a credit on the 5% franchise fee. The cable franchise fee is a charge allowed under federal law to be levied on cable companies for use of the right of way and to be used for cable related purposes. Peg is one of those purposes. So certainly the cable industry's tax is capped at 5%. Whether other companies would pay a larger percentage or a smaller percentage based on the number of attachments they have is an open question. But when you're talking about expanding into very rural areas where the population density is low and the cost service is already high, the business case there is marginal and small changes such as changes in tax structure might have a disproportionate effect on rural broadband deployment. So it would be interesting to see how the tax, once applied to the industry, how it would affect individual actors in the industry. So would it have a disproportionate effect on say EC fiber compared to the revenues versus a company that like a cable company which is not required to go into rural areas and makes a business out of serving the village centers, the denser areas that there may be some unfairness there. How technocratic we get about that and how we try to compensate for that, I think it could get interesting pretty quick. Is the tax worth our time given the amount of work that the tax department might have to do, the government would have to do to ensure proper collection of that tax versus the amount of revenue we're collecting. Are you saying that, are other people experiencing the echo? Is it my connection? I don't know, okay. Are you saying that there'd be more pull attachments per customer for providers that are serving more rural areas? Yes. Oh, okay. And then my other question on that is, are you also saying that the revenue that we would be able to collect if we did add a fear of tax to pull attachments for cable companies wouldn't ever be allowed to go over that 5% because we'd be prohibited federally from doing that. I hesitate to say that's the way it would turn out. If I were a cable company that's certainly the argument I would make when I sue the state of Vermont for trying to exceed the 5% franchise fee. So I don't know how that would play out in litigation, but certainly when, I mean, I'll be blunt. When you draw the ire of the telecommunication industry you do need to set aside something for your legal defense funds. So some of these propositions I would anticipate would be challenged in federal court. We would need to be prepared to defend those challenges. And certainly that comes with the cost. I was imagining that for compliance you would have someone on your team drive around to all of the polls, the way that you did to check a few years ago to check to see how our self-service was going up. You're going to have to give me a few more people to drive around. Jim, did you have another question? Yeah, just briefly, Clay, thanks. Thanks for the nuances that you've described, which I wasn't aware of earlier. And I think I heard you on the radio, a couple of months ago, talking about these things and peg access and that sort of stuff, or maybe it wasn't you, but at any rate on first pass easy fiber likes the pole attachment thing because it treats us all the same. Although you certainly describe complications that may make it not worth our while. So thank you. You're welcome. I may be wrong. There are many very smart and thoughtful people at easy fiber who thought through this quite a bit, but it could be and certainly something to think about and we wanna see companies like easy fiber and consolidated and in Comcast extend their networks and reach people that frankly, a lot of industry players aren't that interested in doing because the business case isn't there. And so the effect that any tax would have on the business case of rural expansion it needs to be carefully considered. Lauren Glenda, do you wanna add something? An important part of the study talks about revenue neutrality isn't the word, but in essence, if the cable companies and Peter could speak a little more about it, but if the cable companies were assessed an additional fee in the scenarios that Peter spells out the franchise fee would be reduced by that amount. So it wouldn't be piling on more and more costs. So I think that there's a principle here in the study that's important because it is meant to balance costs across all providers and not to burden any one of them disproportionately. Right, Peter? Madam Chair, may I comment? Yeah, I think the idea of a new charge on the new pole attachment charge that would be paid by the CUDs is a little bit distasteful at the moment. And I only, my only response would be it's less than or equal to the amount that they're now paying for pole attachments to the pole owners. So it would be a little wind in the face for the communications union districts, but I don't think it would be necessarily determinative. And I really appreciate hearing from Representative Maislin that EC-Fiber has recognized the importance of competitive neutrality in the long run and not having silo specific taxes the way we do now. Yeah, I think that that's certainly a principle that should guide any kind of tax reform. We are taxing 21st century technology with 1980s and early 90s statutes. So things have changed and it certainly is time to consider whether our taxation meets today's technology. But the last thing I did wanna raise with the committee on the pole attachment is the issue that Peter discussed with AOT. We have heard consistently from the agency of transportation that fees levied for use of the right of way would need to buy federal law be deposited into the transportation fund and offset federal funding for highways. Not all roads are state highways subject to that limitation, but the committee of interested in this proposal may wanna hear also from AOT about what federal limitations might preclude a pole attachment fee from being used to support Peg or any other purpose. That's not for the use of right of way. And then Clayton, did you have more you wanted to add thoughts on the Universal Service Fund? I do. If it would please the committee, I'd be happy to come back and talk more about the Universal Service Fund specifically. It's certainly under a lot of pressure right now. The fund supports several very important telecommunications programs like TRS, it's relay service that's for a deaf and hard of hearing populations so that they can access telecommunication services. The lion's share of the fund goes to 911 which is also very important and then we are funding broadband through that. So the fund actually, I wanna be clear the fund actually raises enough revenue to overall to potentially support its programs. But the way the fund is structured 0.4% that 0.4% or one fifth of the fund is dedicated to broadband. So there is a positive balance in the fund but the money can't be used to pay the other programs like 911 and TRS, it is reserved for broadband deployment. So there is a cash in the bank so to speak but we're limited in how we can use a fifth of that money and so we can't pay 911 bills right now but the fund can't support 911 bills. There are certainly some things that we should consider and I know that the legislature is interested in taking a look at contribution reform next year. Right now the fund rate is set by statute which is different from other states. Many states have an administrative proceeding to set the rate. The rate is usually set based on the revenue requirement to meet the funds obligations. So in other states once they have the 911 appropriation then they set the rate through their public utility commission or some other administrative body that reflects the appropriation. And then to the rate is usually set annually so it fluctuates with the cost of the fund. Some states have also moved to a rather than a percentage of retail sales like we do here they've moved to a fixed fee per line in service. So no matter whether your cell phone costs $40 or $50 you pay the same amount say like a dollar that would go to the fund and that has helped stabilize other states funds as they've seen a decline in the revenue generated from the sale of telecommunication services. So there are things that other states are doing that might be worth looking at. And certainly something that the department would be willing to study if asked to do so. I personally am curious about that. I don't have other members of the committee. Do folks have other questions? Clay is there anything else you wanted to add or? No, again, I think this has been a great discussion both and had Senate Finance and this committee as well. I do think that these ideas merit further exploration. I just would recommend we exercise caution as we move ahead on some of these proposals just to ensure that the risk of litigation is low and the application of a new tax doesn't have unforeseen consequences for broadband deployment and the like. Representative Durfee. Clay, you mentioned a bundling earlier. I'm imagining that the cable providers or whoever the providers here they're all faced with the same set of circumstances. So they're ultimately gonna end up allocating what they charge the customer more or less in the same way to the different services that they're bundling together. Is that the case? And do we have any control over how they allocate it if it was in our interest to serve consumers and therefore allocating things a little differently perhaps than the interest that the companies themselves have? Yeah, that's a good question. I believe there are generally accepted accounting standards for the allocation or attribution of revenue for bundle packages. And I know that a change in those standards actually played into the 5% decrease that Peg Station saw in their franchise fee revenue back in 2018. So I would assume that these carriers are following generally accepted accounting practices but those accounting practices do have an impact on our revenues. We also have the prospect of cord cutting in the future. So a lot of people have stopped buying cable television. Cable TV is now competing head to head with streaming services like Netflix and Hulu and Disney Plus and people are switching in and out. So even if they are buying cable, it's not generating as much profit as it might not be generating as much profit for cable companies as they used to because of things like churn, the constant switching back between services and also people trying to limit the amount they pay for cable, they're constantly trying to go back and get the better deal. You have satellite now competing with them. So the market for video programming is quite competitive and certainly I would foresee that having an impact on traditional cable video service in the future. We are gonna need to wrap up in just a couple of minutes so we can finish a bill about pet food supplements and the like, which I don't remember the bill number of. But I'm wondering, Peter or Lauren Glenn, is there anything you wanted to add before we... Madam Chair, I just want one little footnote for something that Clay mentioned. The question of what are the restrictions on the use of revenues from right-of-way fees in certain federal highways? And I think Clay accurately presented the summary of that federal law that I heard from the Vermont Agency of Transportation. But I encourage the committee, if you think that's a problem, I think encourage you to look a little deeper. I haven't looked all the way to the bottom, but I did ask what the statute was on which they were relying. I read the statute and it seemed to me that the statute was dealing with the question of if the federal government gives a state money to build a highway and the state later abandons that right-of-way and sells it, does the federal government get some of the money back? And the answer based on that statute is yes. But this is a much different situation and I could not find any cases that supported this broad interpretation that the Vermont Agency of Transportation took to the statute. So it's a question that you should look into carefully. Thank you. Madam Chair, I just wanted to say thank you very much. And thank you, Chair Ansel. Also nice to see everyone. And we look forward to figuring out how we might be able to move this large question forward, even though Peg is a part of it, I think it's a larger question that goes beyond the funding of community media. So thank you. And thank you. Even though we've spent most of our time focused on the much larger question, I just really wanna commend and thank all the Peg stations for all the incredible work they've done through the pandemic to keep government accessible and in people's homes and thoughts. So thank you for that. I hope I could capture that testimonial and use it. Thank you. Thank you. And Emily, thank you for sharing those. I'm enjoying just being able to listen for a change. So committee, we're gonna at shortly 1145, I guess, we're gonna go back to S102, which is the ag bill. And Sorsha, I think Carrie Chagir is able to join us at 1145, is that right? Yes. And Dan Dickerson as well. And Dan as well. So we've got five minutes. I don't know what to do with it. Shall I take us offline for five minutes? Sure. Okay.