 Hi, I'm good morning, and I'm representing Mike and Tashka, I represent Charlotte and part of Heinsberg, and I'm on the Energy and Technology Committee, and I'm Vice Chair of this committee. So, I think first of all we should have some introductions, so we'll start with you Lauren. Sure, I'm Lauren Glendavidian. I'm the Executive Director of CCQE Center for Media and Democracy and a member of Vermont Access Network, the statewide organization for the 25 Access Centers in Vermont. Now I'm Andrea Papiti, I am a Utilities Analyst for the Public Utility Commission, and I'm serving on this committee on behalf of the commission. I'm Clay Purvis with the Department of Public Service, and I am serving on this committee as a member of the Department of Public Service. Good morning, I'm Dan Glendavidian. I work with Comcast, and I'm serving on the committee as an industry representative. And we have two other members of the committee who can't be here today, and that's our Chair, Senator Becker-Beyland, and Karen Horne, who represents the Vermont League of Cities and Towns. So we'll start with just a notation that we're going to have a public hearing on 10-16 as required by statute, and that will be at 10 to 12 p.m. in Room 10 at the State House, and that will be followed by a committee meeting from 1 to 3.30 p.m. in the same room. So that's for everybody's awareness. And so the rest of the agenda will have public comments for anybody who wants to speak. We'll go through the AMO Financials and Revenue Forecast. We'll get an update on the Comcast CPG, and then we'll look into a number of options that we might be considering for revenue generation for our AMOs. And so let's start with public comments. Does anyone like to speak to the committee about things? We'll proceed with the first item on the agenda, which is the AMO Financials and Revenue Forecast. So we'll have Plague Fervor, Senator Lauren Glenn, Virginia, provide us with some information here. Okay. Well, I don't actually have much to add. I provided the committee members with some basic financial information that we put together from AMO annual reports that's available on the committee webpage. As you can see there, this is just basic balance sheet information for each of the AMOs. And I provided it to the committee in part so that everyone had some numbers to go with the narrative that we've been building the last three meetings. And so I'm hopeful that this is a useful tool. I don't have much insight into it other than this is what's reported to us through their annual reports. So I imagine that there are conclusions that could be drawn, and I hope that Lauren Glenn and the AMOs can provide some insight into that meeting. Sure. I would defer to Kevin Christopher and Elizabeth Malone just to comment on these numbers. This is one year of revenue. And what year does this sum represent? This is 2018. So this is the most recent financial information we have. So organizations near ends range anywhere from the end of December to the end of September. So there could be an 18 month swing in this data. But there was another question that had been asked at the prior meeting about the trends since 2006, since the cable revenue has increased and 5% of that revenue has also increased to the benefit of Vermont communities through access. And so we did some research into that. And Elizabeth and Kevin have some remarks to make if that's okay. Hopefully everyone received a memo that went out earlier this week. Please identify yourselves. Oh, Elizabeth Malone, Executive Director for Northwest Access TV in St. Lawrence. And Kevin Christopher, Executive Director of Leak-Shan Plain Access TV in Colchester and then Vermont Access Network Board of Directors, President. So again, hopefully you've got the memo that outlined the changes that the AMOs have made between 2006 and 2018. I'm just interested in time. If anyone has questions about this, just let us know. We've outlined changes to services, capital investments and personnel during that time as well as talking a little bit about cash reserves. Would you like to recap since there are people in the audience? And do I have that in the memo? Yeah, so changes to services during this time included expanded service territories that include more towns being served by the same AMO. Expansion of production and community coverage has increased by 40%. So that's the number of programs that we produce in a year, up 40%. And of course, while regular business costs are rising, we continue to offer the same and expanded services to those areas. Capital investments that we've made include to production equipment, playback, distribution and archiving. That time span when you're talking 12 to 13 years is incredibly long in our field. So equipment regularly has to be replaced in order to keep contemporary with what our producers need and what our communities need. And under personnel, during the 12-year period, there's been a 70% increase in the number of full-time employees that are working with the community to produce shows and also train them to produce shows for themselves. And we've also increased compensation throughout our organizations to a more livable wage. And finally, I think everyone that looks at a budget sees how much things, benefit costs have been going up, especially health insurance over those years. But we're very committed, you know, as a community-minded organization to maintaining good benefits for our staff. Want to talk a little bit about the service? Yeah, so just a few words about you see from Clay's spreadsheet that there are AMOs with cash on hand and reserves and some considerable cash assets. There's a few drivers for this. A lot of us will bank funds for major capital purchases if we're talking about a video server system, for example. That can be an expense upwards of $50,000, which might not fit into a regular capital annual capital budget. So it's good to have cash on hand for that sort of purchase. A couple of us here at this table have had facility relocations within that period. So there was a lot of banking for that, saving up for that, and then huge capital outputs when that happened. I think around the state, we have been cognizant of both last year with the GAP reclassifications that I think this committee addressed earlier and with what's been going on at a federal level, cognizant of fact that our funding is being impacted and could be further impacted in the next few years and looking to maintain operations at some semblance of what they look like now. So in terms of that, putting more reserves aside than we would normally do so that we can continue to provide services and maintain the staffing that we have now for as long as possible in the face of whatever is to come. Just a couple of questions. This reflects 2018 numbers. This is prior to any changes the FCC made in terms of how the funding goes, right? Now, when you have some of the AMOs with running deficits here and others that have some surpluses, when you talk about a reserve fund, is that what these surpluses represent? Right, yes. For the large part, yeah. Is there any revenue sharing among the AMOs, those that have larger surpluses? Do they help out the ones that are running deficits at all? I don't know of any overlap like that. I think we've mentioned before the partnership between Vermont Community Access Media and RETN in Burlington and their collective efforts. I think, and I would defer to RETN's executive director who's behind me, but I think there's possibly some revenue sharing between those two organizations. We're not yet? No, we are sharing some staff. So I guess if we could call that revenue sharing perhaps, but we're supporting some staff positions together. But I'm unaware of any sort of Robin Hood scenarios where the larger centers are helping, financially helping out the smaller centers. There are examples of services and production that we share, however. I think there's two points to add to that. These organizations that show a loss for the year all have equity. So they may be spending systematically from their reserves, so that would be the case of Channel 17, for example. So every year we have a loss, but that's our way of spending down what was at one time, quite a large reserve. So none of these are actually in the red overall. They might be in the red for the year. And then I think the second point that's important to make is that the access centers work together. And when we, for example, have a litigation, each of the centers contributes to those costs based on their percentage of revenue, of the whole that they represent. So it's not cost sharing per se, but it is a kind of mutual aid contribution based on the relative size of each of the organizations. So the Burlington or the Rutland organizations will be making a bigger contribution to legal expenses, let's say, or a statewide project than the smaller ones would. Okay, so equity, that column equity, is that cash equity or is that equity in terms of equipment and things like that? It looks like total current, the third column is current assets, which are probably more liquid versus total assets, which are equipment and liquid assets. And then the equity is gonna be the difference between the total assets and the liabilities. See how that works. So total assets would be cashed in and... Equipment, yeah. And if I may, just as an example, like for non-access media, I believe the first column liquid assets really is just cash, like that. I think that represents a money market fund, if I'm not mistaken, so that's 1.3 million. And then other current are, I guess, classified as things that are somewhat liquid or assets that can be turned into cash quickly. Can we better define what liquid is? Is that something that you can draw on? Well, it's a GAP standard. In other words, if you look on a balance sheet, which we could drop one, you'll see that the liquid assets are going to be maybe money markets, maybe payroll accounts. Okay, thank you. They tend to be cash. And then what you could cash in if you had to close the business is, so we maintain, for example, a current ratio, which is the current assets that you could liquidify quickly or liquid over the money that you owe for that month or a year. So that's, so anyway, in any event, liquid and current is going to go into this third column current assets. Okay, so one more follow-up question. In the net income loss, if you compare this to 16 or 17, is this similar to what you would see and what influence did the GAP change have on this particular year? GAP change was about a half a million dollar drop in revenue. And you would see it the next year, probably not this year, not here. Okay, thank you. Yeah. When, just for clarification, when you're talking about GAP, excuse me, when you're talking about GAP, it's general accounting practices. And are you using that to refer to the changes that the FCC made or is this? No, that is separate. So the FCC docket is over here under FCC regulation. The GAP, Dan could probably explain it better, but it was a reclassification of cable operators. Actually, it was a change in accounting practices for how revenue is classified, which resulted in a change in what the 5% franchise fee was set against. And the net effect was a half a million dollar drop statewide for the access centers. And it had to do with how cable services are bundled and how they're priced and how the accountants wanted those bundled services to be priced. Any other questions on this particular agenda, Dana? And we had a PUC workshop on that question. We went into it pretty detailed. So we looked at that. Yeah. Anything you wanted to add? Thanks for doing all that research. Appreciate it. Okay, so going on to, I apologize, I just got a little bit of a cold. Next item on the agenda, the CPG update, the top cast CPG. Great, thank you. We filed with the PUC that file is before them for consideration. We'll resolve all of the pending issues that were appealed. We think satisfactorily to all of the parties involved. So we're waiting for a decision on that matter. There's also a piece that was outlined in the provision that will have a outlay of dollars as well associated with this, greater than a half million dollars are associated with it and are outlined in specifics in the filing. We hope to have this resolved soon. Clearly, if there are any questions, we stand ready as parties to respond to those questions. So is this an agreement that's already been made between the parties? Yeah, so what we had to do, there's a provision under the federal court, which we appealed in which there was a mandatory mediation procedure. We participated in the mediation procedure with the representative of the PUC, with the representatives of VAN and Comcast and we had three sessions, three day long sessions where we negotiated over the terms and conditions. We came to agreement on those terms and conditions. The main area was some funding issues, the build out requirements, the interactive program guide and what we call return lines that allow for live remote origination programming to take place from the ALS. We were able to satisfactorily resolve all of those issues. We signed a settlement agreement early in the summer. We put together a filing which was filed just a little over a week ago at the PUC and they're taking it up for consideration. Okay. Any comments from? We could send that, there's a kind of summary document that we could share with the committee so we could post here in the materials that really sums up the highlights of the changes as Dan often says when we go into negotiation, a good negotiation is one when not everyone is completely happy at the end, but we essentially agreed to move peg channels to a new neighborhood, a new section of the channel lineup so that each one of those channels could have access to an interactive program guide. That was technically the most efficient and effective way to achieve that and then Comcast is going to provide rebranding support for those channel changes, but pretty much all of the peg channels in the state are going to be relocated, so that's a pretty big change next year. Regarding remote origination sites, if you would like, for example, to go to the Winniski Senior Center and go live from there, but Comcast doesn't run, or the cable operator doesn't run by the senior center, you could go to the cable operator and say could you bring us a fee to that location and they would say either yes or no it's yes, but we have to charge you because of its distance from the plant. So what this agreement does is it provides some resources for an access center to come up with an alternative solution to use the internet or cellular banded solution, for example, rather than an expensive solution that might come from rewiring of the plant essentially. So that compensation is quite helpful and there's also included in this a, Comcast was not willing to provide HD channels to the access centers. We can start to request those next year, but they did offer a statewide high def channel and resources to create a playback system for such a channel. So that's a step forward. So those were really the highlights and then the build out requirements, the state had required what was it, 500 miles? 550. 550 and that was reduced to 350. Those are the specifics. Do you have anything that I could? No, I think that sums it up. My apologies for asking this, if you did cover it. The rebranding costs, the specific costs share a little bit about what those costs will cover and how much. Well, to tell everybody we moved. Yeah. So those, I forget the numbers, is it 3,500 bucks? 3,500 per AMO and we will keep, we'll do a dual running of the channels for a period of time. I think it's three months where it will be on their current channel as well as their new channel which will allow for scrolls to run at the bottom or elsewhere on the screen to say an X date will be moving to a new location. So three months is a pretty long period of time that will enable people to see where that location is. And the big benefit of this is that currently many of the access centers do not have access to the interactive program guide and cannot be handled like a commercial channel. They can't be recorded, you can't do an audio fine channel 17. And in the case, for example, Burlington and Richmond, if we were to put Burlington City Council on the interactive program guide, it would appear on Richmond's interactive program guide because of the design of the network. So this gives everyone their own channel which gives them all the functionality of a commercial channel which is what we were seeking in the docket. And you will be able to use the voice remote even though today you could say fine channel 17 and it would get you there. Oh you could, okay. Other channels will have the, we will add a specific wording to enable people to use the voice remote for that purpose. Okay, so this is an agreement with Comcast specifically. There are other cable companies in the state. How does it affect them? It doesn't. It doesn't affect them at all. And so will they have to go through a similar CPG? Well, every cable operator goes through, go ahead. Yeah, every 11 years, well, actually there are a handful of cable companies that are grandfathered. But most cable companies go through the CPG process every 11 years. I think Charter was 2013. So they were very recent Waitsfield Champlain Valley's next. So there, you know, every 11 years we go through this same type of proceeding at the PUC. And but Comcast makes up a majority of the AMOs. 20 of the 26 AMOs, 23. So that leaves three AMOs for. 22. 22, or four AMOs for the remainder of the state's nine other cable companies. Okay, so we have a statement of the New England Cable and Control Communications Association to be able to get out of the state. Does anybody here want to speak to this? Comcast is a member of NECTA, but we think that the document speaks for itself. I haven't read it. So is there anything in here that we should be discussing? I think we could take it under advisement and perhaps at the next meeting when more of our members are present, we could have a discussion pertaining to it. If that's okay with the chair. That's okay with me, it's okay with other members. Yes, yes. Okay, it's okay. All right, anything else on the CPG update that anybody wants to talk about? In that case, the next thing we want to do is take a look at various funding options. I think this implies that we need to come up with a funding option, which then leads to the question of what do we expect in terms of, in terms of a shortfall for the AMOs with any further changes that are going to happen in the near future with their funding? I think that there's a bigger question. And the bigger question is that the state's authority to require public benefit from the use of its right of way is being reduced by the FCC through various rulings over the past 18 months to two years. And so the state's ability to accrue any public benefit from use of its right of way, whether it's through PEG or through universal service, which is obviously a bigger matter, but is connected, means that the state has to look at how its ability to accrue public benefit is changing and to think about new ways that it still has the authority to require public benefit. So if you look at recent FCC rulings, you can see, for example, that the state of Vermont has, their hands are pretty tied when it comes to gaining public benefit from internet usage. And so that's just one example. There's several, which were outlined in the memo that we put together at the last meeting. So the question is not that the access revenue is going to go down next year. It's flat, just like cable revenue is flat. It may be slowly going down, but it's pretty flat. So it's not as if the whole thing is going to implode in 24 months. But the state needs to identify, and it has said that it wants to, ways that it can accrue public benefit from the rights of life. I mean, that's really the question. And so what we've been looking at is models that other municipalities and localities, authorities are looking at. Some are looking at sales tax model, like the amusement tax in Chicago, for example, or cloud taxes. Some are looking at excise tax models. Some are looking at, anyway. So there are a variety of ways that other states, other localities are looking at to recover public benefit. So what we're gonna hear today are the different, the sort of the range of authority that the state has, what it has been using in terms of taxing or fees to accrue benefit, to see if there is some way forward for this state. So that's- Yeah, we've talked- The question. In the past about internet delivery and services, apart from the cable delivery and services, that is an pathway for programming to get out to the public. And that's what you're referring to. Well, essentially- Yeah. How do we make sure that the methods of access are reflected in the funding mechanism? Right, and the state exercises what authority it does have, to understand what authority it has, how it's exercising it and how that might be utilized in the future. Okay, so the first option that we talked about as a possibility is a state right-of-way piece on communication providers and agency of transportation. It's Mr. White here, Robert White. Okay. Welcome. Thank you. For the record, I'm Robert White. I'm the agency of transportation's right-of-way chief. My understanding is we'd like to talk a little bit about 19VSA 26A, which is statute that actually talks about the determination of rent that can be charged for leasing or licensing right-of-way. So let me start by saying that generally fair market value is the term we use for determining any sort of use or rental or fee for using the highway right-of-way. A part of this statute really talks about other laws and I really want to move more towards the federal law because almost our entire property is federalized. And so we move to the federal law to really look to see what they say. And they say much of the same thing. It's a fair market rent. I will say that utilities and whatever may be under that definition by federal highway standards is considered an allowed use. And basically what that means that it allows the states to determine whether they want to allow that use to occur free at some lesser value than fair market value or a fair market value. It's really up to the states. And the federal, and actually I can give you the, it's title 23 USC 156, really talks about that fair market value. And it states that any fair market value that's gained by the use of that federalized right-of-way has to be put into what's called a title 23 fund, which is a fund that we have at the agency. And basically that title 23 fund specifies that it has to be used for transportation purposes, specifically for renewal of the infrastructure not maintenance. I don't know if there's any questions about it. Can we ask a question? Yeah. Can you give some examples of what existing rental licenses or leases are that you have? Sure, we have various private entities that may come to us and want to rent it. It could be for a short period of time, long-term lease. We do sell property as well. As we do roadway projects in the road, maybe moves or maybe additional right-of-way. Route seven is probably a good example where the old route seven used to wind down through kind of the valley there. And it's been straightened out over time. So there is what can be considered surplus property in those locations. And so normally what happens is people come to us. We don't search them out. They'll come to us and say, I've got this used. So I want to use it for whatever. It could be a fair or it could be storage of equipment for a short period of time or something like that. Thank you. So when you talk about transportation purposes, does that include anything other than transportation? For instance, the utilities or the utilities have utility poles in the right-of-way. And how does that tie in? Those aren't considered part of the transportation system. They're not, but they're considered an allowed use. So it's sort of this gray area, right? It's not transportation, but I think they understand that there is a public benefit potentially there with the utilities. They have a similar need for land, very long, linear corridors, much like we do. And so they are allowed to come in. And it doesn't necessarily preclude, like I mentioned, that the state charge anything to those utilities or users of that right-of-way. But up to this point, the agency of transportation has not charged for the use of that. So there aren't enough charges at this point. How would that, could I ask a question? I'm sorry. How would that relationship be constructed? I mean, if the state decided to do that, how would that work? Charge. So the way use of the right-of-way is dealt with here in the state is the 1111 permit. So that's of the section 1111 statute that requires not only the state but municipal governments as well to enter into this agreement. Basically, the agreement says we're allowing you to occupy this property. When we need it for transportation use, you've got to move out of the way within a timely manner. So we do it under the 1111 permit. So you, so let's say Green Mountain Power has polls in the right-of-way. So that's the right-of-way we're talking about. So the state would say to Green Mountain Power, we're making an agreement with you. You might have to move the polls. But in the meantime, we want you to pay us fair market value. I mean, it's the fair market value price still apply. How would the cost of that be figured out? So we don't do that now, obviously. If we were to determine fair market value, normally there's two different ways we can do that under federal guidelines. And that's either an appraisal by a licensed appraiser. Or we have a way of determining value, which is called waiver valuations, which doesn't really apply here because it's a threshold of $25,000. And it has to be uncomplicated. This is complicated and is probably going to be over that amount. So we would hire an appraiser that has an understanding of those type of facilities, our type of land, and they would do an assessment of the market and determine what that value is. And is there a prohibition from adding a premium onto that cost? I would say no. The federal government actually says we have to charge, at a minimum, fair market value. So utility polls are there now. We're not charging the fee for them. When a broadband subscriber, the utility polls are there primarily for electric distribution, right? Yes. And landline, probably, right? So depending on who the poll owner is, if it's the utility company, they can charge a fee to broadband providers or for public providers, right? It would be a poll attachment fee. A poll attachment fee is right. If the telephone company is a poll owner, they can also charge attachment fees to broadband providers or whatever, right? Correct. And poll attachment fees are designed to reimburse the poll owning utility for that portion of the poll that the provider is using and is used for maintenance of that poll. So to reimburse for the ongoing operating expenses. And this is totally apart from any right-of-way fees because we don't charge right-of-way fees. Correct. The poll attachment fee is an arrangement between the poll owning utility and the attaching entity. And it's for the operating expenses for maintaining that particular poll to which they're attached. And so if we were to choose this option as a funding mechanism, this would be an entirely new fee structure attached to go with the right-of-way fee. I would say it would be. I do want to point out that you used the word broadband. And I tried not to use that. But when you're talking about broadband or wireless communication specifically under the same statute, Title 19, VSA 26, subsection B, it specifically calls out that infrastructure, broadband and wireless communications, and says that the agency shall charge a reasonable rate. We do not currently, but we know this statute is in place and we're trying to wrap our hands around it. You mentioned that federal guidelines require fair market value so that you have to charge fair market value. Are there federal guidelines that, or not guidelines, but rules or statutes that govern what happens if a state diverts money from the transportation fund for non-transportation purposes? So let's say this fee is levy, but it's not going to the transportation fund for transportation purposes. Is there anything that does that put the state at risk? It does. And I will say I don't know a specific language about if we don't actually divert that money to the Title 23 fund, but generally federal highway is pretty clear that if you're using a funding mechanism inappropriately, they could potentially pull all federal highway funds from the state. So there is a risk, however, to note that we could lose federal funding for highways if we don't use money collected for the right of way for transportation purposes. We could. And I will say we have lost money in the past specific to a project, but we've never lost any high alarming of federal funds. Thank you. Any other questions? Thank you, Mr. White. Thank you. Thank you. The next item is the Telephone Personal Property Tax. Doug Farnham from the Paxes. He said he was going to be able to come, but I also put him on the agenda for 1115. So he might be thinking that we should be here at that time where we're probably just running right through this. And Graham Campbell, who's from the JFO office, testifying this afternoon, has some word changes on the agenda for his topics on the district because right before this. Well, I guess we could either jump ahead to the connection please, or we could take the time to read the statement that was just given to us for your preference. I think we should move ahead to connection please. OK. I would second that. All right. OK, Maria, you're up. Thank you. This is the back page. This change is just the name. Good morning. Good morning, Maria Royal from Legislative Council. And so I'm going to be talking about connection fees. Just for background purposes, these are fees that usually come up in the context of financing universal service programs. So for example, Vermont, like other states, has a state universal service fund. It funds various programs, including relay service for the hearing impaired, the Lifeline program, E911, which is probably the biggest drawer down those funds, the connectivity initiative, and the high cost program. So right now, those programs, that fund, is financed by a surcharge on your phone bill, slash 2% fee. It went up actually last year by 4% of a percent, and that money was specifically directed to the connectivity initiative, which is a broadband grant program. So this structure has been in place. The state universal service fund has been in place, I think since 1994. The programs have changed a little bit over the years. But in terms of the revenue in the fund, because it's a proportional charge on your phone bill, that revenue has been declining over the years, in part because, for one, people used to have a landline, and then they got a cell phone. When they were paying the charge on both of those services, a lot of people now are dropping the landline. So there's a declining base. Also, with the bundling of services, VoIP with broadband, cable, television, the fees are going down on the voice part of the phone bill. So to address the declining revenue in other states, one proposal is to switch to, rather than a proportion of potentially declining revenue, a flat fee that remains stable. And that fee is imposed on the connection, your phone line. So you pay maybe a dollar a month, and it doesn't fluctuate with revenue. And so that's one methodology for funding universal service programs. So I think you heard, maybe earlier, in terms of financing pay, access television specifically, maybe making that another program that's funded through the Universal Service Fund. But then you also heard those revenues are going down, the state's having a hard time funding existing programs. So I think the issue came up, well, do we just overall change the contribution method to a per line charge? Does that stabilize the fund? Potentially allow for expanding the distributions to other services. So these are all policy choices. So that's basically a description. In other states, I think there are four states that have done some version of a per line charge. Nebraska may have been the first state. The Nebraska Public Utilities Commission has a somewhat broader authority than the Vermont Commission in the sense that they can, on its own motion, come up with different funding mechanisms for the Universal Service Program. So they initiated a proceeding in 2014 on their own motion. And then I think three years later came up with a methodology that uses a hybrid, basically a connection fee on residential lines, small business lines, and still has a proportional fee on the larger businesses. And all of that's being monitored and is subject to change. That was Nebraska. So other states that have looked at the connection, per connection fee, include Utah, New Mexico, and Maine. So I can't tell you in Vermont exactly how many lines of service there are, what the line count is, or what the fee might be to raise revenue sufficient to fund the existing programs or the existing plus additional programs. But that is certainly something that you could consider. So when you talk about a connection, are you talking of the people who are dropping their land lines? You're assuming they still have a connection because they might have cable or fiber or whatever. They might have VoIP through cable service, voice over internet, or they might have just a cell phone and not have their land line anymore. They have sufficient cell service, so they just use a cell phone. So those voice services would be subject, would be considered a connection. And then some households have many connections. Family members might have several cell phones. And right now it's just on land lines. No? No. OK. Right now it's on cell phones and VoIP. It's interconnected with the public switch now. Is there anything that could stop the state from applying it to broadband? I think there's a preemption issue on broadband. So right now we're just talking about voice services. Right. Now I'm talking about broadband services. So is there a connection charge on a broadband service may not be printed or is it printed? So on make the pool bigger. Right. Expanding the base. I think you're running the same problem you would as applying the universal surcharge on broadband. What is it? All carriers. So you're raising probably one of the most problematic areas being faced by states and the telecommunications industry. And when the FCC in 2016 reclassified broadband internet access as an information service, it also specified that to promote broadband deployment, states were preempted from regulating or imposing taxes on broadband. So you don't see that. And that's a problem if all of your services are migrating to broadband and you're losing your revenue base clearly. I think that's something that states are grappling with. But the preemption is a big issue. I'm not sure how you get around that. Did I understand you the same way that the USF currently applies to landlines, cell phones, and VoIP? And VoIP is voice over internet protocol. So that applies broadband. It's used on an internet platform, yes. But it's a voice service. And it interconnects with the public switch network. You can have a. Is that like an exception for this you can't tax the internet thing? I don't know that it's an exception. The FCC has never classified VoIP service as either an information service or a telecommunication service and has allowed states to continue imposing the, Clay, correct me if I'm wrong. No, I think that's correct. I mean, the way to think about it is the service being provided. So yes, it's over a broadband connection, but it's a voice service. So in the case of Comcast, it's not simply an over-the-top service. And it's just treated like every other internet traffic. It's a specific and separate service. It is interconnected with the PSTN. And those providers do pay into the fund and have them and make up a large portion of the fund. So I have a question. The programs that are funded by the USF, are those mostly health and safety related programs? Or do they have a different public benefit that would be more comparable to the service provided by the access networks? I'd say public benefit. We can go over each of them. So there's the relay service, which is for hearing impaired. So that's more of a health-related, to support their communication. It's accessible to ensure that folks who can't use a regular telephone aren't able to participate. In society, and use the communication services. So relay service, we hire Sprint. This allows a deaf person to interact with a Sprint call center. We can then use by sign language relay information to the caller and back. So that's what that's for. Lifeline service. So there's a federal lifeline program that's a credit on your telephone bill for low income consumers and telephone service. We have an additional credit. So the federal credit reduces the costs of telephone. Our state credit reduces that cost even further. So that's a $4.25 credit, in addition to the $9.25 credit offered by the federal government. And then 9-1-1 makes up about 83% of the fund. That's a clear public safety function. And then the last is broadband internet, so the connectivity fund, which is spending money to build broadband facilities to locations that don't have it today. That helps. So really, people that are benefiting are low income, hearing impaired, and then also the E9-1-1, which is a public benefit for everyone. Yeah. The fund is about, I'm sorry. I was going to say, but we don't want to lose sign of the fact that we're also trying to build out broadband with it, too. Right. And that's a smaller, that's a pretty small portion. And why was the funding allocated for that? For broadband? Yeah. Well, not why necessarily, I understand why, but how was the? The original structure was that, so there's an order of priority. That's an important aspect of the way the Universal Service Fund is structured. First comes relay service. So we're paying for that first, followed by a lifeline. Then followed by 9-1-1, and last is the connectivity fund. So the connectivity fund has traditionally been a sweep of whatever's left over. And so that's fluctuated greatly. But I would say that in recent years, it has been between $200,000 and $500,000, so it's not a big draw on the fund. This past year, the legislature increased the Universal Service Fund from 2% to 2.4%, and segregated that 0.4% for broadband. So 0.4% of the fund is guaranteed for broadband. All the other programs draw on the remaining 2%, and that order of priority governs. And how much is that fund? FY19, it's looking like about $5.5 million. So is there any prohibition on the broadband internet connectivity fund comes from phone users? So I guess, once again, I would ask, what stands in the way of a connection charge being accrued to other users as a network, meaning broadband? Well, I'm not saying it's not really, but broadband users. So why wouldn't broadband users be contributing to the broadband connectivity fund? Because federal law pre-empts states from levying taxes of any kind. And I believe Peter Bloom spoke to this. Well, he did, and he suggested connection charges, which is why I'm keep going back to it. Well, I mean, I think it's a matter of, I think his point is that as you see revenues, the amount of money that people spend on retail telecommunication services decline, the USF fee is pegged as a percentage of that revenue. So if you're a bill for voice service is $100, you pay $2 on the fee. And as we've seen the price for voice service decline over the years, the amount that a subscriber contributes to the fund changes, my understanding is that a connection charge is a flat fee based on the line in service. So I keep thinking Ethan Allen is right there. I know. I do. So regardless of the fluctuation in price for voice service, the fee would be stagnant or static and be set to whatever the legislature sets it at or whatever the revenue requirement for the funds programs is. So in a way, it's kind of regressive. I mean, no matter how much you're spending on telecommunication service, that fee is the same. OK, but here's what Peter Blum said. Connection charges. This option focuses on the wires and fibers that deliver end user service rather than the services themselves. It is why Landers stood as unlikely to provoke FCC preemption. This is the substance of my question. Although I think the FCC is endlessly clever in finding ways to expand its own jurisdiction, I accept that connection charges stand a good chance of surviving a preemption effort. So I would like to know more about that. The method is to stop looking at revenue from telecommunication services and focus instead on the wires and other facilities used to provide that broadband service. In most cases, there is a month or a yearly charge for connection. A connection would be a telephone line or a broadband line. You might decide that a line that provides both is one or two unit connections. So he goes on to say. So I'm really interested in the sentence. But I think there needs to be some consideration in that sentence also that the connection could very well be also the television connection, which is the cable service connection. And the cable service portion of that has a cap on it at 5% of gross revenues, which is the fee associated with it for using the public right of way. And if you're at the 5% cap for that connection for the cable services, you are at the cap of that fee. Right. But let's say you put that franchise fee aside. So let's say you have the 5% cap. And you say, we're not going to recover that through franchise fee. We're going to recover it through a connection charge that we can accrue on cable and broadband and telephony. I think ultimately you would be, my opinion on that would be that you would be circumventing the intent of the Federal Cable Act, which put the cap of 5% on there if you were to do it as you outlined. So what you're saying is that the cable companies that are only at that 5% cap would be exempted from a connection fee, any further connection fees? Well, I think we're, yeah, I think that's correct. But when I be careful, I think what we're doing is we're just intermingling language. And ultimately, it is a fee or a tax associated with the use of the public right of way. And there is the limitation on that from the cable service perspective that limits that at a 5% cap. So my answer is yes, but I had to explain it. No. Right. But if you could accrue it on broadband connections, I guess that's where I'm going. I mean, this language suggests that you could research. We could research this further to find out the implications of connection charges also applied to broadband. Yeah, respectfully, that's the only place I'm hearing that. I'm not hearing that anywhere else in any of the presentations we've had before the panel. So I was hoping you would bring some research that's folks to this a little bit more specifically. I'm not sure exactly what he's saying there. In the context, I think that I've looked at the connection charges been for a voice service. Now, that might be delivered over broadband. That doesn't address the problem that was just raised if you're paying a free, because ultimately it's a customer that's paying. They're paying 5% on their broadband connection, which happens to come over a coaxial cable line. Would they then also be subject to a dollar or something per month surcharge to pay for universal service programs? And that's a legal question. I don't know that I can answer that. But I think Peter was talking about only a connection charge on wires and fiber. And I don't understand that, because does that mean the wireless providers would not be paying? So I'm not sure exactly what he's getting at there. And I would need to speak with him. OK. Maria, thank you. You mentioned four other states, Nebraska and New Mexico, Utah, and Maine. Do you know if any of those four states are levying the fee on broadband connection? Specific on just to broadband. Or to anything other than voice, yeah. Other than voice, I don't know. I will look further into exactly what the states are doing. But my understanding was it was on a voice service. So if you offered voice over it, you might be with the understanding that there may be offsetting issues. I just haven't looked at it that much. And yeah, I think there are challenges and concerns that are being raised in this context for this new methodology in the last couple of years that we've really seen it take hold. And so I would expect there are going to be concerns raised. So the key to doing something like this will be in trying to thread the needle in terms of the federal requirements and what we're trying to accomplish. All right, you're welcome. OK, thank you. OK, and I think Doug? Yes. We'll go for states. Let's say the total and personal property tax here. Good morning. Just further record, I guess, I had the lights on. Doug Farnham, policy director and economist for the Vermont Department of Taxes. I don't have a lot in the way of preparatory remarks. I always generally thought you wanted to hear about the telephone and personal property tax. Personal, is there one? Yes, so basically the telephone and personal property tax. And I would also talk about the telephone and gross receipts tax at the same time. There's in the corporation taxes section of Title 32 sets up the personal property tax, and that is where most of the revenue comes from. And then there's an alternative tax set up for smaller telephone companies that, in fact, so few taxpayers pay it, I won't be able to disclose the exact amounts or number of filers because it's less than 10 filers. That's about all the detail that I can give you on that. And that when you look at the amount of revenue coming in from the telephone personal property tax, the gross receipts tax doesn't really move the needle. It's very little revenue. But the gross receipts tax, that alternative tax structure, makes those companies exempt from the personal property tax. So it's instead of. And it also makes them exempt from the corporate income tax. The personal property tax, on the other hand, that is paid in addition to corporate income tax. So those companies are still going to be filing corporate income tax returns. But it is instead of education property taxes. Without that section of law, the real property, at least not personal property, would be subject to the non-residential or non-homestead as of next year, education tax, right? I personally was not even aware that there was a personal property tax or telephone gross receipts tax. So what is that actually assessed on? So when we talk about a telephone as a personal property, I'm not thinking of a handset or something like that. Right. So the first gate that it has to pass through is that in order for this tax to be levied, it has to be a business that's in the first tier of providing telephone services, which is basically defined as traditional landline telephone services. So it has to be in that type of business. If it's reselling telephone services, then it doesn't qualify for the definition. So it's kind of an older definition that the audience for it has been shrinking over time. So the second gate, then, what is the tax imposed upon? It's on real and personal property, so business personal property, meaning the infrastructure, the lines themselves, unless they are leasing space from a utility company that's going to be treated separately. So any of their infrastructure in the state, and if they have machinery or other equipment in state, it would be levied on that as well. And then it's imposed at a rate of, I may get the rate slightly wrong, I think I'm right, but I think it's 2.37% of net book value. I know it's based on net book value, and I believe it's 2.37%. So that net book value is also, that is a rabbit hole unto itself of how to calculate that. But essentially, it's supposed to represent the operational value of the infrastructure. OK, so that's on all the personal property a telephone company owns. Yes. OK. And do other telcos, well not telcos, do other cable companies pay some version of this? So it's my understanding, and this understanding may not be perfect, but the cable companies are separately defined for federal purposes, and this kind of interplays with this, that they're not, cable companies aren't necessarily defined as telephone companies. So in order to qualify for this tax, they have to be primarily engaged in the business of providing telephone services, and the vast majority of cable companies are not going to qualify for that definition. Do they pay property, I mean, is the property tax, is there an equivalent? So there's, for a cable company? Yeah. There are multiple equivalents, yes. Sorry. No. Sorry. So getting into the treatment, in general, broad terms of a cable company, they have no exemption from corporate income taxes, meaning they would be subjected to corporate income taxes. This legislative session, there was a change made in Vermont corporate income tax treatment that went from cost of performance for services, and I'll try to keep this brief and high level. Basically, we allowed service companies to source where the cost of performing that service was held. So in many cable companies' cases, they would source that to their headquarters because that's where most of their staff are, and they're providing remote services. This year, we changed in corporate income from cost of performance to market based sourcing, which means we allocate that service income for apportioning their corporate income tax liability to the place where the service is performed. And it's impactful for many industries. It's a general, very broad change in our corporate income tax treatment. It is quite impactful for service industries like cable companies because where previously those services may have been apportioned out of state if their headquarters were out of state or if most of their service personnel were out of state. Now, it's based on their customers, and we expect them to apportion the income from those services to Vermont. So corporate income does apply to cable companies and is likely to increase on that industry under market based sourcing. Also, yes. And the revenue from that is expected, where is that? That's general fund. Because of the 2017 federal tax changes, that revenue source has been highly volatile in an upward direction, but it's a little bit over $100 million. And it generally fluctuates historically between $60 and $90 million in all going to the general fund. The corporate income. Corporate income tax, yes. And the changes? The changes from cost of performance to market based sourcing aren't expected to dramatically increase corporate income tax. However, they do change who will be paying it. And it's a move to be more consistent with other states. Most states have been moving in the direction of market based sourcing because it's seen as a more fair, more modern way to treat companies. Because if someone is, think about a Vermont company, if they're providing services out of state, we are taxing on them on that. And then they may be getting taxed in those other states for providing the services as well. So under our previous model, there was a potential for double taxation of Vermont based corporations. So other equivalents to the telephone personal property tax on the capill side beyond corporate income tax? So their property would be subjected to the just regular education property taxes. They have no exemption or special treatment there. So the primary thing that the personal property tax takes the place of is the education property tax. So the way it would work functionally right now is if you were to just say, just repeal the telephone personal property tax, just take that sub chapter out of Vermont law, then they would revert to non-homestead education property tax. And that's approximately $1.59 on the fair market value, which has some correlation to net book value. But I could not explain that in less than a day, probably. I just have a, I'm sorry. Just a really basic question. When you start talking about taxes, I get lost easily. The telephone personal property tax, the revenue generated from that, does that go into the education fund? No. So that goes to the general fund. And the money that is raised through assessments on cable companies for their property, does that go into the general fund as well? No, that would just go into the education fund. Yeah, thank you. I believe it's just because the telephone personal property, and we also have a railroad company tax. We have a couple of older taxes that are on an industry basis like this, where they go into the general fund, but they've pre-existed Act 60. And I just don't know that they became part of any conversations. Good answer. The question you just asked about the cable company assessments that's property, you're talking about property tax there, too, right? Just property. Education tax doesn't apply to personal property. But looking at how some towns can still tax personal property, they have the authorization to, if they choose to, not many choose to do it. But most of the value in the telephone personal property tax is, I wouldn't label it as personal property, because it's real and personal. And most of the value comes from the real components, installed infrastructure. And that goes into the general fund, indeed. Telephone gross receipts tax. This is also a general fund. This is also a general fund. And I'm sorry, just to clarify, these are the gross receipts tax. Telephone gross receipts tax. So I'll turn it into personal property tax. OK. Sorry. I was thinking of another gross receipts tax. Yeah. It's very confusing. So we're all telcos subject to the telephone personal property tax? What's the, how is that defined? Is it your telco, you're regulated that way, or your cable company and you have pipelines? What, how does that work? So the definitions are older, and they're not necessarily cross-referenced with how we regulate companies. So I could not point in the statute to a direct relationship between how we regulate the telephone company and how we tax it. It's got a kind of a standalone definition. Maybe you could specify who pays the telephone personal property tax, which companies. I definitely can't do that. OK, let us know. I can tell you that there are, it's paid by between 10 and 20 companies pay the telephone personal property tax. And the revenue from it in fiscal year 2012 was about 9 million. And then it has steadily declined on pretty much an even slope up to this point where in fiscal year 19, it was just over 5 million. So we've seen about on an average 3,000 to 400,000 of revenue loss in this tax type per year. But our tax confidentiality laws prevent me from disclosing any direct taxpayer information. So I can't tell you who pays it, sorry. Any other questions? I find it very confusing myself. I just want to make a comment that the telephone and cable companies also pay the gross receipts tax, which is a tax to the Department of Public Service and the Public Utility Commission that is in addition to these other taxes. And that's usually levied on gross revenue, I believe about 0.5% of gross revenue for the state, right above the telephone and cable. Well, we saw in that memo last week, last month, how many? It's actually kind of incredible how many taxes are on telecommunications providers. I mean, there's every flavor for cable companies. OK, well, thank you. Thank you. Thank you very much. OK, so the next thing on the agenda would be the sales tax on pre-written software, accessory, and molding. That's otherwise known as? Outtox? This is Graham Campbell. I don't see Graham in the room. Try fiscal office. It's actually on the agenda for 1145. And we're kind of on about 25 minutes early. Yeah, he's speaking on the next three, right? So yeah, he's on it for the next three. So possibly a break? We can have a break. So let's be back here and just say 1130. And get from us on the record here. How are you? Very well. Hi, buddy. OK, we are on the record again. So we have Graham Campbell. How are you? Very well. How are you? You're welcome. So we've got three items here that we'll talk about. I guess sales tax on pre-written software, taxes on video streaming services, and satellite TV tax. And I guess take them right in a row because you're going to speak to all of them, right? Apparently, yeah. OK. So I don't know. I have paper copies. I don't know. I have a mic and mic. I don't know. Yeah, we're doing this. You guys got it. OK. So my name is Graham Campbell. I work at the Vermont Legislative Joint Fiscal Office. In our office, I handle mostly non-property, non-transportation revenue sources. So the big ones, income taxes, personal and corporate, sales and use taxes, and then a slew of all other types of taxes. So I was asked to come here and speak about taxes on pre-written software, both accessed remotely and not accessed remotely. And I'll go into what that means, essentially. And then Dan Dickerson helped put together some materials on satellite taxes. I'm not super familiar with that area of taxation, but I'm going to sort of kind of sum up with Dan's. And if there are any questions, then I can forward them to Dan Dickerson. After the meeting. So when we talk about pre-written software, tax on pre-written software, that's been referred to as a cloud tax, right? Or is that different then? So the cloud tax, as it's been colloquially called, is the sales tax on pre-written software accessed remotely. So pre-written software, it's broken down into two areas, pre-written software that's downloaded or not accessed remotely, and then pre-written software accessed remotely. Pre-written software accessed remotely is what you'd consider the cloud. The other pre-written software would be sort of like audio books, streaming, things like that. So I'll get into that as I go along here. But correct. But when you hear things like Netflix tax or cloud tax, just remember that 95% of the time, even in the sort of discourse of tax discussion, we're not talking about a specific tax on cloud pre-written software accessed remotely or Netflix or Hulu or anything. We're talking about the sales and use tax being applied to those services and products. So a quick overview of the sales tax. The rate in Vermont is 6% on the final sale of what we call tangible personal property. In sort of layman's terms, what that means is things that you can touch or things that you can see. Largely, that means goods. In Vermont, we don't really tax any services. There's, I think, about 35 services that we tax, but the idea of services is usually not taxed. In most state tax jurisdictions that have a sales tax. Some localities in Vermont have a 1% local options tax, and usually it's collected at the point of sale. So at the final point of sale, usually the consumer, it's collected there, and it's remitted to the Department of Taxes by the retailer, whoever sells it. And the big thing that's been happening in sales and use taxes is we can now, because of the Supreme Court decision in 2018 against Wayfair versus South Dakota, we can now collect sales taxes on sales from remote sellers, so online sales. They're at a longer requirement that the remote seller have an actual physical presence in the state in terms of sales tax. A key point that I'm going to emphasize here is that sales tax is 100% of that revenue right now is dedicated to the Education Fund. So any sort of proposal to use sales tax money would need to be diverted out of the Education Fund, specifically written into any sort of statute. And to give you a sense of how much we collect, we are projected to collect about $436 million in fiscal 20. That is, I think, probably the third or fourth largest revenue stream in the state. So let's get to your question representative on pre-ruined software. So I'm going to kind of combine my presentation here for cloud taxes and streaming taxes. You know, I should call them the sales taxes on those two things. I'm into one presentation, and the other one is about the sales tax on the satellite tax on the backend. So when we talk about pre-written software, things like digital services, audio and video streaming services, downloads, cloud, we shouldn't put services, but cloud software is considered in this giant bucket of pre-written software. And in Vermont, we currently consider certain types of pre-written software to be tangible personal properties. So something that is considered tangible personal property is taxable for the sales tax, and therefore we currently collect the sales tax on that. So generally, if you think about software that's downloaded from the internet and installed on a computer, that's like the key thing, installing it can be if you're downloading it, you're personating it, it's installing a computer, or if you're buying a disk from Office Depot and installing a computer, that is currently considered tangible personal property and is taxable. The same goes for any software delivered, like I said, on a portable disk or USB. And things like audio visual works, audio works, audio visual being streaming services, audio works, like audio books, digital books and ringtones are currently considered tangible personal property. So things like Netflix, Hulu and other streaming services currently pay the sales and use tax in Vermont. So how is that charged? If I go out to Netflix and I download a... It's on your subscription. It's part of your subscription. It's part of your subscription. Correct. So I'm not sure how much revenue we currently collect from all those types of services at the moment. That would be interesting to know. Yeah, I'm also checking with the tax department. My understanding is that it's not insignificant amount of money, but my ability to get that information might be limited by confidentiality and tax department. So just a question on that. So if I subscribe to Netflix, does Netflix have to report how many subscribers it has in Vermont and then they remit a portion of the subscription fees? I would guess not. My intuition would be that I'm just thinking about how the form, how you report your sales tax to business, you essentially report your taxable sales. So Netflix would report how much in taxable sales they would have in Vermont. So that would include, you know, for the quarter of a month, I can't remember how much they remit it, but they remit in that month or quarter how much in taxable sales they have. So you would, from the tax part, would not know, I don't believe, how many subscribers Netflix would have based upon their information. What they would know is how much in taxable sales they would each have. That would be a pass through the customer, a line item, just like sales tax. Yeah, I mean, I don't believe they're required to put on the bill that it's a sales tax, but in theory it's a pass through. Sorry, I should talk up on the side of this. I'm going to be looking at some of these. Less neck turning. So you're nodding and everything. Yes, Mr. Campbell is correct. We do not know the number of transactions. We don't include that because it's not part of the tax and it would be burdensome. We, as long as we had more than 10 streaming companies, then we could share information, but if it's less than 10, we can't share direct information. And then, I'm sorry, what was the last thing? The line item, whether they are required to separately state it. So if you look at your Netflix bill, they do break out the super tax sales tax. Just other curiosity, the confidentiality agreements as far as, you know, if there's less than 10, you can't talk about it. You can't say who they are. Is that something that's an agreement between a state and those companies, or is that just a general rule of law or something? That's an excellent question. So in Vermont law, it says the department's not allowed to disclose any return information. And there are plenty of exemptions from that, but they're specific for certain situations and for certain tax types. For instance, property transfer tax returns are public. So we can talk about any field of data on a property transfer. But everything else is protected by confidentiality. And it says we can't disclose any return information. The IRS has best practices of not disclosing aggregated information for populations of 10 or less. Because when you get to under 10, you can kind of, you can figure out roughly what their taxes and what their income is if you make the tax tax. So that rule of 10 isn't in inner rule or law. It's a policy at the department, a policy that we get from the IRS. And we do make exceptions sometimes and produce more of a range or an approximation if it's less than 10, but it's a really important question. But it's on an exception basis and we really have to consider that we are undermining the taxpayer's rights. And if I disclose information, I can actually be fined significantly and go to jail. Does that non-disclosure apply to identifying the companies or does it pertain also to the amount? So in most cases, it prevents us from identifying the company like in telephone personal property tax, but with sales tax because it's a pass-through. There's a provision in Vermont law where we, the department can confirm whether or not a company is registered for sales tax and if they're in good standing. So we can't tell you how much sales tax they're remitting, but we can tell you if they are remitting and if they're in good standing. So if they have an account and they're in good standing, it means that they're paying the sales tax and that we haven't run into any issues with them. Thank you for that. Thank you, Doug. And so the key point I want you to take away from this is currently we applied the sales and use tax to digital streaming services. That one could Netflix, Amazon Prime, Hulu. So for streaming services, what do other states do? So 45 states have a sales tax and 33 apply their sales tax to streaming services of which this includes Vermont and states have gradually started expanding their sales tax bases to include these types of services so three that have recently done this are Washington which relies entirely mostly for its revenues on sales taxes, Iowa and Pennsylvania. So the switching gears, the concept of a separate tax on video streaming services or audio visual streaming services is not something that I have generally seen happening nationwide. There are a couple jurisdictions. The main one I saw researching this in the past and for this is Florida's communication services tax. This is a tax that has existed in Florida well before the advent of video and music streaming services. It applies to cable and satellite television services, telephone services, mobile services, and they recently put in video and music streaming. It has a varying rate but it's 7.44% broken out into two parts. One is this 5.07 for the state tax which the customer pays and 2.37 which is the gross receipts tax which is paid by the dealer in this case usually it's Netflix or Hulu or utility. The things like internet services are exempt and residential sales only pay that second rate. That's sort of one that I've seen states. I've seen the city of Chicago recently expanded their amusement tax which is I think 9% to include Netflix and other streaming services. There was a protracted legal battle over whether these things qualified as amusements but generally we talk about taxes on streaming services. We're mostly talking the sales tax and very few actual jurisdictions have created a separate thing on top of their sales tax for these types of services. Can we put an asterisk on the Florida communication service tax to talk about after you're done? Sure. I'm curious about this. It's applied to all carriers you said. Yeah it's applied to the... Well there's the rate of 7.44 and it's split out so the 5 is paid by the customer right on their bill and then the 2.37 is remitted and it's paid for by the actual dealer or the company itself. Do you call it an excise tax? They call it a gross receipts tax I mean. Do you know how the 5% where the 5% comes from is that the federal franchise fee associated with cable service? I don't know the answer to that question. And then I guess another question is it's exempt to 5.07 by taking into account the fee on fee perspective that is traditionally known associated with cable services which would be my presumption but I would like confirmation on that. So the question is that 5.07 related to the federal... Federal franchise fee and does it rise... which is capped at 5% and does it rise to 5.07 based on the fee on fee? Issues. Do you think a related question you may know this is the 5% of franchise fee? The cable. I think that's it. That would be a question because before to subsume the franchise fee into this it would be likely... It looks that way based on the number but I guess that's the question. I don't have a certain answer to that question. We could find out. I'll look into it and get back to the community. Thank you. We'll talk about regarding streaming services and so what we're talking about there is pre-written software but the next category is this idea of pre-written software accessed remotely and this is what we commonly know as cloud cloud based services and products cloud software so cloud services are what we call pre-written software accessed remotely and this is solely this is software that's solely accessed through the internet or a cloud based platform and I should apologize to say there are many iterations of what this could possibly mean and different stakes take different definitions but under the current Vermont statues pre-written software accessed remotely is not considered tangible personal property and is therefore not taxable and so sometimes you'll hear cloud services and cloud software as a service generally that's what cloud services and cloud taxes but you might also hear things such as infrastructure as a service this is a different type of cloud based service where a company is operating computer infrastructure where the customer would pay the contractor operate on the customer the company is operating server space on behalf of the customer that is infrastructure as a service and there's a separate category called platform or services where a company will provide software services to a customer that allows a customer to develop and run and make changes to that software so a good example that would be web design services so some states have when they've decided to make changes to whether they should tax pre-written software accessed remotely have narrowed the definitions of things like software as a service others have beroaked in all three of these types of services and software so when I'm talking about pre-written software accessed remotely I'm largely referring to software as a service because this is what was talked about last year during the legislative session so 18 other states currently consider pre-written software accessed remotely in the narrow definition of software as a service as taxable so they're applying their sales tax to that type of software so if you had a company that sells point of sale software to a retail outlet what would that fall under part of the infrastructure as a service or platform as a service or a software as a service it kind of depends on how it's being used but my guess is that if you think about that software that if that company is talking to Doug if you think of that software as what we call canned or it's designed and it's sold as like a package to the to the retailer that's using it considered pre-written software accessed remotely more on the side of software as a service and then that if the exemption were removed would be taxable under a change and remember this is the sales tax we're talking about we're not talking about it several times okay that's kind of a side of the way so I have an example here that might help clarify things but just to give an update to the community what was talked about in this session as 96 which was the clean water bill was amended by the house and it repealed the exemption that currently exists in the statute for pre-written software accessed remotely that portion was removed from the bill from a senate further proposal amendment and eventually that bill was enacted into law without that clause in the bill we estimated that for fiscal 20 it would generate about $6 million in sales tax revenue with the caveat this will grow, likely grow quite quickly since this is a very rapidly changing and growing industry on software so I'll give a basic example of what pre-written software accessed remotely is so the classic example that we use is TurboTax so if you want to do your taxes on TurboTax you can do it in three ways the first is you can go to the store and you can buy a TurboTax disc and install it on your computer the second way is you can go to TurboTax's website, pay them and download TurboTax and put it on your computer the third is you can go to TurboTax.com log in with your email and password and you can do your taxes right there on the internet in the cloud right now sales tax is 1 and 2 there but it is not applied to option 3 because that option 3 is considered pre-written software accessed remotely so it's the same software it's what we call can it's pre-written it's the same thing as the first two but you're accessing it over the internet and so that is currently not being taxed so any exemption would mean taxing things like that and why was it struck from the Senate bill because it wasn't germane to water or because there were doubts about it I think it was a policy decision by the senate finance committee to move it I mean was there anything intrinsic to the idea of taxing PSAR that people was there a big rise up in lobbying efforts against this so maybe if I just rewind a little bit so what the House did was they in order to pay for clean water they took a certain percentage of the meals and rooms tax which currently goes into the education fund out and dedicated to clean water but to replace the money that they had taken out they ended this exemption for pre-written software access remotely so the education fund would be made whole so that was their essentially construct of how to fund clean water what ultimately came out of the Senate was an act that was a redirection of meals and rooms tax money from the general fund to the clean water fund during the testimony there was quite a bit of testimony against appealing the exemption in the senate finance committee and there was a lot of confusion about what this might get applied to and so I believe the department of tax is working this summer and it was directed to to educate tax payers on what exactly this would apply to and hopefully they created this a fact sheet which they have for lots of other sales and use tax items about pre-written software access remotely to help tax payers understand what it is we're talking about and so this is directly from that fact sheet to give assist tax payers what the current system is for taxing software and what falls under pre-written software access remotely and is this not tax now because it's a modern kind of tax and we haven't I mean we just started thinking about it in the last couple of years my understanding is that there's an exemption actually in statute for this so usually that means there's taxes that aren't we might not be collecting because it's the marketplace bill that we passed this year we weren't previously collecting on Amazon's third part of marketplaces but that was because our statute was not updated enough to capture those types of sales so we changed the language this one pre-written software access remotely is specifically written as exempt in our statute so that would be me to indicate that this is specifically put in as an exemption for some reason there's no statutory purpose for it right now which most of our sales tax exemptions have but I don't think this has it's not like one of those modernization things it's specifically written in do you remember why it was exempt? so a couple minutes on the history of this one sure so in approximately 2010 we adopted streamlined definitions to be in streamlined sales tax and then updated our rules and regulations and in about 2010 the department of taxes pointed out that our new definitions treat digital products as tangible personal property because that was an update that streamlined sales tax did and that most states are now talking about software as tangible personal property so that was in the early 2000s that change happened in tax law and then between 2011 and 2015 the department of taxes started to say we are going to have to impose sales tax on pre-written software that's accessed remotely because we consider that tangible personal property and then in 2015 right as we were about to finalize rules that clarified that this was taxable the legislature chose to pass a specific exemption to prevent that from occurring I believe a lot of the discussion was around the growing tech industry and promoting that industry in Vermont but I wasn't directly engaged in those conversations at the time but that's my understanding of the history okay so I'm going to move on to satellite QE taxes and I'll caveat this by saying this is not my daily week but I'm going to present what Dan gave to me and if you have any questions I can write them down and forward them to Dan so again I'm still sticking in the sales tax world so satellite television services and products are currently subject to the 6% sales and use tax rate and this applies to both the program and plans themselves and any accessories that go along with it we don't really know exactly what the current sales tax revenues from satellite TV providers are because there are not very many payers who actually pay this or remit the sales tax but we do know from prior information when there were more that they were remitting about $5.3 million and that was in fiscal year 2012 so I have no indication of whether that number has gone up or down you know if people are cord cutting or getting rid of their TV services it might have gone down but then again these have gotten bigger that just gives you the ballpark of what we are talking about my understanding is that satellite TV providers don't also provide internet services is that correct they do some do spotty but they do Dan put together this list of what other states in New England do regarding satellite taxes so Maine has a specific service provider tax of 6% which is in lieu of their state sales tax New Hampshire doesn't have a state tax apparently satellite TV is exempt from their communication services tax which they don't know a lot about so I can't speak about that Massachusetts has a separate 5% excise tax on satellite services and it is in lieu of its sales tax Connecticut has its sales tax of 6.35% and then a 5% gross earnings tax that the company has to pay but they are allowed to pass it on to the consumer as well where Allen applies their sales tax New York doesn't have a state tax on satellite TV providers but there are a lot of potential for local taxes in New York particularly New York City has very high sales taxes and then Connecticut collects a gross earnings tax on the provider but then that is like Connecticut that sounds awfully familiar Dan do you know anything about the New Hampshire communication services tax and what that is? I don't that would be interesting along the lines of the Florida I guess again I'm wondering these are approved on communications companies who pays it why don't federal pre-emptions create a problem there I'll look into it and get back to the committee here are some examples of other states that apply specific taxes to satellite services so Florida with its communication service tax which I've spoken about however the rate is higher to what is called direct to home satellite services so the tax is that 2.37 plus 9.00 total of 11.44 percent that the provider builds to customers Kentucky apparently has a telecommunications tax on multi-channel video and audio service a 3% excise tax which is called a sales tax and then a 2.4% gross receipts tax that the dealer or the company collects but then is allowed to pass on to the consumer Tennessee has a special sales tax rate that applies to satellite television services but this would not work in a place like Vermont because we are constrained by the streamlined sales tax and use agreement which prevents charging a higher sales tax to a different good and then Connecticut also collects a multi-channel video or audio services tax at 6.25% this is Utah sorry so how are those so these multi-channel video or audio service taxes what I mean we don't charge that's not something we have here so I guess that falls in the category of New Hampshire and Florida what are those is that something that could be a broad based assessment and replace the franchise fee but also be a crewed on broadband how does that work and again there may be people on the table that understand this but I'm not sure about that nothing I'm seeing on this list is applied to broadband multi-channel video and audio services multi-channel video is a cable provider yeah it's just another new cable provider audio service might be like Sirius XM radio I'm going to ask Dan to look into this and then obviously the committee is aware of the cable franchise fee and tax I guess it's called the fee it's currently applied to cable television providers and funds programming at 5% tax rate and I've been informed that proposals in the past have talked about applying this to satellite TV providers and Mark Perle in our office who worked on this in the past based upon data from the tax department in 2012 on gross receipts for satellite TV providers estimated that a 5% tax would bring in about 4.4 million although as a caveat here that estimate could have changed significantly depending upon whether the gross receipts of satellite TV providers has gone up and down four down since then and again that's not data that so we relied on that estimate we contacted the department of taxes to give us essentially what they were remitting in sales tax as a proxy for what they are gross receipts for and then we'd be able to back into what the revenue would be with a 5% franchise fee on top of that however because the number of taxpayers have changed for satellite TV services they're no longer able to with the information on the gross receipts for satellite TV providers so right now the franchise fee is not applied to satellite TVs but you're saying that if it were applied to satellite TV it would raise 4 to 5 million there have been proposals in the past to apply that fee to satellite TV providers and in the past in 2012 it was estimated to bring in 4.4 million is that allowable to be able to apply that to satellite TV you know I'm not 100% sure whether it's allowable the franchise fees are a public benefit related to cable not satellite so the FCC the Federal Act allows for franchise fees so it's kind of an apple in an orange from a federal regulatory standpoint so I don't think you actually, I think the state could say oh we want a tax satellite which I think in the past it tried to but it wouldn't be applying a franchise fee to satellite TV basically taking a sales tax or a tax that the state decided to nice research yeah I apologize my knowledge of the whole world of public access, television and things like that and the rules around taxation, FCC rules are not super strong so I will get back to the community with answers to your questions thank you very much appreciate that so that pretty much concludes our agenda I hope that we'll have our other committee members here so I guess the question I have is what is the purpose of the public hearing so I mean I think we it would be helpful for us to spend some time talking about what we've heard and what other permission we would want but then what's the question that we would be posing and is that question right for public hearing have we confirmed that we posted that date too because that date I know I'm an out of town meeting that on that date yeah I did not at the last meeting when we when we responded to the survey but I'm not required to be at a state meeting as committee assistant I sent out a Microsoft Outlook meeting request for both of the public hearing and the regular committee meeting as soon as the chair had decided on what date it would be and I've added them in to the database so it reflects on the general assembly's website that there is two peg access TV meetings that day one at 10 being the public hearing and one at one o'clock being the regular committee what day was that again October 16th I think 16th or 18th 16th 16th is what we had what is the same on agenda here 16th 16th okay I thought it was 16th I've got it on my calendar is that the date you're going I'm out of state the 16th, 17th, and 18th legislation requires that meeting to be on the value of peg access television to Vermont communities and the cost of such programming and services and funding options so can I send a representative I guess you could okay my thoughts about public hearing would be that we would have some kind of a proposal ready for discussion of public hearing I'm not sure that we're ready to do that yet though so I would want to consult with our chair and see what we decide on as far as what type of things that we're thinking about our charge is to actually report back to the legislature in the form of proposal legislation so it presumes that we will have a recommendation that would record legislation and I think as part of that we'll have to contain our recommendation as far as any additional type of funding we're recommending and the thing to remember is that whatever we propose whatever this committee recommends to the legislature the proposal legislation is going to go through the committees of jurisdiction the energy and technology committee and the finance committee and the house and the finance committee and the senate and probably also through ways and means in the house and appropriations so whatever we recommend is not cast in stone anyway it's going to be a proposal and those committees will have their own hearings and take their own testimony and then decide if they want to modify those proposals or not maybe since we have a couple of minutes yet are there any comments from the members of the committee in terms of what we might recommend as a form of revenue can we go back to the date for a moment is there any chance of moving that date I think we could okay can I suggest a date Friday the 25th Friday the 25th yes that could possibly work I've got a conflict with that in the evening and that's down in Connecticut so I can give you a ride one thing just logistically about this building that's the last day before the building shuts down to go through two weeks of renovations so that's I imagine there's going to be a lot of movement of equipment moving out of the building for our offsite location during that shutdown they're cutting the power to the state house for renovations could we hold it the pavilion I recommend an alternative location I think the building is still going to be open and functional but that's the day before it all goes down so you know it's going to be a mess are there any other days besides the 25th do the 21st Monday the 21st the building's got room 10 and 11 available I don't think we want to get back in here put back a care I would suggest that we put out a meeting proposal and see if we can make it like a doodle fall I'm curious to hear from other members of the committee what you've heard today and what if you see a viable path in some of these examples and models that could be adapted for the future of PEG and public benefit in general well I have a suggestion I think I brought it up at the last meeting I think that everyone's put a lot of work into this I think we've done some work on demonstrating the corner of Glen to take your words that there isn't a catastrophe in the next several years with regard to AMO funding so my suggestion would be that we don't be a solution in search of a problem and rather we report back that this matter continued to be reviewed for the next several years and perhaps reconvene this group at a date certain after 24 or 36 months to then make a recommendation if we see the matter continue to move in that direction I think I said this at the last meeting I'm still not clear on what we're looking for you still have the 5% so are we looking for a replacement for the 5% as in getting rid of the franchise fee and replacing it with a revenue stream a supplement to that 5% and so what is the revenue requirement what does the performance look like for the next few years we've provided one year of financial information I think it was pointed out that is just one year and so I think I'm a little interested in hearing a little more about what does the future look like in numbers what do we expect to get next year for Pegaccess television what do we need next year and how that revenue would be used philosophy has been that at least when we made this change is that all the revenues from the sales tax should go to the education fund if we start peeling off pieces of the sales tax for other purposes that's going that's going to fly in the face of that philosophy so I would prefer to go in the direction other than the sales tax for the purposes of raising any additional revenue as far as whether supplementing or supplementing the 5% franchise fee that's an issue that I'm agnostic on and I think that it really depends on how much money we're trying to raise in addition to the 5% and that seems kind of nebulous to me at the moment so we as pointed out that we increased the Vermont USF by half a percent to provide additional funds for connectivity we would be with a connection fee we would basically be asking for another addition to it in order to provide for this and whether that's another half a percent or a quarter percent or something else we try to put a hybrid flat fee in order to fund this is I think open to discussion yeah I agree I think that the connection fees option is pretty much the the best option before us but I don't have strong feelings on how to do that or whether it's appropriate so that would be something to talk about so I think one of the things we're going to have to answer is how much revenue we would expect we would want to be targeting the Vermont I don't know what that number is and I would have to ask VA most to tell me what they would expect what they would project as far as the current revenue sources go and what the shortfall is going to be in terms of their operational and anybody from AMO's want to comment on that or at this point I think that might be good fodder for the public hearing because our expectations for the future of AMO is that a statewide AMO? yeah the it's a evolving landscape with the evolution of Vermont Access Network into a statewide AMO and potentially centralized archiving said one channel high def the evolution of the other channels to high def which were delayed through this stipulated settlement there I don't think we are at a place where we should assume costs are going to remain safe and that there could well be a significant need for increased revenue so in talking about sorry Elizabeth in talking about what the effect will be on AMO's in the coming year as a result of the FCC order that's not something that AMO's know only the cable companies are making that calculation and only they know that fair market value that they're using in that calculation so that wouldn't really it's not anything we can answer we're waiting to hear the answer well I think we have something to say about as we have and you presented earlier we're responding since you know 2006 the increase in peg costs has been related directly to meeting community needs so we're driven by what community needs and interests are we have an assessment of what we think those are going forward which is why we think it's important to have this conversation about continuing funding so I think that there's a bigger strategic picture that you're referring to and that van is holding that may be an $8 million picture might be a $20 million picture and I think it's incumbent on us to reflect that back and have a sense we may not have that in the next month but I think that's important for us to paint that picture and then I think the other side of it is there is this basket of charges that we as a state charge to either the users of the telecommunications broadly speaking the users of the rights of way or the companies that run in the rights of way there's kind of use tax or excise tax and that's in a big basket and that big basket includes the universal service you know what's in universal service so what authority does the state have to take that basket make it one basket that funds all public benefit and if the state were to decide to reconstruct how that happened either add to the USF or create another thing that's a multi-year conversation that's not a piece of legislation we're going to come up with in two months and think it's going to get passed in a year you know this is a longer policy deliberation about how to meet public interest and public benefit through the rights of way in a changing rapidly changing environment because what we heard today is telephone revenue is going down but software as a service is going up as a revenue source you know the whole picture is changing and this has been helpful for us to understand how better but you know we can attack Peg as a one you know one problem to be solved and or we can see it within the bigger context and I think that these conversations point to a bigger context that may be a longer term policy discussion one of the things I've been thinking about is that right now the AMO's are non-governmental entities I don't think it's a purview of the state to dictate as to how they're organized so for the van to become a statewide AMO and then have just different branches throughout the state that's something that I think needs to be decided by the AMO's themselves and not by the state and so if we created a separate fund in order to in order or if we decided that we're going to allocate a certain amount from the USF to AMO's which do provide a benefit in my opinion to the state in terms of the grassroots level democracy that we experience with recording of meetings and things like that and providing a voice for individual citizens to get their opinions out on the air and if we see that as a benefit you know I don't want to get the state to my opinion I don't want to necessarily get the state involved in regulating the AMO's but if we can help in some way we should try to do that it sounds like we have a date change and then we have some sort of what the preview of the public hearing is going to be and if that time is actually the right time to do that public hearing we'll have more discussion so could we expect from from VAN kind of an estimate about how much revenue we want to raise to supplement the 5% for the next meeting for discussion purposes it would be helpful to know what our losses will be for the coming year as a result of the MCC and I don't know when you're going to be ready to provide us with those numbers I don't anticipate losses so we haven't looked at this statement from MEC I don't know if it addresses that but Dan with this pick on memo address what you expect in terms of that memo doesn't cover that I think they're talking about the 621 order that's still a matter that's being there's a whole host of issues surrounding it in resolution of our general issues pertaining to the CPG we anticipate that revenues will remain consistent with what they have been over the past several years so we don't have incline costs in Vermont that you would subtract from the franchise fee well I don't know that for certain there are some we outlined some of this in the resolution order or the resolution settlement that we signed together so I don't see a huge discussion on that going forward if there are in kind provisions that are specifically further outlined and determined there will be a different discussion but pertaining to how we resolve the matter we are very clear on those issues I think what Elizabeth is pointing to is are there in kind services that you provide in Vermont we're not aware of that you would then say when we sit down to negotiate we're going to subtract that from the franchise fee there may be things that we just don't know what you're giving in kind or accounting against that you would count against the cable because you have a lot to do that the FCC has said the decision was very clear on what the provisions are and even the courtesy services were outlined in the settlement agreement so you don't expect that there will be subtraction from the current franchise fee funding that we have? I don't want you to put words in my mouth there hasn't been a full determination pertaining to all of those issues surrounding the order and review of that but based upon where we stand today with the resolution of the CPG issues we don't anticipate that from that so we will provide a picture at the next meeting of where we think it's going I think you could start with a level funding assumption it would be good to replace 5% of the equivalent 8 million or how that builds up but I think you could add anything on to that but I think what we're finding out is that these other resources you've got 4 million on satellite you've got 2 million on this there are very few revenue sources right now that are anywhere near right? so whatever percentage you would have to add on the universal service fund presuming that you're not charging a franchise fee to customers they're still going to be paying one way or the other but that might be a pretty significant percentage to come up with that amount of money that's a number crunching but you know these are big numbers can I ask for one more follow up too? I did notice in the information that was provided that there was a 40% incremental increase in programming we could get some specifics on where that lies I think that would be helpful whether it's locally produced original programming and then I also notice during that same period of time there's a 70% increase in human capital resources so if there's a 70% increase in that regard how did that figure into only a 40% increase in programming and what is that difference in the 30% increase in human resource funding what is that being what is that being utilized for? well I think just generally programming isn't the only thing we do so I don't think it's a straight line between staff and programming because the staff is helping people produce programming producing programming training operating you know they're doing a whole variety of buying equipment talking to you like we're doing all kinds of things so I'm not sure that there is a straight line and I think it would be safe to say that's an increase in locally produced programming out of the facilities that is being imported to us programming when we did that analysis we only looked at locally produced programs so I think we're providing a basket of community services it isn't just execution and when we increased the USF by 0.4% how much revenue did that generate it seems to me like it was 1.2 million I believe that was the estimate we got here last session I think it's actually a little bit I think the why we sit here and do the math because it's about five and a half percent excuse me five and a half million at two percent I think the connectivity initiative we're estimating between six and seven hundred thousand dollars and then we have the position which is 120 so somewhere around a million so if we were going to also plant the franchise fee with the Vermont USF but we're talking about an increase in the USF fee of three percent at least so it would be going from 2.54% up to about five and a half percent so that's a major consideration when we're doing legislation and it's not accrued on cable we saw what happened last year when we tried to increase the fuel tax by two cents immediately we were doubling it yeah it doesn't sound like it would be a replacement it would be a replacement but that wouldn't matter because the opposition would say well we're doubling the USF fee and that's where the that's where the opposition would come in and the spin so we have to be also mindful of what we could accomplish in the legislature as well so can I reinforce one statement with regard to offset I'm going to be really clear that with regard to the CPG as I stated that there we were very clear to itemize that in the settlement provisions so I don't want to I don't do forward-looking statements with regard to this because I just don't know what lies there but by the flip side of that there is no plan in place there is no agenda in that regard and so I don't want to send out the message that that there is some that there is something that is going to happen because at this juncture there simply isn't thank you for your question did you want to finish your report on the USF yeah my what I was trying to get at was that when when you just explained it one option would be to increase to the 3% in which case that would supplant the cable franchise fee and another option would be to just make it a smaller percentage that would be tied to some incremental amount that would additionally fund she's not being this more viable and so one thing just to the community needs assessment have folks tied any sort of monetary value to what it would take to implement the highest level of meeting the needs or just trying to get to what you raised about what's the difference what are we looking to do here to fill some additional need to take into account what you said about the the next couple of years looking okay is there a horizon 20 year plan that has been that's a good question it's sort of like pie in the sky so how much effort do you really put into that that's a planning function which we can always be aided by by the department when we look at these things but we haven't done a 20 year plan I think we have been in oh my goodness and now we're starting to turn our attention to those longer term horizons but there is a direct line between our identification of community needs and what our budgets are we always start with community needs assessments and those drive what our operating capital budgets are within reason you can't meet all the needs but we're very connected to what those assessments are so the budgets that we propose or the funding levels that we require are not based on oh we'll ask for 10 and hopefully get 5 this is a unit cost analysis based on community needs so can I take the next step and say if we were to meet these other needs it would cost this much more money I think the question is what are the other needs what would you put in that basket would you put in a statewide I mean for example and how to quantify it too right I mean as an example CONCAST has offered us a statewide HD channel and that's going to cost something to operate and we're going to have to figure out the way to generate additional revenue from what we have to pay in addition to the playback funding that we've received how to do that so it really depends on the aspirations of the group and also the diversification of revenue is a real thing like we know we have to diversify the franchise fee is not going to be the only revenue source going forward so all of these things are in play we know that we've got an 8 million dollar whole potentially to fill we know it's not going to be tomorrow but we know that it's coming and we need to be prepared as a state from a policy perspective and as AMOs from a smart business perspective I think one of the key factor you raised some valid points that the whole nature of community needs and interests is defined by the federal law and it's determining what those community needs and interests are and the CPG piece to the federal law is also considering the costs of meeting those needs and the department during our CPG renewal as well as providers do individual needs assessments as well through independent survey taking and one of the considerations taken into account is what price consumers are willing to bear in order to meet these needs so some of that data exists today but I think it's an important and integral piece that we are going forward. And I think how we interpret community is always where we get into the thing but the fact is that there is price sensitivity on the part of the consumer and we're very aware of that. So that whole willingness to pay thing is that something that we could talk about at my next meeting? Sure we have some data but I've been more inclined to raise this as a valid point it's subject to interpretation on how questions, types of questions we're not going to sit here and deny that they want to pay more money what the general answer is to it but I do think it is the federal standard and has some validity for consideration and conversation.