Franchise Reform Should Include Lower Telecom Taxes

Published June 5, 2007

Dear Editor:

The 113-0 vote in the Illinois House of Representatives in favor of cable TV franchise reform sends a welcome message to consumers that state elected officials have embraced the competitive era.

I share the Tribune‘s support for the bill (“The Illinois Model,” June 5). It will bring more competition for video, telecom, and broadband services.

The unanimous House vote, as well as the bipartisan work behind it, belies the contention that franchise reform is anti-consumer. Legislators were right to question the dubious assertion that new competitors, after investing billions of dollars in network upgrades, would deliberately choose not to sell service to large segments of the population. Market data show low-income households purchase cable services at the same rate as wealthier ones. While the bill includes provisions for build-out in all neighborhoods, even without such provisions, low-income neighborhoods would not be ignored.

The state could assure even greater penetration of advanced video and broadband services by lowering taxes and surcharges on telecom services. According to a new report from The Heartland Institute, when federal, state, and local levies are added up, Chicago consumers pay an average tax of 14.18 percent on phone, cable, wireless, and Internet services. Springfield customers pay 12.67 percent. By comparison, the state retail sales tax is 6.25 percent.

Like local cable franchises, high telecom taxes are a holdover from the monopoly era, when officials felt companies could passed them on to consumers without discouraging use or creating competitive barriers. I hope franchise reform is just the start of a legislative re-evaluation of telecom policy in Illinois.

Steven Titch ([email protected]) is senior fellow for IT and telecom policy at The Heartland Institute.