Take a glance at the tax-and-fee section of your phone and cable bill: Texas has one of the highest communications taxes in the nation, roughly 22 percent for land-line phone and 14 percent for land-line video services. The cable industry has been working with the Texas Legislature to find ways to lower and equalize the tax burdens on consumers in today’s highly competitive video and voice marketplace.

Texas Universal Service Fund

As part of the USF Reform Coalition, TCA has worked for a number of years to reform the Texas Universal Service Fund (USF) so that Texans are not required to pay taxes for unnecessary government subsidies to  phone companies.

The objective is to eliminate unnecessary and unjustified subsidies in competitive environments to increase accountability for USF subsidies. Texas consumers saw a 27 percent increase in their TUSF fee in 2012, an increase approved by the Texas Public Utility Commission because of the unnecessary subsidies paid to phone companies.  TCA worked to help lower the tax rate in the 2013 session, but it still remains higher today than before its increase in 2012. 

Franchise Fees

SICFA holders must pay a franchise fee to each municipality in the amount of 5% of the provider’s annual gross revenue as defined in the statute. The complex definition is nearly five pages long, encompassing not just revenues from subscribers but also from advertisers and home shopping purchases made within the municipality. Operators itemize the franchise fee on customers’ bills as allowed by law, and the pass-through receipts themselves are considered revenue subject to the 5% fee, making the effective fee 5.25%. This is what often is referred to as a “fee on fee.”

PEG Fee Capital

SICFA holders must pay a PEG Capital fee in the amount of 1% of gross revenues in lieu of in-kind compensation and grants. This fee may be used only to pay for capital expenditures related to Public, Educational and Government Access channels, but it is paid to a municipality automatically. Some (but not all) cities are opting to waive the 1% fee if the municipality has no PEG channels. SB 1087, passed by the Texas Legislature in 2011, introduced transparency standards so cities can be held accountable for how those funds are used. Like the Franchise Fee, the PEG Capital Fee collections are subject to “fee on fee.”