Transcript The Wireless Roadshow

The Wireless Snapshot
FACTS & TAX
Senate Briefing
March 20, 2006
Wireless: Proof that Competition Works
200,000,000
180,000,000
The wireless industry kicked off service on October 13, 1983
160,000,000
By the start of 1994, we’d grown to 17 million customers – 17
times the total number originally expected by the year 2000
140,000,000
Twelve years later, we’d grown to more than 200 million –
120,000,000
100,000,000
80,000,000
more than 200 times the total number that had been expected
by 2000
Last year, customers used more than 1 trillion minutes –
adding more minutes than used in all of 2000
60,000,000
40,000,000
20,000,000
0
Dec85
Dec86
Dec87
Dec88
Dec89
Dec90
Dec91
Dec92
Dec93
Dec94
Dec95
Dec96
Dec97
Dec98
Dec99
Dec00
Dec01
Dec02
Dec03
Dec04
Competition Works for the Consumer
300
3 carriers
8
Market Population (in Millions)
250
6 or more
carriers
105
194
200
6 or more
carriers
150
2 carriers
44
2 carriers
249
197
5 carriers
77
4 carriers
30
3 carriers
34
2 carriers
100
118
50
1 carrier
1 carrier
0
1985
1990
1 Carrier
Source: CTIA
23
2 Carriers
2 carriers
1 carrier
1995
3 Carriers
4 Carriers
2000
5 Carriers
31
5 carriers
51
4 carriers
28
3 carriers
2 carriers
2004
6 or More Carriers
17
Competition Works for the U.S. Economy
1993
2004
• Contribution to the economy
 Contribution to the economy
– $12.75 billion cumulative capital
investment

$173.9 billion cumulative capital
investment
– Revenues of $8 billion annually

Revenues of $102 billion annually
– 31,000 employees

226,340 employees
• Service on local/regional
 Almost all service on digital
• 11 billion minutes of use
 Over one trillion minutes of use
• Data Rates of 4.8 kbps
 Data Rates up to 500 kbps
• Limited internet access
 Full Internet Access
analog networks
Source: CTIA Semi-Annual Wireless Survey, CTIA Research
nationwide networks
Competition Works for the U.S. Economy
• 2005 Ovum / Indepen report has calculated broader
contributions of the wireless industry to the U.S. economy:
– 3.6 million jobs were directly and indirectly dependent on the US wireless
telecommunications industry in 2004
– In total, the US wireless industry generated $118 billion in revenues and
contributed $92 billion to the US Gross Domestic Product in 2004
– If the average wireless consumer in America spends $54 per month on
wireless voice and data services, that same consumer would pay
approximately $125 US for the same services in the European Union
– Ovum predicts that over the next 10 years, the US wireless telecom industry
will create an additional 2-3 million new jobs, adding a cumulative additional
$450 billion in GDP. This figure is based on the conservative assumption
that no services are added beyond what are available today.
Wireless is Bridging the Digital Divide
By year-end 2005, 182 wireless companies served 195 million
customers nationwide – 65% of all Americans.
The FCC has found that
97% of Americans live in
counties in which three or
more wireless service
providers offer services,
and 87% in counties where
five or more wireless
providers offer service.
More than 50% of
rural households use
wireless service
compared with 53% of
urban households.
Sources: CTIA Semi-Annual Wireless Survey, FCC 10th CMRS Report
and BLS data
Where Does the U.S.
Range in Global
Broadband
Penetration?
Not at the Top
Source: International Telecommunications Union
The Wireless Renaissance: Wireless
Broadband
• Verizon Wireless has launched broadband service in 171
markets that are home to more than 140 million people
• Sprint Nextel offers its wireless broadband service in 208
markets
• Cingular Wireless launched its HSDPA-based
BroadbandConnect service in December 2005
• Alltel’s AxcessSM Mobilink service is available in markets in 31
states and Alltel’s AxcessSM Broadband service is offered in 11
markets
• T-Mobile USA offers mobile Internet access through GPRS,
and offers an extensive network of wireless hotspots in the
U.S. (7,428 as of Feb. 27, 2005)
The Wireless Renaissance: Deployed by
Carriers of All Sizes
•
Alaska Communications offers its ACS Mobile Broadband in Alaska
•
Alaska DigiTel offers wireless data service in Alaska
•
Cellular One of Amarillo offers Mobile Internet service in Texas
•
Cellular South offers CDMA-based wireless data service in the Southeastern
U.S.
•
Dobson Cellular, operating in 16 states, introduced its Signalink™ data service
in September 2005
•
GCI offers GSM-EDGE-based broadband service in Alaska
•
First Cellular of Southern Illinois offers "WOW Network" web access in Illinois
•
Midwest Wireless offers Mobile Wireless Internet service in the Upper Midwest
•
U.S. Cellular offers its Brew™–based easyedge™ Enhanced Wireless Service
in all of its markets
The Wireless Renaissance: A Peek at the
Future
– Mobile commerce - proximity
payments
– Mobile monitoring systems flow of people, traffic and
agricultural applications
– Remote analysis - mobile
medical examination, wireless
medical monitoring devices
– Biometrics: facial recognition,
retina scanners
– Real time video, image
transmission from databases
Facial Recognition
Image Transmission from
Crime Databases
Iris Recognition
What Can Jeopardize this Story of
Wireless Investment, Growth and
Innovation?
Risks to Growth and Innovation
• Balkanized state-by-state regulation threatens to disrupt the
competitive forces which drive rates down across the
country, and drive new services into markets nationwide.
• Legislation which creates uncertainty has a direct, adverse
impact on investment in the wireless industry: this ultimately
disserves consumers.
• Taxes and fees which fall heavily on wireless consumers
and providers alike, discourage the adoption of innovative
technologies and services.
–Federal Excise Tax
–Wireless equipment federal depreciation lives
–Excessive State and local taxation
Why Are Wireless Consumers Still Paying the
Spanish American War Tax?
Why are these assets subject to the
same federal tax depreciable lives?
What Have We Heard?
• Cost of wireless service to consumers
Good News: From
1993 through 2004,
wireless growth has
had a tremendous
impact on the
economy:
• The number of
wireless employees
grew by nearly eight
times
• Revenues grew by
nearly thirteen times
$0.50
$0.45
600
$0.40
500
Monthly Minutes of Use
investment increased
by nearly fourteen
times
700
$0.35
$0.30
400
$0.25
300
$0.20
$0.15
200
$0.10
100
$0.05
0
$0.00
1994
1995
Source: FCC 10th CMRS Report
1996
1997
1998
1999
Minutes of Use Per Month
2000
2001
2002
2003
Average Revenue Per Minute
2004
Effective Price Per Minute
• Wireless capital
has dropped substantially
The State of the States
30%
From January 2003 through April 2004, the average State
and local tax rate on wireless services grew nine times
faster than state/local tax rate on other consumer goods
and services.
25%
Combined Wireless Tax /
Fee Rate
20%
The Combined federal / state / local weighted average
effective wireless tax / fee rate is 16.85 % - the average
effective general business tax rate is 6.94 %
State-Local Tax / Fee Rate
15%
10%
5%
0%
Nevada
Idaho
Oregon
Alaska
Louisiana
Montana
Delaware
Wisconsin
Massachusetts
Connecticut
Iowa
Ohio
West Virginia
Michigan
Wyoming
Vermont
Maine
Alabama
Virginia
North Carolina
Hawaii
New Jersey
Georgia
New
New Mexico
South Carolina
Minnesota
Indiana
Mississippi
Kentucky
Colorado
Oklahoma
Arizona
Maryland
Missouri
North Dakota
Arkansas
Kansas
Tennessee
District of
South Dakota
Illinois
Utah
Pennsylvania
California
Rhode Island
Texas
Florida
New York
Washington
Nebraska
Combined Federal-State-Local Effective Tax/Fee Rate
State-Local Effective Tax/Fee Rate
General Business Effective Tax Rate
Federal Effective Tax/Fee Rate
Source: Scott Mackey, Kimball Sherman & Ellis
Convergence: Taxation
of Consumer Services in
a Wireless World
II
Type of Service
Effective Rate
Telecommunications Services
7 – 34%
Cable Services
5 – 11%
Information Services
0 – 6%
Digital Services (games, music, etc.)
0 – 6%
General Business
6%
[Effective Rate includes Federal, State and Local Taxes, Fees and Surcharges]
A New York wireless bill reflects how the consumer sees the
current state and local taxation of wireless services
State Sales Tax
4.25%
Local Sales Taxes
4.00%*
MCTD Sales Tax
0.13%*
State Excise Tax
2.50%
MCTD Excise/Surcharge
0.30%*
Local Utility Gross Receipts Tax
1.51%*
State Wireless 911
2.48%
Local Wireless 911
0.62%*
MCTD Surcharge
0.07%*
NY Franchise Tax
0.38%
Federal Excise Tax
3.00%
Federal USF
3.05%
Total
22.29%
7/17/2015
*Tax applied in selected cities and regions
INVOICE
18
Impact of Wireless Services Sold through
National Pricing Plans
State and local boundaries are immaterial:
• Federal impact – “all distance service” and the FET
• State impact – NASUCA petition and the FCC Truth in Billing Order
• Uniform national pricing results in service sold in rural Vermont being
the same price as service sold in NYC
National plans highlight the need to simplify and centralize taxes on
wireless services:
• Inconsistent rules and locally administered taxes result in consumer
confusion and potential double taxation
• Wireless Industry supports the Sales Tax Fairness and Simplification
Act which simplifies taxes and fees imposed by state and local
governments on communications services – Currently, 344 telecom
different taxes require filing of approximately 48,000 returns annually
7/17/2015
19
Rights-of-Way/Franchise Fees are
frequently confused with being taxes
• Wireless providers do not use the public rights of way and are
not required to be franchised with a local authority to operate
• Wireless companies have paid more than $24 billion to the
U.S. government for the spectrum to deliver wireless service to
consumers – their operating right / “franchise”
• Wireless companies pay fair rent to landowners for all facility
placements – their “rights of way”
• However, states continue to attempt to shift rights-of-way/
franchise fees on wireless consumers as “taxes,” confusing
operating rights and benefits with principles of taxation
• Texas
• Louisiana
• Oregon
What is the Economic Impact of High
Wireless Taxes?
Wireless Taxes are Regressive: Historically telecom taxes were
hidden in rates for utility telecom service – this system of taxing
telecom services was very regressive with the largest impact on lowerincome consumers.
High Wireless Taxes Impact Overall Economic Growth: Economist
Gregory Sidak estimates that a one-percent decrease in wireless prices
would "increase U.S. GDP by between $6.8 billion and $7.8 billion
within two years of the tax reduction."
High Taxes Stifle Industry Growth: Each 1% increase in the price of
service reduces demand by an estimated 1.12% to 1.29% – So, cutting
the FL or NY combined wireless tax rate in half would result in a 10%
increase in consumer demand for wireless services.
7/17/2015
21
How Can We Reverse this Trend?
• Eliminate excessive and discriminatory federal, state and local
taxation of wireless services
• Ensure equitable taxation of wireless capital investments to
encourage deployment of the most advanced networks
• Ensure fair taxation of wireless to stimulate increased innovation
and affordability of the newest services
• Ensure simplification of existing tax system applicable to
telecommunications services