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Subsea cable operators oppose US cable tax

A coalition of subsea cable operators that includes Southern Cross and Pipe Networks have lodged their opposition to being forced to pay a 15.7 per cent tax to connect to the US.
Written by Josh Taylor, Contributor

A proposal by the US Federal Communications Commission (FCC) to remove a tax exemption for international cable operators carrying network traffic in and out of the United States has been met with criticism by the cable operators.

In the US, telecommunications companies carrying data between the states are required to pay a 15.7 per cent tax on interstate and end-user revenues to ensure universal access to telecommunications across the country. Currently, cable companies carrying traffic in and out of the US are exempt from this tax. However, under a proposal outed by the FCC in April, this exemption may be removed as part of an overhaul of the universal access contributions.

As first reported by Communications Day, last week, lawyer Kent Bressie — acting on behalf of subsea cable operators such as Level 3 Communications and Southern Cross Cables — lodged opposition to the proposal (PDF), saying that it would cut into "razor-thin" operating margins for cable companies.

Operators would be forced to renegotiate hundreds of agreements with customers that have leased capacity from those providers, Bressie stated, and any such move would limit future investment in landing cables in the US.

"The United States has long taken for granted that undersea cables will continue to land in the United States, providing abundant connectivity for US consumers, businesses and government agencies, while permitting the rest of the world to continue to access a large percentage of internet content located in the United States," he said.

"Nevertheless, the share of internet bandwidth connecting the United States to the Asia-Pacific region, Latin America and Africa has declined considerably over the last decade; the share of internet bandwidth connecting the United States to Europe has never been particularly high."

He said that there has been speculation that fears over the intrusive nature of the Patriot Act would push hosting of internet content outside of the US, and said that any move to remove the exemption on international cables would just accelerate this trend.

The FCC is taking comment on the proposals until 6 August.

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