TR Daily FCC Releases FY 2019 Regulatory Fee Order, FNPRM Eyeing FY 2020 Changes
Wednesday, August 28, 2019

FCC Releases FY 2019 Regulatory Fee Order, FNPRM Eyeing FY 2020 Changes

The FCC has released a report and order adopting a schedule to collect $339 million in regulatory fees for fiscal year 2019, which ends Sept. 30. The Commission adopted the regulatory fee regime proposed in a notice of proposed rulemaking it released in May (TR Daily, May 9), and it released a companion further notice of proposed rulemaking soliciting comment on proposals to amend its international and broadcast regulatory fee schedule for FY 2020.

“This Report and Order adopts the proposals in the Notice to collect $339,000,000 in regulatory fees for FY 2019, as detailed in the fee schedules in Appendix C, including (1) an increase in the DBS fee rate to 60 cents per subscriber so that the DBS fee would approach the cable television/IPTV fee, based on the Media Bureau FTEs [full-time equivalents] devoted to issues that include DBS; and (2) a new methodology for calculating the full power broadcast television regulatory fees that is based on an average of the actual population and the Designated Market Groupings, which the Commission adopted in FY 2018,” the FCC said in the order released late yesterday in MD docket 19-105. “For satellite TV, the fee is the average computed using the flat satellite fee and the actual population. The Commission adopted the new methodology for FY 2019 as a means of transitioning the affected regulatees, which may include small entities, from the previous methodology (based on Designated Market Groupings) to a population based methodology, to be utilized starting in FY 2020.”

The FCC noted that in the FY 2019 NPRM, it “described in some detail the RAY BAUM’S Act modifications to section 9 and the new section 9A and sought comment on how those modifications should be incorporated into our regulatory fee process. Each year the Commission must collect regulatory fees sufficient to equal the amount appropriated by Congress for the Commission’s use for such fiscal year (as before). Each year, the Commission must assess regulatory fees that ‘reflect the fulltime equivalent number of employees within the bureaus and offices of the Commission’ (as before). And each year the Commission’s assessed regulatory fees must be ‘adjusted to take into account factors that are reasonably related to the benefits provided to the payor of the fee by the Commission’s activities’ (as before). Accordingly, we find the fee assessment structure dictated by the statute fundamentally remains unchanged. Or in other words, because the new section 9 closely aligns to how the Commission assessed and collected fees under the prior section 9, we will hew closely to our prior methodology in assessing FY 2019 regulatory fees.”

“Based on these allocations and the requirement to collect $339,000,000 in regulatory fees this year, we project collecting approximately $25.39 million (7.49%) in fees from International Bureau regulatees; $85.15 million (25.12%) in fees from Wireless Telecommunications Bureau regulatees; $106.64 million (31.46%) from Wireline Competition Bureau regulatees; and $121.82 million (35.93%) from Media Bureau regulates,” the FCC said.

“We reject the arguments of the State Broadcasters and NAB who ask us to overturn this long-running framework for allocating regulatory fees—and specifically our allocation of indirect FTEs in proportion to direct FTEs,” the order said.

“We also reject the arguments of the Satellite Operators, who assert that the International Bureau’s direct FTE count is unfairly high in proportion to the direct FTE count in the other core bureaus, owing to the staff reassignments from other bureaus to indirect FTE status,” the order added. “We recognize that the increase in allocation for International Bureau regulates—from 6.25% to 7.49%—is non-trivial, but we disagree with the Satellite Operators that we should arbitrarily shift these fees onto other regulatees and keep satellite regulatory fees proportional to changes in our appropriations.”

The FCC also rejected “the claims of INCOMPAS and NASCA [North American Submarine Cable Association] that the proposed increase in the regulatory fees for submarine cable in FY 2019 is unreasonable because the Commission failed to demonstrate an increase in ‘the benefits provided’ to submarine cable licensees, as compared to other licensees. The Commission has never followed that standard nor could it since we do not control many of the factors we must account for in setting fees, such as the total annual amount to be collected or the number of payment units in a category.”

The FCC adopted its proposed updated tiers for submarine cable operations and clarified “that ‘capacity’ for regulatory fee purposes continues to be ‘lit capacity.’”

The order also maintains “the per Gbps fee for satellite and terrestrial IBCs [international bearer circuits], which is $121 per Gbps for FY 2019.”

“Section 9(e)(2) of the RAY BAUM’S Act permits the Commission to exempt a party from paying regulatory fees if ‘in the judgment of the Commission, the cost of collecting a regulatory fee established under this section from a party would exceed the amount collected from such party. . . .’ In the FY 2019 NPRM, we sought comment on how to implement section 9(e)(2) and on a proposed section 9(e)(2) de minimis fee exemption of $1,000.” The order adopted the $1,000 threshold.

The order will be effective upon publication in the “Federal Register.” Regulatory fees are due by Sept. 24.

The further notice seeks comment on reforming regulatory fee assessments for International Bureau regulates.

“First, we seek comment on whether we should assess regulatory fees on all space stations granted approval by the Commission to communicate with earth stations in the United States. In the past, the Commission has assessed regulatory fees on space stations (both geostationary and non-geostationary orbit) licensed by the Commission, but not on foreign-licensed space stations that have been granted market access by the Commission,” it said. “We seek comment on whether assessing non-U.S. licensed space stations would promote regulatory parity among space station operators.”

“Second, several commenters have argued that we should adjust the apportionment among fee categories within the International Bureau. For example, NASCA claims that the Commission has continued to over-recover regulatory fees from submarine cable operators because the combined submarine cable and IBC revenue requirement is relatively high compared to the satellite and earth station categories,” the FNPRM said.

The FCC also sought comment on whether it should adjust TV and radio broadcaster regulatory fees.

Comments on the FNPRM are due 30 days after “Federal Register” publication and replies are due 30 days after that.

Commissioner Mike O’Rielly issued a statement on the item.

“Practically all the items we consider at the Commission affect the financial bottom line of regulated entities in some form or another. Apart from forfeitures, however, none have such a direct effect on a company’s balance sheet than our annual regulatory fees order. But, unlike forfeitures, which penalize individual companies based on specific conduct, any adjustments to the fee structure create a zero-sum gain or loss for an affected entity irrespective of its actions. Since one industry segment’s relief is another’s burden, it takes a delicate balance to create a fair and viable fee structure and requires careful consideration,” he said.

“Therefore, I am sympathetic to concerns raised by our nation’s broadcasters, satellite providers, and others over the fee increases included in this year’s item. While some aspects of the fees admittedly may be outside the Commission’s control, we have the option to keep fees down at least in part by controlling overall costs and spending less. And, since the burden of paying our regulatory fees is ultimately borne by consumers, tightening our metaphorical belt would certainly be prudent at this time,” the Commissioner added. “In my view, all possible internal restraints on spending should be considered and every idea for improving operations must on the table and aggressively pursued.” —Paul Kirby, [email protected]

MainStory: FCC FederalNews

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