April 2013

Disruption in media biz unlocks opportunities

"Disruption creates a lot of carnage," said Mathew Ingram, a senior writer for the tech website GigaOM, "but it also creates a lot of opportunity."

If ever an industry has been thoroughly disrupted, it's the media business. The advent of the Internet and the digital era has completely turned it upside down. For legacy media institutions such as newspapers and magazines and broadcast networks, disruption has meant the painful challenge of adaptation and reinvention in a radically different landscape. But for innovators and entrepreneurs, it has created a matchless opportunity to try new things, to experiment, to build far-reaching new enterprises virtually overnight.

Preliminary Findings on Federal Relocation Costs and Spectrum Auction Revenues

The Government Accountability Office was asked to review the costs to relocate federal spectrum users and revenues from spectrum auctions.

This testimony before the Senate Committee on Armed Services addresses GAO’s preliminary findings on
1) estimated and actual relocation costs and revenue from the previously auctioned 1710-1755 MHz band,
2) the extent to which DOD followed best practices to prepare its preliminary cost estimate for vacating the 1755-1850 MHz band, and
3) existing government or industry forecasts for revenue from an auction of the 1755-1850 MHz band.

GAO reviewed relevant reports; interviewed Department of Defense, Federal Communications Commission, National Telecommunications and Information Administration, and Office of Management and Budget officials and industry stakeholders; and analyzed the extent to which DOD's preliminary cost estimate met best practices identified in GAO's Cost Estimating and Assessment Guide (Cost Guide). DOD's preliminary cost estimate for relocating systems from the 1755-1850 MHz band substantially or partially met GAO's best practices, but changes in key assumptions may affect future costs. Adherence with GAO's Cost Guide helps to minimize the risk of cost overruns, missed deadlines, and unmet performance targets. GAO found that DOD's estimate substantially met the comprehensive and well-documented best practices.

[GAO-13-563T]

Senate votes 75-22 to advance online sales tax bill

The Senate took a second procedural step on a bill that would allow states to collect online sales tax. In a 75-22 vote, the Senate proceeded to The Marketplace Fairness Act, S. 743, which would empower states to collect taxes on purchases made online by consumers in their states. The latest vote suggests supporters of the bill are likely to see it win approval in the Senate later this week.

Its path through the House, despite the support of many GOP governors, is less clear. Senators in states without a sales tax voiced opposition to the bill, arguing it would burden retailers in their states by forcing them to collect taxes for other state governments. “This legislation would impose new burdens on small businesses not only in New Hampshire but actually across the country,” Sen. Jeanne Shaheen (D-NH) said. “Small businesses across the country — not just in non-sales tax states, such as New Hampshire, but small businesses across the country — will see their tax burdens increase.” Those supporting the bill have called it a “states’ rights bill” because it would allow states — many of which are battling large budget deficits — to collect the revenue they need to fund state programs.

CBO Scores Marketplace Fairness Act

The Marketplace Fairness Act of 2013 (S. 743) would allow states to require certain sellers that are not physically located in the state to collect taxes on sales to individuals who are located in the state. The requirement to collect those taxes would not apply to sellers that make a total of $1 million or less in annual sales in states where they do not have a physical presence. The bill also would require states to meet several criteria before they could require sellers to collect the tax. CBO estimates that enacting S. 743 would have no impact on the federal budget.

The fight over Internet sales taxes

We’re more than 20 years into the mainstream Web era—20 years!—and Congress is finally seriously considering force retailers to collect sales taxes online, ending a loophole that has given online-only retailers an unfair advantage over physical retailers.

Thanks to a catalog company’s 1992 Supreme Court victory, states can’t require retailers that don’t have a physical presence within their borders to collect sales taxes on transactions done living in the state. That ruling predated the Mosaic browser by less than eight months, and combined with inaction at the federal level, it has given online retailers a serious leg up (as much as 10 percent) over their bricks-and-mortar competition. When Congress considered legislation to fix the problem back in the (original) dot com bubble, opponents argued that taxes would kill the baby in the cradle. When online retailers turned into Baby Huey—and Amazon is the poster child here—they argued that it would be a logistical burden to collect sales taxes in the thousands of different localities—never mind that the Barnes & Nobles and Targets of the world have already had to do that with their online sales. Now Amazon, having lost several battles with states over collecting taxes, and wanting to expand its physical presence to speed up its delivery, says it’s on board with a federal law allowing states.

Direct Marketing Association Urges Senate To Reject Online Tax Bill

A proposed Internet tax bill will “hinder economic growth and job creation,” the Direct Marketing Association said in a letter to the Senate.

“The bill makes complex changes to the economy while leaving many important questions unanswered -- putting both businesses and consumers in harm’s way,” the DMA argues. “The Senate should hold states accountable before granting them expansive new tax powers and we respectfully request that you vote against any Internet sales tax proposal that does not include reasonable simplification requirements.” If passed, the Marketplace Fairness Act (S. 743) will empower state governments to require out-of-state retailers with at least $1 million in sales revenue to collect tax from consumers. Supporters say the law will help brick-and-mortar stores to compete with online retailers.

Internet Sales Taxes Are Inevitable

[Commentary] Online sales taxes is an issue in which the hyper-polarized politics of the 21st century give way to old-school deal-making, pragmatism, and parochialism. The issue at hand relates to what Tim Fernholz calls large-scale “accidental Internet tax evasion.”

Online shoppers have been engaged in it for the past 10–15 years. Most states and some municipalities in the United States depend on retail sales taxes for revenue. And if you look up those laws, you’ll find that in theory you’re generally supposed to pay sales taxes to the state where you live on everything you buy even if you got it from another state or bought it on the Internet. In practice, of course, nobody does this. Until recently, cross-border shopping wasn’t economically significant, and no enforcement mechanisms existed to compel you to pay taxes back in your home state. Then came the Internet. States are seeing their tax base melt away. Enter the Marketplace Fairness Act, enthusiastically pushed by big-box retail chains and Sen. Dick Durbin (D-IL). There’s a lot of clout behind taxing Internet sales. Even if it doesn’t pass the House this year, it’s hard to see the no-taxation coalition holding up in the long run. As a bonus, it even makes sense on the merits! E-commerce is great, but it shouldn’t just be a vehicle for tax evasion.

MetroPCS Shareholders Approve T-Mobile USA Merger

MetroPCS Communications shareholders approved a sweetened deal to merge with Deutsche Telekom AG’s T-Mobile USA in a crucial vote that gives the German company a chance to revive its US business. The transaction will probably be completed by May 1 after today’s ballot cleared the final hurdle for the combination of the country’s fourth- and fifth-largest wireless carriers. The deal gives Deutsche Telekom a 74 percent stake in the merged entity and MetroPCS shareholders a $1.5 billion cash payment. The enlarged T-Mobile USA will be exchange-listed and Deutsche Telekom has agreed not to sell the shares on the market for 18 months.

CPB study to examine public policy implications of spectrum auctions

The Corporation for Public Broadcasting has initiated a six-month research project on the upcoming broadcast spectrum auctions that will culminate with publication of a white paper. The study will examine multiple complex issues surrounding the auctions, such as preservation of universal service of public broadcasting to all Americans; the role of Community Service Grant policy in spectrum discussions; how much noncommercial spectrum may be necessary in large and overlap markets; the financial implications for individual stations as well as the system as a whole; and station responsibilities to their communities.

The intended audience for the paper, said Mark Erstling, s.v.p. system development, will be the CPB Board, station boards and management “who are making the tough decisions” regarding the future of their spectrum; policymakers in state and federal government and other key stakeholders; and the public. One significant reason for doing the white paper, noted CPB COO Vincent Curren, “is for CPB to play an influential role to help influence policy discussions at the FCC. They are aware of the importance of maintaining universal public media service; we are confident there is an understanding of that at the staff level,” Curren said. “But for the full FCC, it’s helpful to have a report from us saying this is critical to pay attention to.”

Homeland Security Chairman to develop cybersecurity bill

House Homeland Security Chairman Michael McCaul (R-TX) said he is crafting his own cybersecurity bill that will clarify the Department of Homeland Security's role in sharing information about cyber threats with companies.

Last week Chairman McCaul helped push for the passage of the Cyber Intelligence Sharing and Protection Act (CISPA), which easily cleared the lower chamber after getting hit with a veto threat from the White House. With that bill passed, the Texas Republican plans to continue work on his own cybersecurity measure. "I also intend to develop a bill out of the committee on Homeland Security that deals with the role of DHS and the sharing of ... cyber threat information with the private sector and critical infrastructures to better protect them, so that we don't see power grids coming down, financial infrastructures coming down," Chairman McCaul said on MSNBC's "The Daily Rundown."

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