Satellite TV Discrimination Must End

By Joseph Widoff | Monday, June 15, 2009 | Lowell Sun

Mike and Peter are neighbors. Both are Red Sox fans and both subscribe to pay TV for channels like NESN to ensure that they never miss a game. For this privilege, Massachusetts is planning to slap Mike with a tax of 5 percent, but lets Peter off without paying a penny of state tax on his TV bill. Why the difference? Because Mike subscribes to satellite TV, while Peter chooses cable. The state Senate slipped this provision into the budget quietly, and consumers must stand up and reject yet another tax.

There is a word for all this: discrimination. And in this context, it violates the U.S. Constitution. If enacted, the state could have to refund more than $11 million per year in taxes to satellite-TV customers.

Why is the proposed tax unconstitutional? Because it illegally discriminates against interstate commerce, which is impermissible under the Commerce Clause of the U.S. Constitution. While the Commerce Clause is not as well-known to the public as, say, the First Amendment, it plays a vital role in the health of our national economy. The founders adopted the Commerce Clause to address a problem that almost scuttled our nascent republic -- the propensity of each state to find ways to benefit its own citizens' economic interests, at the expense of out-of-state interests. They understood that they would never succeed in fostering a vibrant national economy if each state was left to indulge its worst protectionist tendencies. So they entrusted the courts with the responsibility to enforce the prohibition against favoring local economic interests over out-of-state interests.

While arguments will be made on both sides of this issue, in the most fully developed court case to date, taking place in Ohio, the decision of a state to decide to tax satellite and not cable is in serious jeopardy. In addition to the legal reasons involving the commerce clause, the tax is especially unfair to rural subscribers, who are penalized for subscribing to satellite TV even though cable won't spend the money to serve them. If this discrimination is allowed, it will mean that all consumers will pay higher prices, for cable is now free to charge its own customers even more.

The vast majority of states let cable and satellite compete for customers on a level playing field, encouraging their residents to choose between the two TV providers based on things like service, programming and price. But rather than compete fairly, the cable industry and its army of lobbyists have used the economic crisis and the historic state budget crunch to gain a competitive advantage by taxing their only competitor.

The impact of this tax makes it of interest to everyone in Massachusetts, not just to the million households that subscribe to satellite TV. The Massachusetts Legislature should do its duty not only because the proposed tax on satellite customers is unconstitutional but because it is fundamentally unfair. It is discriminatory and it punishes consumer choice. The Legislature should reject this tax hike.

Joseph Widoff is executive director of the Satellite Broadcasting & Communications Association.