Comcast Wants Maine Governor To Veto ‘Peacock’ Tax
By Ted Hearn, Editor of Policyband
Washington, D.C., Feb. 12, 2024 – The state of Maine is just a stroke of the pen away from enacting a tax on streaming services like Peacock, triggering a strong reaction from Peacock parent Comcast Corp., a provider of cable TV and Internet to thousands of Maine households.
Last Thursday, a senior Comcast lawyer sent a letter to Gov. Janet Mills – who is expected to sign the bill – that detailed the Philadelphia-based company’s extensive statutory and constitutional objections. Comcast’s lawyer urged the second-term Democrat to veto the measure.
“The [bill] unfairly singles out Peacock and a handful of other streaming services for unprecedented and discriminatory fees and regulatory obligations,” wrote Kimberley D. Harris, Executive Vice President of Comcast Corp. and General Counsel of NBCUniversal. “It will only apply to Maine consumers who access Peacock’s linear and on-demand video content over broadband Internet service provided by an affiliate, Comcast Cable.”
The bill’s sponsor, Rep. Rep. Melanie Sachs, a Democrat from Freeport, took strong issue with Comcast’s interpretation of the bill that it would somehow result in a “Peacock tax.”
“That’s not my understanding whatsoever,” Rep. Sachs said in a recent interview.
She said the purpose the law was to modernize the state’s cable franchising statutes created decades ago in the era of analog television.
“There is no is no ill-will toward cable operators,” she said.
The Maine legislation (LD-1967), termed “An Act to Support Municipal Franchise Agreement,” comfortably passed Maine’s Democratic-controlled House and Senate in Augusta. The ten days permitted for Gov. Mills to sign the bill are tolling.
Asked if Gov. Mills, the first female to become the state’s chief executive, would sign the bill, Rep. Sachs would only say: “I have worked very closely with her administration.”
Peacock is Comcast’s ambitious, though money-losing, streaming service that netted 3 million new subscribers last quarter to end with 31 million. Its online rivals include Netflix, Disney’s Hulu, Amazon Prime Video, and Warner Bros. Discovery’s Max.
Peacock is the home of hit TV shows “The Office” and “Parks and Recreation” and live sporting events, such as Premier League English soccer. Ad-supported plans start at $5.99 a month.
The service won plaudits for setting a record for the most-streamed live event in U.S. history through exclusive coverage of the Jan. 13 NFL wildcard playoff game between the Kansas City Chiefs and the Miami Dolphins. [The game, watched by 23 million on Peacock, could also be seen on broadcast TV in the two teams’ home markets.]
Comcast – which serves about 71,100 Maine households – testified against LD 1967 last October along with Charter Communications, the Motion Picture Association, and the Maine State Chamber of Commerce over provisions they criticized as unfair, discriminatory or inconsistent with federal law.
Charter is the state’s largest cable company with 466,000 subscribers in 300 Maine communities.
According to Comcast, the bill empowers Maine towns or local franchising authorities (LFAs) to require a cable company to pay fees to local governments on the gross receipts of affiliated streaming video services. In Comcast’s case, that would be Peacock, and it would include locally derived subscription and advertising revenue in the definition of gross receipts.
Meanwhile, Charter in offering Peacock, Netflix or Hulu to Maine customers would not have to pay a streaming fee on those services, according to Comcast.
“LD 1967 will not apply to Maine consumers who use other broadband providers besides Comcast (e.g. Charter) to stream Peacock,” Comcast/NBCU lawyer Harris said. “Nor will it apply to Maine consumers who use their mobile devices on wireless services (e.g., Verizon) to watch Peacock and in their homes, or while at an airport, retail establishment, or myriad other places.”
Maine’s bill, according to Comcast, would violate the First Amendment by allowing LFAs to require Peacock to host public, education and governmental (PEG) channels carried on traditional cable TV systems.
“The engineering and physical network construction needed to connect a PEG provider in Maine with a streaming service designed to be available anywhere in the U.S. is expensive and the costs will be borne by customers,” Ashley Luszczki, Government Relations Specialist with Maine State Chamber of Commerce, said in Oct. 25, 2023 testimony before Maine’s Energy, Utilities and Technology Committee.
Harris said LD 1967 also violates numerous federal laws that pre-empt state action in the cable and broadband sectors, including the Internet Tax Freedom Act.
Since 1984, LFAs have been authorized by federal law to collect fees from Comcast in exchange for granting the company access to municipal property, such as rights of way under public streets. The maximum franchise fee, set by federal law, is 5%. According to Charter, nearly one third of Maine’s LFAs do not collect a franchise fee and a third collect less than the 5% maximum.
Like many states, Maine decades ago adopted franchising laws when cable TV did not have much in the way of wireline competition. Maine lawmakers in the new bill have made adjustments in order to franchise non-cable communications providers.
For example, the Maine law substitutes “video service provider” for “cable system operator,” new language that will likely enable LFAs in Maine’s 16 counties to collect fees from communications companies in their rights of way that offer broadband Internet access but not traditional cable TV service. Comcast said this change would lead to fees on streaming services.
Rep. Sachs said the energy and utilities panel that worked on LD 1967 “did not believe that interpretation of the bill.”
Sachs said an important feature of the bill is that it will help small Maine towns avoid costly litigation in franchising disputes with communications companies. She said the bill would allow towns to seek less costly dispute resolution at the state Public Utilities Commission, which is already mediating disputes between utility pole attachers and pole owners.
Cable’s difficulty in managing relations with Maine state officials has resulted in three federal law suits in recent years.
In 2019, the cable industry won in federal court over a law that required Maine cable operators to offer channels and programs on an à la carte basis. The court found the law a violation of First Amendment. LD 1967 repeals the à la carte law.
A year later, Maine passed a law that required cable TV companies to provide partial-month rebates to customers who terminate service three or more working days before the end of a monthly billing period. Charter fought the law, arguing it was an impermissible form of rate regulation. After Maine won in federal appeals court, the U.S. Supreme Court declined to hear Charter’s request for review.
In 2021, Maine successfully defended a state law related to the placement of PEG channels on cable systems and the mandated deployment of cable facilities in rural areas meeting certain density requirements. The case was brought by NCTA - The Internet & Television Association, whose members include Comcast and Charter.