CenturyLink Takes Portland to Court Over New Landline Tax
CenturyLink hopes to block Portland, Ore., from changing how it taxes landline phones. The legal challenge focuses on the Portland City Council’s Nov. 28 approval of changes to City Utility License Law, which “substantially increase taxes” on local wireline phone services of incumbent companies CenturyLink and Frontier Communications, effective Dec. 28, according to CenturyLink’s court document filed at the Multnomah County Circuit Court in Portland. Other telecom providers don’t pay these fees, the injunction request said, mentioning wireless companies as an example.
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"CenturyLink believes that this change in how the city taxes local telephone companies is in conflict with applicable state and federal restrictions on the taxes and fees that cities may charge consumers for local telephone service,” the telco said in a statement. “At this time, CenturyLink is not passing through the increased tax as we believe the city tax conflicts with both state and federal limits on how cities can tax local telephone service. However, this may change if the city tax is upheld.” It went to court to “obtain a definitive resolution of this issue and to protect its customers’ interests,” the company added.
Sam Adams, whose term just ended as mayor of Portland, defended the measure at the November council meeting. “This is an incremental step toward equity,” he said, while acknowledging the valid concerns about wireless versus landline taxation. He said then that after his term ended, he hoped the city government would continue to take on “the issue of cell taxes” over the next four years.
"The practical effect of the Amendments, however, will be to increase CenturyLink’s cost of service and materially undermine its ability to compete against other telecommunications providers, particularly wireless providers,” CenturyLink said in the complaint. “The Amendments will also have a direct and disproportionate impact on CenturyLink’s customers -- many of whom are seniors -- by essentially singling them out to pay the entire cost of remedial measures for City-wide police misconduct.” Adams had said the tax revenue would be used to pay for police training and supervision tied to a federal settlement, the complaint said, which was acknowledged when commissioners voted.
The city had charged CenturyLink and other incumbents 7 percent of their gross access exchange revenue for years, the company said. The city’s recent amendments will “more than double” the taxes collected, CenturyLink said, as they “impose a tax of 5 percent on all of CenturyLink’s gross revenues in the City of Portland, not simply those derived from exchange access services.” The telco argued that these taxes violate the Oregon Revised Statutes because they're not taxing the access charge revenue and the federal Telecom Act of 1996 because they “dramatically increase the existing disparity between the taxes and fees imposed on wireline telecommunications carriers such as CenturyLink and wireless carriers.” The complaint notes the number of Portland households that have come to rely on wireless only, 18.5 percent in 2007 to 38.2 percent in 2011, which makes wireless “the predominant” telecom provider in the city.
"While we have a small presence of customers within the city limits of Portland, we are still evaluating CenturyLink’s law suit but in general we oppose adding another tax to our customers’ bills while other companies (e.g. wireless) are excluded allowing for a competitive advantage,” a Frontier spokesman told us in a statement.
All five commissioners supported the amendments at the November meeting. Some described robocalls and “misinformation” that had spread about the tax changes prior to the vote. The city needed to raise about $5 million to cover the Justice Department settlement, which is associated with this tax change, said Commissioner Amanda Fritz. “It does disproportionately affect seniors and elders because landlines to me really are life lines,” Commissioner Dan Saltzman said, noting the rise of wireless. But he called landlines a “bargain” and suspected this would only mean another $12 or so on a customer’s bill annually and wouldn’t dissuade them: “I think this is something that I believe our citizens will tolerate when they understand that it’s going to be used in part to pay for our compliance with the Justice Department’s consent decree.” Commissioner Randy Leonard saw the increase in taxation as small but important for Portland: “We have a revenue issue in this city that this [tax] alone won’t fix -- but helps a little bit.”
The office of incoming Portland Mayor Charlie Hales, who was elected in November and sworn in within the past week, declined comment.