May 18, 2012
Action packed Agenda at next MITA Roundtable Luncheon
By Connie Groh
May 18, 2012
Senator John Proos to Participate in MITA Roundtable Discussion and Luncheon on June 6th
The Michigan Internet & Telecommunications Alliance will be hosting its regular quarterly meeting on June 6th with two impressive headliners. On the public policy side will be State Senator John Proos (R-St. Joseph) to discuss the Cloud Computing tax prohibition legislation that he has co-sponsored. Also addressing the group will be David Ledbetter, National Sales Director of Equinox Information Systems from Nashville, Tennessee.
The “Cloud Computing” bills introduced by Senator Proos ensure that “Cloud Computing” services will not be subject to Michigan sales or use tax. “Cloud Computing” generally refers to the use of servers or other infrastructure provided by companies in order to store and manage data. Users of these increasingly popular services access the provider’s software online through a web browser, rather than installing software on a computer at their home or office.
Senator Proos co-sponsored the bills, SB 335 and 336, along with Senator John Pappageorge (R-Troy). These bills, which were introduced on April 26, 2011, clarify Michigan law by specifically excluding “granting the right to use prewritten software installed on another person’s server” from the list of items subject to sales or use tax. The Michigan Department of Treasury initially took the position that cloud computing services were not taxable, but later the reversed that position to maintain that taxes apply, thus making clarification essential.
“A series of mixed rulings by the Treasury Department has made this clarity absolutely necessary,” Senator Proos said in a press release as the bills were taken up by the Senate, where they passed on June 16. “Michigan job providers deserve the certainty of knowing what is taxable and what is not. I sponsored this reform to give the business community this kind of clarification and to help avoid costly legal battles over this issue,” Senator Proos said.
The bills are now with the House Tax Policy Committee, which heard testimony on October 26, 2011, but has not yet voted on the bills. The Committee expects to place the bills on their hearing agenda again in the very near future.
Senator Proos currently serves as Majority Vice Chair of the Senate Energy and Technology Committee. His extensive experience with telecommunications issues also includes a previous position on the House Energy and Technology Committee. Among other current committee assignments, Senator Proos serves on the Senate Appropriations Committee and Senate Finance Committee.
For more information about Senator Proos, please visit http://www.misenategop.com/senators/Proos.asp?District=21
Additionally, the MITA Board is very pleased to have David Ledbetter of EQUINOX Information Systems to address the board prior to the luncheon. Mr. Ledbetter is the National Sales Director for EQUINOX which is a company that specializes in a full range of telecom related billing and revenue assurance protections. Of particular interest is the Company’s proven track record fighting phantom traffic, an issue of increasing importance as the telecom world moves quickly to VoIP technology.
The MITA meeting will begin at 11am with David Ledbetter presenting and the luncheon and round table discussion with Senator Proos will take place at 12 p.m. The meetings will be held at the Troppo Restaurant located at 120 N. Washington Square, Lansing, MI 48933 (telephone (517) 371-4000). If you wish to attend please contact MITA Executive Director John Liskey by June 1st, at 517-913-5109 or Liskey@mita1.org for more information.
May 11, 2012
Committee Delays Action on Tower Bill
By Connie Groh
May 11, 2012
The Michigan House Energy and Technology Committee will work on fine tuning the “Tower Bill” (HB 5342) before voting on whether to send the bill to the House floor. The bill, introduced on February 2, 2012, would allow the Department of Technology, Management and Budget (DTMB) to offer space on Michigan Public Safety Communications System (MPSCS) towers for lease by the private sector, including telecom and Internet Service Providers (ISPs). On May 8, 2012, the Committee heard testimony on a substitute version of the bill, but did not vote on whether to release the bill for consideration by the full House. The Committee has held two prior hearings on the Tower Bill.
At the May 8 hearing, Phil Jeffery, Chief Deputy Director for the DTMB, testified in support of the Tower Bill, joined by Brad Stoddard of the MPSCS and Valerie Brader of Governor Rick Snyder’s office. The Committee posed numerous questions, many of which related to the role the MPSCS towers would play in spreading broadband service to underserved areas of Michigan. Ms. Brader noted that rural areas will be the main beneficiaries of the bill. Because of anticipated benefits to agriculture, the Commission of Agriculture & Rural Development is particularly interested in the bill. Mr. Jeffery pointed out that where there is unused space on an existing tower, there is an opportunity for ISPs to expand the availability of broadband service without incurring the cost of erecting new infrastructure. “The towers are there – they [ISPs] can just hang radios,” Mr. Jeffery said.
Members of the Committee expressed concern that the substitute bill does not state as clearly as the original that the first priority use of the towers is and remains public safety. The witnesses agreed that there is no intent to change that priority.
There was also considerable discussion of the definition of “underserved area.” The substitute bill designates an area as “underserved” if the transmission of nonpublic safety data between an end-user and the end-user’s IPS is available at a speed of 3 megabits per second or less. There is no special category or priority for areas with no broadband service at all. Whether this definition is sufficiently precise, and whether it strikes the proper balance in the effort to expand broadband service throughout the state, was discussed at several points during the May 8 hearing.
There was also discussion on what impact, if any, enactment of the Tower Bill could have on the roll-out of the 700-Megahertz Public Safety Broadband Network (PSBN). Members of the Committee wondered whether the Tower Bill will permit space to be taken that will later be needed for the PSBN. Mr. Stoddard said that while additional towers will be needed for the PSBN (for appropriate spacing of towers, for example), that need will arise in any event, not because of this bill.
The substitute version of the Tower Bill adds language restricting the right of local public entities to use the MPSCS towers to compete with private entities. Specifically, the substitute bill prohibits governmental entities from colocating on the MPSCS system for a commercial or business purpose for three years. Beginning three years after the effective date of the Tower Bill, governmental entities will be allowed to colocate on the system, but in “underserved areas” only.
The addition of the restriction on participation by government entities revived an ongoing controversy concerning the scope of the bill. On February 21, 2012, Samantha Harkins of the Michigan Municipal League (MML) testified in favor of allowing participation by public entities, while on that same date Matt Groen, of the Michigan Cable Telecommunications Association (MCTA) testified against allowing such participation.
Ms. Harkin and Mr. Groen both testified again on May 8 in opposition to the substitute version of the bill, but for dramatically different reasons. Ms. Harkin would support the original version of the Tower Bill, allowing public entities access to tower space. She testified that the MML interprets Michigan’s Telecommunications Act to require public entities to follow guidelines that would effectively prevent them from competing unfairly with the private sector. By contrast, Mr. Groen, testifying along with attorney Mike Ashton on behalf of MCTA, took the position that the substitute bill does not restrict the participation of public entities enough. MCTA proposed amended language intended to address their concerns, including closing off the possibility that after three years, public entities will become commercial competitors in areas that are not unambiguously “underserved.”
Representative Ed McBroom (R-Vulcan), a proponent of the expansion of broadband service to rural areas whose district is in the Upper Peninsula, commented that the number of people potentially impacted by the effort to extend service is a large one – at least 400,000.
Committee Chairman Kenneth B. Horn directed that the various stakeholders should confer together to clear up ambiguities and, if possible, to resolve outstanding issues on the Tower Bill within a time frame of one week.
MITA’s Executive Director John Liskey has submitted a letter supporting the Tower Bill.
STATE LEGISLATIVE UPDATE: The Michigan House of Representatives has passed HB 5468, providing that Michigan’s 9-1-1 surcharge would be collected at the point of sale at a flat rate of 1.92 percent of the retail transaction. The bill, which passed the House on May 3, 2012, by a vote of 106-3, is now with the Senate Energy and Technology Committee. SB 1064, a bill to simplify processes for land use approval for wireless communications equipment, has also passed in the House. The bill, which passed the Senate on April 24, cleared the House on May 3 by a vote of 104-5. The measure has been ordered enrolled in the Senate. The bill has reached the Governor’s desk for signature.
UPDATE ON BTOP BROADBAND LOANS AND GRANTS: At the federal level, the House Subcommittee on Communications & Technology has scheduled a hearing May 16 on “broadband loans and grants.” The hearing is expected to address concerns that Republican leaders have expressed about how Broadband Technology Opportunities Program (BTOP) loans and grants created by the American Recovery and Reinvestment Act are being spent. Questions include, among other things, the degree to which moneys are being used to subsidize competition to existing service. The programs are administered by the Commerce Department’s National Telecommunications and Information Administration and the Department of Agriculture’s Rural Utilities Program.
ATTENTION MITA MEMBERS: The Federal Communications Commission (FCC) has issued a Public Notice announcing a webinar to be held May 14, 2012 on the Broadband Adoption Pilot Program the FCC created in its reform of the Lifeline rules. If you are interested, please visit: http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-12-713A1.pdf
May 4, 2012
House Committee Takes Action on Two Communications Bills
By Connie Groh
May 4, 2012
The House Energy and Technology Committee has voted unanimously to send two bills affecting communications to the floor of the Michigan House of Representatives. On May 1, 2012, the Committee heard testimony on HB 5468 and SB 1064 and approved these bills for consideration by the full House. If passed, HB 5468 will simplify the collection of surcharges on prepaid wireless 9-1-1 services, and SB 1064 will simplify processes for land use approval for wireless communications equipment.
HB 5468, introduced by Representative Aric Nesbitt (R- Lawton) would amend the Emergency 9-1-1 Service Enabling Act, 1986 PA 32 (Emergency 9-1-1 Act), to change the way users of prepaid wireless phone minutes would pay for state 9-1-1 surcharges. 
Prepaid wireless 9-1-1 services, generally marketed through “middlemen” such as major retail stores and gas stations, are becoming increasingly popular. However, under current law, the payment of 911 surcharges is relatively complex and the charges are not transparent to the customer. Presently the surcharge is collected either by the service provider or the reseller, and the service provider is held responsible for depositing the funds into a 9-1-1 emergency fund. Surcharges are calculated using formulas based on a “state 9-1-1 fee” established annually. Millions of dollars in surcharge fees go uncollected.
By contrast, under HB 5468, the 9-1-1 surcharge will be a flat rate of 1.92 percent of the retail transaction. The retailer will collect the surcharge at the point of sale and will remit the surcharge at the same time and in the same way as general sales taxes. The surcharges will be administered by the Department of Treasury.
The Committee previously heard testimony on HB 5468 on March 20, 2012. Since that time, the bill has been modified slightly and will go to the House floor in a substitute version. The most significant change is that a “sunset” provision, which the former version eliminated from the Emergency 9-1-1 Act, has been re-introduced. The new “sunset” provides that the Emergency 9-1-1 Act will expire on December 31, 2021.
Sprint/ Nextel, the Detroit Regional Chamber of Commerce, T-Mobile, the Telecommunications Association of Michigan, Verizon, AT&T and the Michigan Association of Counties went on record in support of HB 5468.
SB 1064, introduced by Senator Mike Kowall (R-White Lake), would amend the Michigan Zoning Enabling Act, 2006 PA 110, to provide that wireless communications equipment would not need any approvals under the Act if the equipment is to be collocated on an existing wireless support structure or in an existing equipment compound that is in compliance with the local unit’s zoning ordinance or was approved by the appropriate zoning body or local official. If the new equipment meets these standards, but would require either an increase in height of 20 feet or 10 percent, an increase in width by more than the minimum necessary to permit collocation, or an increase in the area of an equipment compound to greater than 2,500 square feet, a streamlined special land use approval process will apply. A complete application for these relatively minor infrastructure changes would have to be approved or denied within 60 days. Applications for new equipment that will not go onto an existing structure or in an existing equipment compound, or for a wireless communications support structure, will be also be streamlined, but allowed 90 days’ processing time. Local governments would be allowed to authorize wireless communications equipment as a permitted use not subject to special land use approval.
Senator Kowall offered testimony and took questions concerning the bill. Committee members expressed interest in relative costs and fees. SB 1064 allows local governments to impose an application fee representing actual costs up to a limit of $1,000. This fee limit is up from $250 proposed in an earlier version of the bill. Concern has been expressed that the bill, especially with the original $250 limit, could increase costs by more than it increased revenue and thus not cover the local unit’s expenses. However, the bill’s supporters believe that the faster processing of applications will generally result in significant cost savings. At present, some of these applications can move back and forth for as much as a year, Senator Kowall indicated. SB 1064 will shorten the time needed to get the same thing done. In this context, “time is money,” Senator Kowall said.
The Lansing Regional Chamber submitted written testimony supporting SB 1064. Others going on record supporting the bill were Sprint/ Nextel, the Michigan Wireless Association, the Detroit Regional Chamber, T-Mobile, Verizon, AT&T, and the Michigan Chamber of Commerce.
“UPDATE to SB 499”: A Senate bill that will allow data infrastructure providers to install facilities along Michigan’s state-controlled rail trails has passed in the House. On May 2, 2012, the House approved the measure by a 100-9 vote. The bill now heads back to the Senate for concurrence. Michigan Internet & Telecommunications Alliance’s Executive Director, John Liskey, previously submitted written testimony supporting the measure.
April 27, 2012
COMPTEL Supports Michigan CLECS in Filing
By Connie Groh
On April 24, 2012, COMPTEL filed comments with the Michigan Public Service Commission (MPSC or Commission) standing up for the rights of Competitive Local Exchange Carriers (CLECs) in an arbitration case that could severely restrict access to dark fiber for interconnection purposes. In that case, the Commission, while ruling substantially in favor of the CLECs on other issues, accepted AT&T Michigan’s position that dark fiber may not qualify as one of the types of entrance facilities that AT&T must provide. The CLECs have asked the MPSC to reconsider its ruling. The ruling was part of an MPSC order issued on February 15, 2012 in Case U-16906, involving the terms of the CLECs’ interconnection agreement with AT&T Michigan. An arbitration panel had earlier ruled in favor of the CLECs’ position on dark fiber.
COMPTEL’s comments point out that the MPSC’s February 15 decision on dark fiber is inconsistent with the Commission’s own ruling in a recent case that was appealed to, and affirmed by, the United States Supreme Court. In that case, Talk America, Inc. v. Michigan Bell Telephone Company, d/b/a AT&T Michigan (2011), the Supreme Court upheld the Commission’s ruling that AT&T Michigan must make entrance facilities used for interconnection purposes available to competitors at cost based rates. The Court found that AT&T Michigan had the obligation to lease, at cost based rates, “any requested facilities for obtaining interconnection with the incumbent LEC’s [ILEC] network unless it is technically infeasible to do so.”
In the present Case U-16906, however, when the CLECs proposed language in their interconnection agreement that would provide access to dark fiber entrance facilities, the Commission stated that “dark fiber may not meet the definition of an entrance facility when it is incorporated into the CLEC’s network. In that configuration, it does not connect a pair of wire centers.”
COMPTEL, in its comments in the case, pointed out that the rules of the Federal Communications Commission (FCC) define interconnection as “the linking of two networks for the mutual exchange of traffic.” COMPTEL emphasized that “all entrance facilities used by CLECs, whether dark fiber or not, are ‘incorporated into the CLEC’s network’ to the extent that they ‘connect competitive LECs’ networks with incumbent LECs’ networks’ for the mutual exchange of traffic.” COMPTEL explained that “the fact that the CLEC adds electronics to the dark fiber entrance facility to enable it to carry traffic does not alter the nature of the physical connection: it is still a fiber optic cable carrying an interconnector’s circuits from the interconnector’s switch into the ILEC’s premises, it still connects the CLEC’s network to the ILEC’s network and is still an entrance facility.” Indeed, COMPTEL insisted, “The Commission’s finding that dark fiber, once it is lit by a CLEC, is neither an entrance facility nor does it ‘connect a pair of wire centers’ ignores the actual physical architecture of telephone networks.”
The ten CLECs participating in the case are ACD Telecom, Inc.; Arialink Telecom, LLC; CynergyComm.Net, Inc.; DayStarr LLC, Lucre, Inc; Michigan Access, Inc.; Osirus Communications, Inc.; Superior Spectrum Telephone and Data, LLC; TC3 Telecom, Inc.; and Telnet Worldwide, Inc. Field Law Group(www.fieldlawgroup.com) of Okemos, Michigan represents the Michigan CLECs in the proceeding.
March 30, 2012
Annual State 9-1-1 Technology Forum Held
By Connie Groh
On April 18, 2012, the Michigan State 9-1-1 Office and the Emerging Technology Subcommittee held its Annual 9-1-1 Technology Forum. The full day of sessions included presentations on Texting and 9-1-1, D Block and Broadband, Vehicle Telematics (Ford “Sync” and OnStar), Social Media, and ESInets. The program was coordinated by Harriet Miller-Brown, ENP, State 9-1-1 Administrator.
Mr. Rod Robinson of TeleCommunication Systems, Inc. (TCS) presented on “TCS and Texting,” addressing the opportunities that the widespread and growing use of text messaging now provides in the area of public safety emergency response. The impetus to add text messaging to the arsenal available to public safety answering point (PSAP) personnel derives from a basic principal – members of the general public expect to be able to communicate with PSAPs in the same way that they communicate with one another. Thus, “9-1-1 services must be in alignment with current communications styles and preferences,” Mr. Robinson said. Mr. Robinson’s presentation included a demonstration of TCS’s “Geospatial Emergency Messaging” 9-1-1 system (TCS-GEM-911).
Ms. Cynthia Wenzel Cole of Cynergyze delivered a presentation on the “D Block,” a 10 MHz piece of spectrum in the upper 700 MHz spectral band (Band 14) to be dedicated to public safety use, in addition to the spectrum currently licensed to public safety. The allocation of the D Block to public safety use was one element in the federal Middle Class Tax Relief and Job Creation Act of 2012 (H.R. 3630 or Public Law No: 112-96), passed in February 2012. H.R. 3630 will also provide $2 billion in federal funding and will establish the First Responder Network Authority (FirstNet) to govern the newly dedicated network along with the existing public safety broadband spectrum. New technology utilizing the expanded broadband space will increase PSAP capabilities to dispatch data (including videos) by PSAPs. It will not affect incoming calls, nor yet enable critical voice communications, for which radios will still be needed for the foreseeable future. Ms. Wenzel Cole is a consultant to the State of Texas, which received a waiver from the Federal Communications Commission to become an “early adopter” of the D Block system, a temporary license which enables Texas (along with 20 other entities) to participate at the ground level in the expansion of broadband availability to public safety systems.
Mr. Brad Stoddard of the Michigan Public Safety Communications System (MPSCS) presented on “The Public Safety Broadband Network: Fundamentals and Michigan’s Next Step,” setting out how Michigan may be impacted by the D Block. Mr. Stoddard explained that the Public Safety Broadband Network (PSBN) is a single nationwide network based on the industry standard Long Term Evolution (LTE) technology. At present, we still have a “patchwork” of communications systems that are not interoperable. Michigan, like Texas, filed for an FCC “early adopter” waiver allowing ground level participation, but the FCC has not acted on Michigan’s request. However, Michigan has been participating in both regional and national planning, in particular concerning border communications with Canada, Ohio and Indiana. Under H.R. 3630, each state governor will have 90 days either to “opt in” or “opt out” of the federal system once the federal plan is released. Careful planning will be needed in advance of that decision, Mr. Stoddard said. In view of developments in LTE technologies, we can expect to see considerable device turnover in the area of public safety, as we have in the past in the commercial field, Mr. Stoddard said.
Mr. David Hatton and Mr. Arthur Jack presented on behalf of Ford Motor Company on “Ford Sync,” which provides, among many other features, the “Ford Sync 911 Assist.” This technology has been available in Ford vehicles since 2008, and operates so long as the vehicle occupant has “paired” his or her cell phone to the vehicle’s system. The 911 Assist feature provides “intelligent crash detection” which will call 9-1-1 automatically whenever an accident results in either air bag deployment or fuel pump shutoff. The Ford system does not operate through a call center, but features direct contact with 9-1-1. The emergency operator will receive, among other things, the GPS coordinates of the affected vehicle. Ford expects enhanced capabilities for their system in the future, such as an expansion in the data that is sent along with the 9-1-1 call.
Mr. George Baker presented on behalf of OnStar, the emergency system provided in General Motors vehicles. OnStar also utilizes GPS technology and provides for automatic emergency calling, as well as allowing calls to be initiated by the vehicle occupant. A key difference between the Ford and OnStar systems is that OnStar works through call centers rather than sending calls directly from the vehicle to the 9-1-1 center. The OnStar staff evaluates calls and, if appropriate, sends them on to the PSAP. The PSAP personnel then make the determination whether to interact with the vehicle occupants. OnStar also features such services as vehicle security, allowing, for example, OnStar personnel to slow down a stolen vehicle if it is safe to do so, and to prevent a thief from restarting a vehicle once that vehicle’s ignition has been turned off. OnStar also plans expanded services in the future and seeks active input from the public safety sector in evaluating and improving its systems.
Mr. James Buttelman of the Mecosta Medical Systems presented on “Social Networks.” Mr. Buttelman emphasized that social networking will play a major role in public safety in the coming years, as more and more people communicate through expanding social networks. “If Facebook were a country, it would be the third largest,” Mr. Buttelman said. The growth of the social media has signaled a “fundamental shift in the way we communicate,” Mr. Buttelman said. This shift will bring the need for new hardware and new software and will require changes in attitudes and culture in the public safety sector. New ways of communicating about emergencies are already in common use. Mr. Buttelman described, for example, the use of “hashtags” (#) in gathering information on emergencies using Twitter. Mr. Buttelman called for collaboration and for the creation of open, non-proprietary systems that will help to bridge gaps in public safety access.
Finally, Mr. Dan Mongrain of Frequentis gave a presentation on the development of Emergency Services IP networks (ESInets). ESInets provide the hardware and IP transport infrastructure over which Next Generation (NG) 9-1-1 can run. Mr. Mongrain set out guidelines as to what needs to be taken into account in planning and designing an ESInet. The National Emergency Number Association (NENA) has published a document (Document 08-506) to provide information for the designers and manufacturers of these systems to be put to use in processing emergency calls. The networks will connect PSAPs and other public safety agencies within a region and provide interconnection to other ESInets and originating service providers within a region or state. Among many other things, Mr. Mongrain addressed availability and reliability requirements, network security considerations, management and monitoring, and the service level agreements that persons developing the networks would enter into with vendors.
The Michigan Internet and Telecommunications Alliance (MITA) will provide links to all of the Powerpoint slides that accompanied each of these presentations in the near future on its website at www.mita1.org.
For the Michigan State 9-1-1 Committee website, please visit http://www.michigan.gov/msp/0,1607,7-123-1593_47748—,00.html.
March 30, 2012
First Quarter Review – 2012
It has been a busy first quarter for the telecommunications industry in Michigan. Of several bills pending before the Michigan Legislature relating to telecommunications, perhaps none are more important than SB 335 and SB 336, which together clarify Michigan law to specify that “cloud computing” services are not subject to Michigan sales or use tax. This clarification is essential, since the Michigan Department of Treasury has taken the position that cloud computing services are taxable, reversing its earlier view that they are not. SB 335 and SB 336 will remove all doubt, by explicitly excluding “granting the right to use prewritten software installed on another person’s server” from the list of items subject to tax. Michigan Internet & Telecommunications Alliance (MITA) Executive Director, John Liskey, has submitted a letter supporting the legislation. SB 335 and SB 336 are now with the House Tax Policy Committee. The House will break for the Easter holiday beginning on April 2, 2012. After returning from break on April 16, the Committee will decide when to schedule further action on the bills.
Also, Senator John Proos (R-St. Joseph), cosponsor of SB 335 and SB 336 will be MITA’s luncheon guest on April 24th at Troppo Restaurant in Lansing. These quarterly roundtable discussions allow MITA members to informally discuss telecom and Internet issues with key state public policymakers.
In other news, MITA member company DayStarr Communications, headquartered on N. Ball, downtown Owosso, has been named the Shiawassee Regional Chamber of Commerce’s “Small Business of the Year.” The award was presented at the Chamber’s 2012 Annual Dinner and Awards Night in February. MITA extends congratulations to DayStarr’s President, Collin Rose, and to all of the folks at DayStarr on the receipt of this honor.
MITA has been following several other bills now making their way through the Michigan legislature.
HB 5342 would permit the Michigan Public Safety Communications System towers (MPSCS) to be utilized by telecom and Internet Service Providers (ISP’s). That bill is with the House Energy and Technology Committee, where testimony was heard on January 24, February 7 and again on February 21, 2012. MITA’s Executive Director John Liskey has submitted a letter supporting the bill.
Mr. Liskey has also submitted a letter supporting SB 499, a bill that would make it easier for data infrastructure providers to install facilities on state-controlled land now being used for rail trails. The House Energy and Technology Committee heard testimony on the bill on February 14. On March 6, 2012, the bill was reported favorably out of Committee for second reading and consideration on the House floor.
Finally, HB 5468 would amend the Emergency 9-1-1 Service Enabling Act to provide for a “point of sale” (POS) model intended to simplify the collection of 9-1-1 surcharges levied on prepaid wireless phone minutes. The bill provides that retailers (such as gas stations and retail stores) would collect the surcharges at the time customers purchase the services. Representative Aric Nesbitt (R- Lawton) is sponsoring the bill and testified on its behalf before the House Energy and Technology Committee on March 20, 2012. Committee Chair Kenneth B. Horn (R-Frankenmuth) indicated that the Committee will take up the bill for a vote immediately after the Easter break.
March 23, 2012
Bill to Revamp Prepaid Wireless 9-1-1 Surcharge Proposed
A bill has been proposed in the Michigan House of Representatives that would change the way Michigan users of prepaid wireless phone minutes would pay for state 9-1-1 surcharges. On March 20, 2012, Representative Aric Nesbitt testified before the House Energy and Technology Committee in support of HB 5468, which he is sponsoring. The bill would amend the Emergency 9-1-1 Service Enabling Act, 1986 PA 32, to provide for a “point of sale” (POS) model intended to simplify the collection of surcharges by making them due at the time customers purchase the services.
Prepaid wireless 9-1-1 services are a growing alternative to “postpaid” services provided under a contract with a telecommunications carrier. Prepaid wireless 9-1-1 services are marketed through “middlemen” such as major retail stores and gas stations. No monthly bills are sent to customers. Consumers purchase services on a cash-and-carry or pay-as-you-go basis from retailers at a wide variety of distribution channels. Prepaid services may be particularly attractive to low-volume or low-income consumers.
Representative Nesbitt stated that HB 5468 will make the calculation and collection of the surcharge more uniform, more transparent, and much simpler than it is under existing law. Currently, millions of dollars in surcharge fees go uncollected, Rep. Nesbitt said. HB 5468 should substantially alleviate this problem, while at the same time eliminating the risk of double collection (collection at both the wholesale and retail stage), which can happen under the existing system.
Under present law, the surcharge is to be collected by the service provider or the reseller, and the service provider is responsible for depositing funds collected into a 9-1-1 emergency fund. The provider or reseller must choose between two alternative methods of calculating the surcharge, both based on a “state 9-1-1 fee” established annually by a state emergency 9-1-1 service committee. By contrast, HB 5468 would operate similarly to the Michigan sales tax. At the time of purchase, the user would pay the retailer a fee equal to 1.92 percent of the retail transaction. The retailer would retain 2 percent of surcharges collected, to cover administrative costs. The program would be administered by the Michigan Department of Treasury, as is the sales tax. The Treasury Department, not the individual service providers, would manage the deposit of funds into the 9-1-1 emergency fund.
As under current law, HB 5468 would allow county boards of commissioners to assess county 9-1-1 charges to service users.
Scott Mackey, from the CTIA – The Wireless Association (CTIA) testified on behalf of AT&T, Sprint, T-Mobile, US Cellular, and Verizon in support of the bill. CTIA has been actively promoting a POS “model bill,” on which HB 5468 is based. Mr. Mackey explained that providers of prepaid 9-1- 1 services may market them nationwide and have no way of knowing who may buy the services, or where. Because state and local surcharges vary widely and some states impose no surcharge at all, it is very difficult for providers to build an appropriate fee into the price of services. Whatever surcharge is imposed becomes a hidden charge, not visible to the purchaser and perhaps not enough to cover the amounts the provider is supposed to deposit into the fund. Under HB 5468, by contrast, the surcharge is part of the actual sales transaction and administration is “piggy-backed” onto systems already existing to administer the sales tax.
Mr. Mackey indicated that nineteen of the thirty-five states that have 9-1-1 surcharge fees have moved to the POS model. Maine has had such a law on the books for two years, and it is working well. South Dakota recently passed such a law. Fifteen states impose no 9-1-1 surcharge.
Ben Bodkin, representing the Michigan Association of Counties, testified that the Association supports the bill in principle, but suggested several changes. Currently the bill exempts sales of less than ten minutes or five dollars. The Association would eliminate those exemptions, and would like to see a “sunset” provision in the bill, instead of the provision it now contains, repealing an existing sunset of December 31, 2014. Chairman Kenneth B. Horn stated that the Committee will work with the Association to address their concerns.
T-Mobile, the Telecommunications Association of Michigan, AT&T, Sprint and Verizon went on record in support of the bill.
No vote was taken on the bill at the March 20 hearing, but Chairman Horn stated that the Committee will take up the bill for a vote immediately after its Easter break.
March 16, 2012
House Committee Hears Presentation on MPSC Annual Report
On March 13, 2012, Gary Kitts, Chief Administrative Officer for the Department of Regulatory Affairs of the Michigan Public Service Commission (MPSC), appeared before the House Energy and Technology Committee to present an overview of the MPSC’s 2011 Annual Report. Michigan law requires the Commission to submit its report each year in early March, and this year’s report was submitted on March 5.
Mr. Kitts’ presentation included power point slides highlighting key focus areas for each division of the MPSC, including the Telecommunications Division. Addressing telecommunications, Mr. Kitts noted that amendments to the Michigan Telecommunications Act (MTA) went into effect in June 2011. Critical changes included eliminating the requirement for providers to offer primary basic local exchange service, rescinding service quality and billing rules, and changing the process for providers to discontinue basic local exchange and toll service to customers in a given area, as well as specifying that the MPSC does not have authority over interconnected voice over internet protocol service (VoIP).
For Competitive Local Exchange Carriers (CLECs) it is important to note that the MPSC maintained authority to promulgate wholesale service quality rules as the MTA amendments removed the automatic sunset that the Michigan Internet and Telecommunications Alliance (MITA) had fought so hard to preserve. An update of those wholesale rules is expected to begin later this year.
With regard to the status of competition among local telephone service providers, Mr. Kitts voiced optimism, noting that as of the end of 2010, CLECs were serving 28.5 percent of the wireline market. The MPSC will release a report in June 2012 updating data on competition through 2011, at which time the House Committee may hear additional testimony.
The Report indicates that in recent years telecommunications complaints had been steadily declining, but that there was an increase in complaints of seven percent in 2011. The MPSC’s Service Quality Division reported that complaints were coming in at an average of 144 complaints per month prior to the MTA changes, but that since the amendments, complaints have increased to an average of 252 per month. Representatives Eileen Kowall and Aric Nesbitt each questioned Mr. Kitts on whether there was any correlation between the rise in complaints and the amendment of the MTA. Mr. Kitts acknowledged that the 2011 Report seems to suggest a correlation, but he does not believe that rise in complaints is significant, given the millions of people receiving telephone service in Michigan. In that context, the numbers of complaints has been essentially “flat,” Mr. Kitts said. At the request of Chairman Kenneth Horn, Mr. Kitts agreed to report back to the Committee to clear up any ambiguity involving the rise in complaints. “It looks like service is great, it is just a matter of our understanding [the Report],” Chairman Horn said.
Mr. Kitts also mentioned several other matters covered by the 2011 Report, including the development of new rules governing 9-1-1 administration, including requirements for multiline telephone systems and training standards for Public Safety Answering Point (PSAP) personnel. A new law, Public Act 271 of 2011, has extended the deadline for compliance to December 31, 2016.
To view the power point slides that accompanied Mr. Kitts’ presentation, please visit http://house.michigan.gov/SessionDocs/2011-2012/Testimony/Committee6-3-13-2012-1.pdf.
For a copy of the 2011 Report, please visit http://www.michigan.gov/documents/mpsc/2011_MPSC_Annual_Report_378366_7.pdf.
March 9, 2012
House Committee Approves Substitute Rail Trails Bill
The House Energy and Technology Committee has approved a substitute version of SB 499, a bill to allow data infrastructure providers to install facilities along Michigan’s state-controlled rail trails. On March 6, 2012, the Committee voted to recommend passage of the substitute bill (Substitute H-2). The Senate passed an earlier version of the bill on February 1, 2012, and the House Committee heard testimony on February 14, 2012. Michigan Internet & Telecommunications Alliance’s Executive Director, John Liskey, submitted written testimony supporting the measure.
Substitute H-2 changes earlier versions of SB 499 in several ways. First, while earlier versions provided for an application fee of $350, Substitute H-2 increases that fee to $500 and provides that the Michigan Department of Natural Resources (DNR), the agency charged with administering the bill, may apply the fees to administrative expenses. Secondly, while Substitute H-2, like earlier versions, provides for a one-time fee of five cents per linear foot of space to be occupied by the facilities, the substitute bill allows counties to receive funds from these fees for use in maintaining and developing the rail trails. Earlier versions required these sums to be deposited in a new Trailway Development Fund, also dedicated to maintenance of the trails. Under Substitute H-2, DNR will be able to impose conditions on the use of these funds by counties.
The bill was approved by a vote of 18-1, with two representatives abstaining. An amendment to reduce the five cent fee per linear foot of space to one cent, but to make it an annual requirement rather than a one-time fee, failed to pass. The substitute bill now goes before the full House and if they approve it, the bill will go back to the Senate for concurrence.
Copies of the final bill as passed by the Committee will be available on the House website soon. MITA members can get an advanced copy by emailing John Liskey at Liskey@mita1.net.
March 2, 2012
MITA Fights Tax on Internet “Cloud” Services
The popularity of cloud computing has led to a debate on whether the service is taxable under either the Michigan sales tax or the Michigan use tax. Although initially, the Michigan Department of Treasury took the position that cloud computing services were not taxable, the Department has reversed its position and now maintains that taxes apply. Senate Bills 335 and 336 would reverse this interpretation and clarify Michigan law by specifically excluding “granting the right to use prewritten software installed on another person’s server” from the list of items subject to tax.
Michigan Internet & Telecommunications Alliance Executive Director, John Liskey, recently submitted a letter supporting this legislation. “As Michigan based telecom and ISP businesses we are acutely aware of the importance of establishing Michigan as a competitive state with pro-technology tax laws and regulations,” said Mr. Liskey. “These two bills specify that Internet services commonly known as ‘cloud computing’ will not be taxed under the Michigan sales and use taxes,” according to Liskey.
“Cloud computing” generally refers to the use of Internet servers or other infrastructure provided by companies, including Google and others, in order to store and manage data. Users of “cloud” services access the provider’s software online through a web browser, rather than installing software on a computer at their home or office. Providers may offer cloud computing services by subscription or on a pay-per-use basis. Once data is stored on the “cloud” (Internet server) rather than on the user’s own computer, the data may be made available to others through secure access codes. Cloud computing also allows users to change computing capabilities or capacity without buying new equipment or new licensed software.
The House Tax Policy Committee has heard some testimony on the bills already. “For Michigan to be competitive for jobs and investment in the 21st century economy, we must embrace a world of constantly-evolving technology,” said Senator John Proos, R-St. Joseph, co-sponsor of the legislation. Howard Ryan, representing the Michigan Department of Treasury, presented testimony in opposition.
Opponents of the bills argue that because cloud computing is a rapidly growing part of the economy, the potential revenue loss to Michigan could be very significant. Supporters of the bill, according to the Senate Fiscal Agency, maintain that “subjecting cloud computing transactions to the sales and use taxes is inconsistent with Michigan’s standard tax treatment of most services. In addition to imposing a cost on the State’s businesses and residents who rely on cloud computing, the Department of Treasury’s varying positions have resulted in uncertainty and confusion.”
As of February 29, 2012, the Committee has not set a date for further consideration of these bills, but it is expected that they will be on the agenda in the near future.
MITA Letter of Support for SB335 & SB336
February 21, 2012
Committee Hears Additional Tower Leasing Testimony
The House Energy & Technology Committee held its 2nd hearing on HB5342 on Tuesday, 2/21/2012. This is the legislation that would permit private telecom providers to lease space on Michigan’s Public Safety Communications System towers.
The key development in regards to this bill was the discussion of an amendment to limit government entities from leasing any space on these towers. The purpose of the amendment is reportedly intended to insure that private entities currently offering internet services will not have to compete with public entities gaining access to the towers for commercial use.
Samantha Harkins of the Michigan Municipal League, along with Timothy Wolff, Village Manager of Lake Isabella, MI, testified in opposition to any such amendment. Mr. Wolff testified, in particular, about the difficulties his small community has had in getting private internet providers to offer service there. Thus far, the private companies have chosen not to invest, and as a result, dial-up internet access is all that is available in Lake Isabella. Residents have problems selling their homes, because potential buyers want high speed internet service, and businesses are moving out, because the village cannot meet their internet needs according to Mr. Wolff.
Former state representative, Mickey Knight offered testimony on behalf of Michigan Tech University (MTU). The University supports the bill without any restrictive amendment that would exclude public entities such as MTU. He stated that the University, in particular, may wish to use the towers in order to offer “hybrid” courses in conjunction with community colleges in the general geographic area. Hybrid programs allow students to do a portion of their course work from home, which is extremely beneficial given the long distances many of them, in that region, have to travel to go to class. Michigan Tech does not plan to use the towers for “commercial” purposes, Mr. Knight said. Mich Tech’s position was supported by Northern Michigan University as well.
Speaking in favor of an amendment to limit tower leasing to only private entities was Matt Groen, of the Michigan Cable Telecommunications Association (MCTA). He stated that MCTA is opposed to allowing the public sector to “unfairly compete” with the private sector. As written, he said, HB 5342 would allow public assets to be used to allow public entities to compete commercially with private providers using taxpayer dollars. Mr. Groen testified that currently, the vast majority of Michigan households (about 95.4%) have access to quality high speed internet through private providers. These providers have a diverse client base, and employ WiFi to many public as well as private users. Under the amendment that MCTA plans to propose, government entities could continue to use the towers for safety and non-commercial use.
Representative Rick Outman asked Mr. Groen what his group’s position is with regard to persons in small communities such as Lake Isabella, where private providers have chosen not to offer service. Mr. Groen said that MCTA was willing to “tweak” the language of their amendment to allow exceptions for low-population areas where service is not offered. Their concern focuses on larger communities where privately offered internet service is “commercially available.”
Chairman Horn commented that when HB 5342 was discussed in prior Committee meetings, a main focus was preservation of the public safety priorities of the MPSCS facilities. He also noted that one of the challenges to be addressed now is to “look at the core competencies” – in other words, what would allow colleges and universities to focus on teaching and to allow internet service to be provided by those who specialize in that. At the same time, a key issue remains, “how do we fill the holes” in service, such as those existing in small communities such as Isabella County. No vote was taken or scheduled at this time.
(The text of the proposed amendment is available to members only of MITA upon request to John Liskey, Executive Director, at Liskey@mita1.net . For information on how to join MITA, please go to www.mita1.org and click on the “Become a Member” tab.)
February 14, 2012
Committee Hears Testimony on Rail Trails Telecom Access Bill
On February 14, 2012, the House Energy and Technology Committee heard testimony on SB 499, a bill that would make it easier for data infrastructure providers to install facilities on state-controlled land now being used for rail trails. The bill, which was introduced by Senator Tom Casperson and approved by the Senate, could help companies bring broadband services to rural areas in both the Upper and Lower Peninsulas of Michigan.
Michigan Internet & Telecommunications Alliance’s Executive Director, John Liskey, submitted testimony supporting the bill. “SB 499 appears to strike a fair balance between telecommunications provider access and protecting the public’s enjoyment of these trail resources,” Mr. Liskey said.
Kendra Everett, Legislative Director for Senator Casperson, testified that telecom providers oftentimes face an extended application process at the Michigan Department of Natural Resources (DNR) to gain access to trails. Ms. Everett also said providers experienced unnecessarily high costs due in part to the variable fee structure imposed by the DNR. Under SB 499, the DNR would have 45 days to review an application and approve it. The application fee would be a one-time fee of $350, plus a one-time fee of five cents per linear foot of space to be occupied by the facilities. These fees would be deposited into a new Trailway Development Fund and used for maintenance of the rail trails. All facilities would be installed underground or attached to existing aboveground structures.
Ms. Everett testified that SB 499′s fee structure was generally patterned on the 2002 “METRO Act” (which created the Metropolitan Extension Telecommunication Rights-of-Way Oversight (METRO) Authority). However, while the METRO Act imposes the five cent fee on an annual basis, SB 499 provides for only a one-time fee. Ms. Everett said that the METRO Act contains a complicated offset arrangement applicable after the first year, but SB 499 simplifies this with a one-time fee, not an annual fee.
Also offering testimony at the meeting was Scott Stevenson of the Telecommunications Association of Michigan (TAM), testifying in support of the bill along with Jay Brogan, CEO of Hiawatha Communications. Mr. Stevenson said the bill, like the METRO Act before it, would bring “standards and certainty” and would create new opportunity for investment, consistent with Governor Snyder’s program to promote the availability of broadband services in remote areas. “Right now you don’t know what you’re going to have to pay,” Mr. Stevenson said.
Mr. Brogan added that using rail trails is potentially much more efficient than using routes along highways, where frequent maintenance gives rise to higher costs. Service providers would be able to expand their networks to unserved areas if this bill were passed. Use of the rail trails would be “another tool in our investment tool box,” Mr. Brogan said.
Also testifying in support of the bill was Bob Stewart of Frontier Communications. Mr. Stewart recommended three amendments: to insure that providers will have “on ramps and off ramps” from the trails; a mechanism for providers to gain around-the-clock access to the trails for repair; and to insure that the five cent fee would apply only to the initial installation, not to the installation of a second cable along the same route.
Several witnesses opposed the bill. Testifying on behalf of the Michigan DNR, Harold Herta and Dennis Knapp indicated that while the DNR supports the goal of making broadband available in rural areas, this bill takes a “broad brush approach” where a narrower measure would be more appropriate. DNR fears, in particular, that because the state does not own all of the land where trails exist, the bill would require DNR to authorize installations on land it does not actually own. The DNR also considers the five cent fee to be too low vis-à-vis actual market value, and voiced concern that the Trailway Development Fund will not function as intended.
Nancy Krupiarz, testifying on behalf of the Michigan Trails and Greenways Alliance, also voiced opposition to the bill. She advocated an annual fee, like the METRO Act, with an adjustment so that companies could take advantage of an offset after the first year. Under that method, the Trailway Development Fund would receive annual fees while the offset would come from a separate source, so more money could be devoted to the maintenance of the trails.
Also opposed to the bill is the Michigan Environmental Council (MEC), which advocates a market value based fee structure for access to the trails. James Clift, testifying on behalf of MEC, suggested that the bill simply “gives away state assets.” Mr. Clift also testified that the bill should authorize the DNR to renegotiate easements when current arrangements do not allow for access by telecommunications providers. He also raised the possibility that some trails could, theoretically, someday be returned to railroad use.
Committee members addressed numerous questions to each of the witnesses. Rep. Jeff Irwin, in a question to Mr. Clift of MEC, expressed concern that any fixed fee will one day become “stale,” and suggested that some mechanism requiring the Legislature to revisit the fee structure might be needed. Rep. Ed McBroom, whose district is located in the Upper Peninsula and who has not been able to secure broadband service at his home and farm, expressed particular concern that the five cent fee is excessive. Rep. McBroom stated that the trails should be made available at no cost. Rep. Paul Opsammer voiced concern about a “timber fee” that could potentially be assessed under existing legislation. Mr. Brogan of Hiawatha, addressing that concern, indicated that as a practical matter, there would be no timber to clear and, in fact, the use of trails would allow companies to avoid such costly operations as rock trenching.
Committee Chair Kenneth Horn made the point that underground installation of the cable takes relatively little time. “Once installed, you hardly know it’s there,” he said.
Although at the beginning of the meeting the Committee adopted a substitute bill for discussion purposes (with a minor variation from the Senate-passed version), no further vote has yet been scheduled.
February 8, 2012
Committee hears Testimony on Tower Leasing
The House Energy and Technology Committee met Tuesday, February 7, 2012, to hear testimony on HB 5342, introduced on February 2, 2012 by Representative Gail Haines. HB 5342 would permit the Michigan Public Safety Communications System (MPSCS) to be utilized by persons not directly involved in public safety.
Rep. Haines testified that the bill would allow space on the MPSCS towers to be leased out for purposes such as the extension of broadband services. The bill follows the example of Florida and Minnesota. In order to accomplish the stated goal, the bonds financing the facilities must be converted from non-taxable to taxable. It is expected that opening space on the towers would yield between $3 and $5 million in revenues.
Bradley Stoddard of the MPSCS testified in support of the bill. He is requesting two amendments, one to clarify that public safety usage will remain primary, and the second to allow the revenues received by the state to be used for maintenance and remediation of legacy equipment, rather than paying down debt. Following this testimony, a number of the committee members addressed questions to Mr. Stoddard.
Michigan Internet & Telecommunications Alliance’s Executive Director, John Liskey submitted testimony supporting the bill. “More Michigan residents are likely to receive the benefits of high-speed Internet service more quickly” if this legislation is passed, according to Liskey.
Representative Amanda Price noted that in the past there has been considerable opposition to opening the MPSCS towers to non-safety related users, but not this time. She asked why there has been a change in mindset. Mr. Stoddard indicated that in today’s “changed world,” efforts are being made to utilize “existing taxpayer investment,” while also protecting public safety needs.
Representative Mike Shirkey asked whether the enacting the bill could lead to “government vs. private competition,” and voiced concern that the bill would simply “help private companies compete.” Mr. Stoddard responded that every non-safety user would pay the same cost for the tower space as other non-safety users. Representative Shirkey then inquired whether consideration had been given to privatizing the system. Mr. Stoddard responded that in the past, private companies had been given the opportunity to take over the MPSCS, but declined to do so. Experience at the federal level has been similar. Therefore, the privatization option was not explored this time.
Representative Ray Franz asked for more detail regarding who safeguards the equality of lease fees. Mr. Stoddard responded that there is a contractor, SBA, which does so. SBA will apply a fixed rate plan for non-safety related users.
Representative Paul Opsommer asked for more detail on administrative rules impacting local entities using the MPSCS. Mr. Stoddard indicated when use of the MPSCS facilities was first broadened to allow use by local safety providers, procedures were put into place, and those procedures would largely be carried over after passage of the bill. Local safety users (such as a county sheriff) will pay the “public safety cost,” or no cost at all if they are members of MPSCS. Non-safety users, across the board, will pay the fixed fee for that type of usage.
Chairman Kenneth Horn expressed concern that priority be reserved for public safety use, and Mr. Stoddard responded that the amendment he is suggesting will do so.
Representative Thomas Stallworth requested more detail on who is interested in leasing the space and whether potential lessees are primarily intending to provide services where no service currently exists or, on the other hand, intending to compete in areas where other providers are currently located. Mr. Stoddard responded that potential users do indeed exist and that companies have contacted him within the past two weeks. He noted that public safety towers sometimes exist where no other towers do. Mr. Stoddard also predicted growth in interest with advances in new technologies.
Representative Brad Jacobsen asked whether converting the bonds will save or cost money, once changes in interest rates are taken into account. An MPSCS representative responded that there will be about $1.5 million in costs. However, if revenues are used to pay down debt rather toward facilities replacement, there will be a need to issue more bonds to pay for the replacements. So, “it is a wash.” Specifically, certain radios need replacement fairly soon.
Representative Charles Smiley asked whether any towers are already full and expressed concern about overloading. Mr. Stoddard said that there are full towers, primarily in southeastern Michigan, and emphasized that a loading study is done on each tower before new space is leased on it. If a tower needs to be “beefed up,” the prospective lessee is responsible for the cost.
Representative Wayne Schmidt inquired whether there is a process for rejecting applications. Mr. Stoddard cited existing MPSCS and SBA procedures that will carry forward.
Representative Amanda Price expressed concern that the new lessees could interfere with one another’s frequencies. Mr. Stoddard explained that there will be an impact study of digital frequencies before a new user is allowed to co-locate on the tower, which should prevent the problem.
Representative Jeff Irwin asked about the history of the system and its opening to local entities, and wondered how many of the towers would be open for the new program. Mr. Stoddard indicated that 180 towers would potentially be opened. These 180 towers were constructed using funds originally dedicated by the legislature in the 1990s or financed by bonds in five subsequent stages. An additional 64 towers, constructed by coalitions involving local communities, will not be within the scope of the new bill.
The Committee has not stated when it will vote on the proposed legislation.
