Minnesota telecommunciations tax will hurt rural broadband

Last month I posted information from Minnesota’s telecommunications industry on the potential impact of the 2013 telecom tax that no longer exempts telecommunications equipment from tax. It looks like the Minneapolis Star Tribune has also picked up the story…

Starting Monday, when cable, telephone and cellular companies buy routers, switches, amplifiers and digital processors, they must add sales tax. The Department of Revenue estimates that by 2016-2017, taxes on these items will generate $82 million in revenue.

That’s $82 million that won’t be spent to expand broadband, said Margaret Anderson Kelliher, president of the Minnesota High Tech Association and chairwoman of the Governor’s Task Force on Broadband.

Folks working for the State say this won’t hold Minnesota back…

Madeline Koch, a spokeswoman for the Department of Employment and Economic Development, which took over the Office of Broadband Development this spring, said the tax will not stop the state from reaching its broadband goals.

“Ultimately, whether or not the tax is involved, we have to get it done,” she said. “We’re not being as competitive as we should be when it comes to broadband. We’re 19th nationally.”

But even without a sales tax, making the numbers work for broadband in rural areas is difficult. Companies must purchase and install big pieces of equipment at central offices and in boxes by the road that serve up to a few hundred homes and businesses. They also must bury miles of new wire and cable.

Industry folks disagree…

Park Region Mutual Telephone in Underwood, Minn., has about 8,500 subscribers, mostly in rural areas, and CEO Dave Bickett said the member-owned company spends anywhere from $400,000 to $1 million per year on capital equipment.

Bickett said, “$400,000 is a real number for this year. “That equates to about $26,000 [in tax] for the year, which may not sound like a lot to someone, but the equipment that we have in the budget to serve broadband to the consumer is roughly $6,000 to do 48 customers.”

He calculates that the new tax will prevent 192 homes from getting faster Internet, most of them on farms.

This entry was posted in MN, Policy, Vendors by Ann Treacy. Bookmark the permalink.

About Ann Treacy

Librarian who follows rural broadband in MN and good uses of new technology (blandinonbroadband.org), hosts a radio show on MN music (mostlyminnesota.com), supports people experiencing homelessness in Minnesota (elimstrongtowershelters.org) and helps with social justice issues through Women’s March MN.

1 thought on “Minnesota telecommunciations tax will hurt rural broadband

  1. Anything that makes something more expensive will have a negative impact. If you need 7% more revenue to make something pay off, it changes the business case.

    I am thrilled that the Broadband Office is in DEED, but we need a bit more strategic thinking than the “We have to get it done” line from Ms. Koch. This telecom tax added to the FCC changes that will negatively impact our rural independent telecom companies is a bummer for broadband investment.

    Now if they wanted to put that $40 million annually into some kind of competitive broadband fund for infrastructure development in un and underserved areas, that might be something that many people could get behind!

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