Submarine cable operators face US levy

Pacific submarine cable operators Southern Cross, OPT French Polynesia, Level 3 and PIPE Network have objected to a US Government proposal that would see them charged a 15.7 percent levy on quarterly revenues.

The US Federal Communications Commission (FCC) sought to remove an exemption on international cable providers from having to contribute to the country's Universal Service Fund.

The fund forms part of the US National Broadband Plan, which FCC chairman Julius Genachowsky said would largely support broadband access to 18 million Americans in rural areas.

In a joint filing to the FCC, the cable operators argued they could not pass on the levy to existing customers, which have signed long-term agreements for leases and locked-in rights of use contracts.

The operators argued that the FCC's proposal would deter new cable landings in the United States, with future cables opting instead for Canada, which has a much lower universal service levy of 0.66 percent.

New cable operators such as the proposed Pacific Fibre system between the US, New Zealand and Australia could also be forced to shelve their proposed builds. Chief executive of the cable company, Mark Rushworth, did not return requests for comment at time of writing.

Should the levy come into effect, operators would face significant loss of revenue and be forced to renegotiate hundreds of agreements, the cable coalition said.

They argued that intense competition in the industry would mean that some avoided compliance with the new levy.