comcast_truck_portland.jpg

The Legislature created the law for Google Fiber, but Comcast may be the big winner.

(Mark Graves/The Oregonian)

Oregon lawmakers designed the state's new "gigabit" tax break for companies that make big new investments in affordable, high-speed Internet access, a prominent state legislator told utility regulators Tuesday.

The break wasn't meant for Comcast, insisted Rep. Rep. Phil Barnhart (D-Eugene). He said the company's new "Gigabit Pro" service uses an existing network and charges extreme prices the Legislature never contemplated when they approved the tax breaks last year. Awarding the tax breaks to Comcast would, Barnhart testified, reward the company for doing "nothing."

"The Legislature is not likely to be that foolish," he said. "We are foolish often, but usually not that foolish."

But utility commissioners ruled unanimously that Comcast's service meets the letter of the law, voting 3-0 in favor of the company. That vote could be worth tens of millions of dollars to Comcast, money Oregon counties and cities spent five years fighting for in court.

"If there's a problem in the law, that can't be fixed here," said commission Chairwoman Susan Ackerman.

The obscure tax issue has enormous consequences for high-speed Internet service in Oregon and property tax revenues.

On Tuesday, the Oregon Public Utility Commission also confirmed prospective services from Frontier Communications and Google Fiber are eligible for the tax break, which provides a property tax exemption to companies that offer most of their customers Internet service of 1 gigabit per second - 40 times faster than the current federal broadband standard.

The ruling on Google Fiber was never in doubt - last year's law was written specifically for that company, at Google's behest. So while that element of Tuesday's vote was a mechanical exercise, it could clear the way for Google Fiber to finally bring its long-awaited "gigabit" service to the Portland area.

At issue is a practice known as "central assessment," which levies property taxes on the value of a company's brand. It applied to cable TV companies, Internet service providers and a limited number of other businesses.

For Oregon cities, counties and schools, the vote on Comcast was a major disappointment. They prevailed before the Oregon Supreme Court in 2014 after Comcast spent five years fighting central assessment in court.

Google Fiber told lawmakers last year the tax would add millions of dollars to its operating costs in Oregon and it threatened to drop plans to serve the Portland market if the Legislature didn't create an exemption. Lawmakers complied with a broadly written bill that Comcast said also applies to its new "Gigabit Pro" service.

Gigabit Pro offers 2 gig service for $300 a month - plus an installation fee of $1,000 or more. That's a great deal more expensive than other services, and local governments told utility commissioners that Comcast was stretching the law beyond recognition by applying for the tax break with a service so expensive that few can afford it.

A Comcast representative testified that the service is available in 26 states, not just Oregon, and that "dozens" of people across the company have signed up for Gigabit Pro since its introduction last year.

Last year's gigabit tax bill didn't specify how much companies should charge to be eligible for the tax break, or how much they have to invest improving their network to qualify. On Tuesday, Barnhart acknowledged to utility commissioners that the Legislature did not delve into key terms associated with the tax break.

"We left that to you," he said, "and I admit that may have been a mistake."

Tuesday's vote isn't the final word: the state Department of Revenue must also certify the tax exemption. And lawmakers could amend last year's law that created the gigabit tax break to set a higher bar for companies to qualify, but with a contentious legislative session winding down that would have to wait until next year.

-- Mike Rogoway

mrogoway@oregonian.com

503-294-7699

@rogoway