Every year, the government rakes in billions from Americans by exploiting cable franchising fees, a complicated policy issue that many don’t even know exists.
Local governments can ask cable providers to pay cable franchising fees, which started as a result of technological boundaries. Since service was limited to city limits, local franchising authorities framed cable franchising fees within a particular municipality in exchange for access to public rights of way. Cable franchising fees are still on the books and are limited to a 5% fee in an effort to prevent LFAs from imposing exorbitant fees.
Unsurprisingly, some LFAs have pushed beyond their boundaries by asking providers to give in kind contributions not related to their video franchising authority. LFAs have been able to maneuver around the cap and ask providers for much more through excessive in kind contributions. In one instance of cable franchising abuse, one city asked a provider to fund a $50,000 scholarship, while in another instance a city went beyond the video franchising authority by telling a provider to put fiber on traffic lights.
When franchise authorities force providers to pay these unwarranted contributions there are negative consequences for consumers, including increasing costs directly. One provider explicitly noted that the overblown cable franchising fees led to higher cable prices in Oregon.
It also inadvertently favors incumbents who are able to pay the hefty fees, which prevents new entrants from joining the market.
If the FCC doesn’t act, non-cable services could be regulated by multiple layers of government, confusing a provider’s obligations and further preventing deployment of service. Clarifying that LFAs only have authority over video service and not the other services that cable operators provide, allows a better competitive environment for both new entrants and incumbent providers to enhance existing networks and build new infrastructure.
In 2018, the FCC issued a second Further Notice of Proposed Rulemaking in response to a recent Sixth Circuit Court of Appeals decision, which asked the Commission for clarification on cable franchising fees. If adopted, the item would reaffirm that LFAs cannot use their video franchising authority to regulate non-cable video services.
The cable franchising rules have been adjusted multiple times. The FCC issued rules in 2007 and 2015 clarifying that in-kind contributions count towards the 5% franchise fee cap established by Congress. Despite this, many times operators are still forced to provide excessive in-kind contributions not related to cable service.
The cable franchising issue is complicated to say the least, and that is how the government has been able to get away with it for so long. It’s an avenue for local governments to force providers to collect and remit tax dollars from their constituents with little way of knowing what is even going on to fight the issue. It’s about time the FCC formally clarifies that in kind contributions count towards the 5% cable franchising fee cap so consumers can enjoy low prices for cable.
Photo Credit: 401(k)2012