FCC Takes on Fixing High Franchise Fees

Local governments are making your cable bill more expensive, and the Federal Communications Commission is trying to stop that. 

Cable companies must obtain a franchise agreement from local authorities to operate cable service. Recognizing the need to provide certainty on the issue, Congress limited the franchise fees a locality could collect to 5 percent of gross revenues from cable services in 1984.

But many municipal governments have found ways to go above this 5 percent cap by requiring operators to pay taxes on non-cable services or demanding cashless “in-kind” contributions. The companies then pass these extra fees onto residents, who see an uptick in their bills. 

And what are these residents paying for? Past in-kind contributions governments have required include a $13 million “wish list,” a $50,000 scholarship, a video hookup for a Christmas event and funds for wildflower seeds, in addition to the more typical contributions of free or discounted Internet service for city buildings.

Essentially, localities have been using cable operators as their own bank accounts, and residents are footing the bill.  

The FCC wants to reign in how municipal governments charge and regulate these operators. Its Enforcing Laws Governing Cable Franchising order would apply in-kind contributions to the 5 percent fee cap and prohibit local cable franchising authorities from regulating non-cable services.

Besides lowering consumers’ cable bills, this order would spur more innovation and technological advancement. If cable operators are less worried about paying exorbitant fees, they can focus more on broadband investment and deployment. This means that many people’s Internet speeds would increase, but it’d also be instrumental in closing the digital divide and empowering more Americans to participate in the digital economy. 

This order is a continuation of the FCC’s efforts to cut regulatory red tape and maintain the United States’ position as the global leader in technology. 

It’s time municipal governments realize they can’t rely on cable operators — and, indirectly, their residents — to pay these excessive fees. The FCC’s cable franchising order would facilitate faster Internet speeds and less expensive cable bills — infinitely more important to Americans than any locality’s wildflower project could ever be.

Author: Bethany Patterson

Photo credit: Gage Skidmore (CC BY-SA 2.0)