Today, the Federal Communications Commission finally approved a long awaited rule regarding the ability for municipalities to levy “in-kind” franchise fees on cable operators. NTU applauds the FCC’s strong action, and particularly thanks Chairman Pai and Commissioner O’Rielly for seeing this Order to a successful conclusion.
With the FCC’s Order, Section 621 of the 1992 Cable Act is being updated to address a glaring loophole in the rules governing Local Franchise Authorities (LFAs). Under Section 621, LFAs are able to charge a “franchise fee” on cable companies operating within the LFAs’ jurisdiction so long as it does not exceed 5 percent of gross revenue.
However, since the Cable Act went into effect, many LFAs have found ways to essentially pierce the Congressionally-mandated revenue cap by requiring “in-kind” contributions as a condition of doing business. In fact, a report by the FCC highlighted just some of the laughable requirements some companies have to meet in order to service customers, noting “the Commission cited the following as examples of in-kind contributions unrelated to the provision of cable services: traffic light control systems; a requirement to prepay $1 million in franchise fees and to fund a $50,000 scholarship; a $13 million “wish list” in Tampa, Florida; a request for video hookup for a Christmas celebration and money for wildflower seeds in New York; and a request for fiber on traffic lights to monitor traffic in Virginia.”
Estimates show cable providers pay more than $3 billion in just monetary franchise fees to state and local governments each year. But it remains unclear the exact dollar amount of in-kind contributions providers are giving to local governments. Nonetheless, excessive fees and burdensome regulations deter investment in next-generation services and raise prices that consumers pay.
Thankfully, the FCC is getting to the heart of the problem. Today’s Order makes clear that the 5 percent cap on franchise fees must also include the value of in-kind contributions in their calculations. In reacting to the approval of the Order, NTU’s Policy and Government Affairs Associate Thomas Aiello offered the following statement:
“With today’s vote, the FCC reaffirms its commitment to protecting customers and taxpayers, limiting intrusive government practices, and promoting free market principles. Updating Section 621 is the latest step by the FCC to knock down barriers that delay the deployment of broadband and will help cable operators to meet growing consumer demands. While it may not garner the same attention as other major FCC actions, modernizing Section 621 will make a real difference in the lives of many consumers and encourage greater investment in American connectivity. We look forward to working with the FCC in the future as they continue to serve the interests of America’s consumers and taxpayers.”
Click here to read more about the importance of modernizing Section 621.