If you’re tired of looking at your cable bill and seeing an endless list of government fees and taxes, you’re not alone. Why should consumers have to pay extra taxes and fees for services if they don’t have to? That’s exactly why the Federal Communications Commission (FCC) this week is changing the way that localities can charge cable operators when it comes to providing customers internet service.
Let’s take a look at the problem. The Cable Act, which was enacted in 1984, permits local franchising authorities to license cable providers to operate in a city or county. In exchange for this license to operate, these localities may only charge up to a 5%franchise fee based on a company’s revenue. Unfortunately, many localities, in order to obtain this franchising fee, require cable operators to provide services free of charge to the government in addition to the fee.
Another problem is the fact that local governments have attempted to effectively double charge cable companies to operate both internet and cable service, which in effect increases costs to consumers. For example, the city of Eugene, Oregon imposed a 5% franchise fee on a cable operator. At the same time, the city of Eugene levied an extra telecommunications fee to site broadband equipment on public rights of way in addition to the cable fee even though the provision of broadband didn't incur any additional costs for the city.
One study found that abusive franchise fee regimes could create a tax burden of $8 billion annually and inhibit broadband buildout in a way that results in consumer welfare losses exceeding $40 billion.
The U.S. Chamber of Commerce argued that the practice of charging cable operators fees to site broadband in addition to the cable franchising fee was preempted by the Cable Act and that the FCC should step in to address this problem. Thankfully, the FCC listened and will take up an order to cut consumer costs.
Here is what the order will do:
- New and legacy cable operators’ cable-related, in-kind contributions will generally count toward the 5% franchise fee cap. So generally, a locality won’t be able to extract many free services from the cable operator for the government outside the value of the franchise fee.
- Franchising authorities, while still able to regulate cable services, will not be able to regulate services such as broadband.
- The FCC preempts localities like Eugene, Oregon from charging a telecommunications tax to site broadband on cable operators already paying the 5% franchise fee.
The FCC’s order removing the red tape from cable operators is a much needed action consistent with its recent work to streamline permitting for communications technologies, such as 5G. Recently, the FCC, led by Commissioner Brendan Carr, passed an order that would prohibit localities from charging exorbitant fees that would make it difficult for consumers to fully benefit from downloading more information faster with 5G technology.
There is a reason that Americans are reaping the benefits of increased broadband investment since 2016 and it’s because of the FCC’s common sense approach to communications regulation and permitting.