Court Rules in Favor of FCC in Franchise Fee Dispute | Citizens Against Government Waste

Court Rules in Favor of FCC in Franchise Fee Dispute

The WasteWatcher

Deploying broadband to unserved and underserved communities across the country has been a high priority for the Federal Communications Commission (FCC), as well as internet service providers, for many years.  But one of the biggest roadblocks to increasing access to broadband has been the franchise fees imposed by local franchising authorities (LFA) that exceed the statutory five percent cap.  On January 30, 2019, my op-ed published in Morning Consult detailed some of the “add-ons” to franchise fees that some local governments were imposing get around the fee caps.

The excessive items added onto the standard franchise fee included “traffic light control systems; prepaying $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.”

On August 2, 2019, the FCC, which has been issuing orders regarding franchise fees for the past 15 years, took aim at these abusive in-kind contributions, and adopted a report and order that determined they are “franchise fees subject to the statutory five percent cap on franchise fees set forth in section 622 of the Act, with limited exceptions, including an exemption for certain capital costs related to public, educational, and governmental access (PEG) channels.”  This was the right decision, since it removes the ability of a LFA to impose any financial requirements on a company seeking a franchise agreement outside of those permitted by law and protects consumers from being forced to pay for those additional costs. 

On May 26, 2021, in seven separate cases (City of Eugene, Or. V. FCC; City of Portland, Or. V. FCC; State of Hawaii v. FCC; Alliance for Community Media v. FCC; Anne Arundel County, Md. v. FCC; City of Pittsburgh, Pa. v. FCC; and, City of Chicago, Ill. V. FCC) the Sixth Circuit Court of Appeals upheld in part the FCC’s August 2 report and order, calling it “a correct interpretation of a federal statute.”

Not everyone agrees with this assessment, including members of Congress who introduced legislation in the 116th Congress that would enable this abusive and costly practice to continue.  H.R. 5659  and S. 3218, the Protecting Community Television Act of 2020, specifies that the five percent franchise fee cap only applies to “a fee, tax, or other monetary assessment” imposed by a LFA or other government entity.  However, there were no hearings or other consideration of this legislation in the House or Senate.

Following the Sixth Circuit Court’s decision, FCC Commissioner Brendan Carr stated, “For too long, franchising authorities needlessly drove up the cost of building and maintaining the infrastructure needed to eliminate the digital divide.  As part of a series of steps to accelerate infrastructure builds and increase competition, the Commission in 2019 cracked down on the outlier conduct that had been slowing down these construction projects and raising the costs of Internet service.”

Commissioner Carr is right.  This decision is a big win for consumers across the country who need access to the internet and will help keep down both their costs and deployment costs.