NCTA: Local Governments Can’t Tax Broadband Revenue

Feb 09, 2024

By Ted Hearn, Editor of Policyband

Washington, D.C., Feb. 9, 2024 – Cable’s largest trade association is issuing a new reminder that cities can’t impose fees on cable operators’ broadband revenue.

NCTA - The Internet & Television Association, in a Feb. 7 letter to the Federal Communications Commission, cited federal law that requires cable to pay local franchise fees based on a percentage of gross revenue derived from cable service.

Broadband is not a cable service but rather an information service.

As a result, NCTA said cities can legitimately require fees to access their property, such as rights of way, on cable service (meaning TV programming) but not Internet access revenue.

“… The fees paid by a cable operator for the right to operate its cable system in the [right of way] have been limited by Congress to no greater than “5 percent of [a] cable operator’s gross revenues derived . . . from the operation of the cable system to provide cable services,” NCTA’s letter said. “In the absence of a legislative change, neither the [FCC] nor LFAs can increase that fee.”

Cities also want the FCC to abolish its “mixed-use” rule, which prevents cities from adding telecommunications or information service fees on cable operators.

In response, NCTA referred to a key federal court ruling that said “the imposition on a cable operator of a separate fee based on the operator's revenues from broadband services ‘is merely the exercise of its franchise power by another name’ that is ‘expressly barred’” by federal statute.

NCTA represents major cable broadband companies, including Comcast Corp., Charter Communications, and Cox Communications. The Washington, D.C.-based association also has programming members, including Fox Networks Group, A+E Networks, and Hallmark Media.

NCTA’s latest letter came as major cities – including Boston, Dallas, and Los Angeles – continue to press the FCC to modify regulations to enable fees on cable broadband revenue.

An FCC decision to allow cities to move ahead would clash with agency policy in other areas.

For example, the FCC’s proposed Net Neutrality regulations would exempt cable from contributing to the $8.5 billion Universal Service Fund, which subsidies rural broadband providers and Internet access to schools and libraries across the country.

Adding cable broadband revenue to the USF contribution base would increase consumer broadband bills by $5.28-$17.96 per month, according to FCC Chair Jessica Rosenworcel.