The Federal Communications Commission (FCC) will take up an important rule at their upcoming open meeting on September 26th that would rework barriers that impact the development of broadband and video services across the country. NTU strongly believes that expanding access to broadband must be a national priority, especially in underserved communities. To that end, it must be a private and competitive market that facilitates such progress with limited regulation by all levels of government.
On the surface it may seem broadband development is a relatively straightforward process, but it is much more complex than it appears. Oftentimes local governments bodies known as local franchising authorities (LFAs) will make the approval process for both underground and above-ground cables unnecessarily expensive and burdensome. Cable operators have to negotiate directly with LFAs for “rights of way,” be subjected to costly fees and taxes, and jump through hoops to meet local approval. When businesses are faced with higher costs (like taxes and fees), they are often passed down to the consumer in form of higher prices, making internet access needlessly more expensive. Further, lengthy approval processes and expensive regulations slow the development of broadband and serve as a barrier to entry for competitors in the market.
The FCC has traditionally held more power to regulate cable operators and providers, but some FCC rules that kept LFAs in check were vacated by the U.S. Court of Appeals for the Sixth Circuit. In the case Montgomery County, MD v. FCC, the Court held the FCC rules which barred LFAs from regulating a provision of non-telecommunications services by incumbent cable providers, as well as FCC rules surrounding in-kind cable-related franchise fees went beyond the intent of Congress. As a result of the ruling, the Court remanded these concerns back to the FCC to be retooled.
Those concerns bring us to the updated proposed rule, which addresses the Court’s issues by clarifying three main points: 1) that in-kind contributions required by LFAs from cable operators should be considered a “franchise fee” and therefore subject to the statutory five percent franchise fee cap; 2) that capital costs for public, educational, and government channels required by the franchise are the only cable-related, in-kind contribution excluded from the five percent franchise fee cap; 3) and that the mixed-use network ruling prohibits LFAs use their video franchising authority to regulate non-cable services offered over cable systems by incumbent cable operators.
We strongly support the actions taken by FCC to rein in out-of-control governments looking to stifle competition and using operators as a source of revenue. As NTU has previously written, the City of Eugene, Oregon is guilty of such a practice. Their decision to tax cable right-of-way use to fund their pension system is misguided and will ultimately result in consumers paying more for access. Worse yet, state courts in 2016 confirmed the legality of these taxes, increasing the chance LFAs elsewhere will experiment further with these kinds of flawed policies.
Barriers such as these make the development of internet services more expensive and challenging, which reduces the ability of consumers to access the internet. At a time when the digital gap remains wide, localities should be reducing regulations and barriers to allow greater competition and innovation. The report the FCC will vote on next week will encourage greater enhancement of broadband investment across the country and allow more Americans to get online.