What You Need to Know about the Recent FCC Cable Order

On Aug. 1, the Federal Communications Commission (FCC) voted 3–2 to approve a report and order (bit.ly/2kkonNj) that will make dramatic changes to the way franchise fees are calculated under cable franchise agreements granted by local governments. The degree to which your municipality will be affected by the new order depends on the details of your particular franchise.

• Franchise fees, charged by municipalities on cable providers, were set at a limit of up to 5% of cable revenues by the Cable Act of 1984. In many cases, jurisdictions also negotiate additional non-cash provisions when creating franchise agreements with cable companies, such as a build-out of infrastructure for broadband access between and among municipal facilities, often referred to as I-Net systems. 
• Once the order goes into effect, cable providers will be able to deduct the "fair market value" of any in-kind franchise obligations from their cash franchise fee payments. This includes any obligation other than build-out requirements, customer service requirements, PEG capital costs or channel placement 
value. This also includes the value of service or infrastructure to government buildings or schools.
• In addition to the proposed changes to the calculation of franchise fees, the FCC order also preempts cities and towns from requiring a franchise or license for non-cable services provided over a cable system. This includes internet services.

What to expect and next steps: 
• The order will take effect on Sept. 26.
• Familiarize yourself with and review your franchise agreement, side letters, settlements, operator offerings (marketing versus requirements), and institutional network and service agreements. 
• Make note of current franchise revenues and possible losses/community impacts. 
• Engage with both internal and external stakeholders.
• Be prepared to hear from your operator. Once contacted, a shot clock of 120 days will begin. 

More information and the NLC FCC Franchise Fee webinar can be found at bit.ly/2m1R3Ln.

Both CML and the Colorado Communications and Utility Alliance will continue to be actively involved in this issue and will provide members with ongoing updates.