Taxing Broadband

Cities have been petitioning the Federal Communications Commission to ask it to revisit the issue of the ‘mixed-use’ rule that blocks municipalities from assessing franchise fees on broadband revenues. Cities argue that franchise fees are not taxes, and instead are fees that help cities to manage their rights-of-way. The municipal (or state) franchise fee is capped at 5% of retail cable TV revenue, and cable companies typically tack this fee onto every cable bill. The biggest complaint from cities involves what they call cable company arbitrage. A big percentage of cable company bills still include a bundle of services, and cable companies get to decide how much of a bundle is subject to the franchise fee. Customers have been saying the same thing, and most customers with a bundle of services have no idea what they pay for each individual product inside the bundle. In a tax-crazy world, it’s amazing how providers have been able to fend off these kinds of fees. While such fees are typically added to customer bills, providers argue that the government shouldn’t be doing anything to make broadband too expensive. That’s rich in an industry where the biggest cable companies have raised rates every year for a decade.