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‘Double Dipping’ Taxes NCTA’s Patience

NCTA-The Internet & Television Association has signaled its patience has been taxed by states it says have found creative ways to extract extra money from their cable providers.

It told the Federal Communications Commission in a filing that states should not be allowed to impose a targeted and duplicative franchise fee masquerading as a general tax.

At the direction of a federal court (the 6th U.S. Circuit Court of Appeals, which remanded the FCC decision in Montgomery County, Maryland, et al.) the FCC is currently looking into how local franchising authorities may, and may not, regulate cable operators.

The cable trade group told the FCC that state governments continue to try and impose a fee for access to rights of way in their franchise areas, which NCTA said “cannot be squared” with the statutory 5% franchise-fee cap. It says the franchise fee is the sole levy that can be charged for access to rights of way in a franchise area, and that states, which vest franchising authority at the local level, should have to live with their decision as to what constitutes the fee.

“Allowing a state to impose its own rights-of-way access fee on top of a 5% franchise fee imposed by the local franchising authority would deplete resources that cable operators could otherwise use for broadband deployment,” NCTA said, playing the “deployment” card that has become a fixture in the capital.

NCTA pointed out that some states — it cited California — try to get around that by “styling” their fees in excess of that 5% as taxes. California styles its tax as one on a cable operator’s “possessory interest” in occupying rights of way, though operators have already paid a local franchise fee for that same right.

NCTA concedes the Cable Act does not define a franchise fee as including a tax of general applicability. It argues, though, that the California fee is a duplicative franchise-fee wolf in “general applicability tax” clothing, and that the Cable Act also makes clear that a franchise fee includes “any tax, fee, or assessment of any kind imposed by a franchising authority or other governmental entity on a cable operator or cable subscriber, or both, solely because of their status as such.”

The NCTA says it flouts statutory interpretation to allow states to evade the 5% cap by calling what is in fact a second franchise fee a tax that nominally applies to other rights-of-way users. It says the valuation of that possessory interest tax is based on cable revenues, which are “inextricably intertwined with the provision of video services,” while the tax is supposed to be levied on the value of the right to be in the rights of way — something the franchise fee has already paid for.

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.