Thursday, June 03, 2021

Sixth Circuit Upholds Key Aspects of FCC's Order on Cable LFA Limits

On May 26, the U.S. Court of Appeals for the Sixth Circuit upheld most of the FCC's 2019 order that adopted reforms on cable infrastructure and local franchising authorities (LFAs). The Commission's order hold LFAs accountable to the law and helps to ensure that cable operators' investment in broadband Internet services are not thwarted by locally-imposed restrictions and costs.  

Section 621(a)(1) of the Communications Act recognizes that LFAs may require cable TV service operators to obtain franchises, but the law subjects LFAs to limits. For example, Section 622(b) limits the amount that LFAs can require cable operators to pay in order to receive franchises to 5% of their cable service gross revenues during any 12-month period. Yet some LFAs have imposed financially costly in-kind obligations on cable operators and effectively exceeded the 5% cap. The Sixth Circuit upheld the FCC's determination in its 2019 order that in-kind contributions count toward the 5% cap.


Additionally, Section 624(b) provides LFAs "may not ... establish requirements for video programming or other information services." But some LFAs have imposed costs that appear to go beyond the statute's limits, potentially draining cable operator investment in their broadband Internet networks. And uncertainty existed as to whether LFAs could leverage their cable franchising authority to regulate cable broadband Internet services. Importantly, the Sixth Circuit upheld the Commission's "mixed use" rule -- which clarifies that LFA's may not use their cable franchising authority to regulate non-cable services. The 2019 order determined that that the City of Eugene was prohibited from imposing fees on cable operator revenues from their broadband Internet access services. The Sixth Circuit upheld this determination.


Although not every aspect of the FCC's 2019 order was upheld, on the whole the Sixth Circuit's decision in City of Eugene v. FCC appears sensible. In December 2018, Free State Foundation President Randolph May and I filed reply comments with the FCC regarding cable infrastructure and LFAs. And for more, see my July 2019 blog post on this topic.