On June 29, a U.S. District Court determined that a 2016 city ordinance that imposed a fee for all utility services provided over the city's rights-of-way (ROW) is preempted by Section 522(7)(C) of the Communications Act, as interpreted by FCC orders. At issue in Comcast of Oregon II v. City of Beaverton, was the preemptive effect of the FCC's 2019 order that interprets the Cable Act provisions that place limits on the ability of local franchising authorities (LFAs) to impose fees on broadband services.
The Commission's 2019 order was upheld, for the most part, by the Sixth Circuit Court of Appeals in City of Eugene v. FCC (2021). The order contains several provisions that prohibit LFAs from collecting fees from a cable operator's provision of non-cable services such as broadband Internet access services. One such provision states: "LFAs may not lawfully impose fees for the provision of information services (such as broadband Internet access) via a franchised cable system." The prohibition on LFAs regulating non-cable services provided via cable networks is known as the "mixed-use" rule. The rule is based on Section 544(b)(1) of the Cable Act, which states that an LFA "in its request for proposals for a franchise… may establish requirements for facilities and equipment, but may not… establish requirements for video programming or other information services[.]"
The District Court determined that the City of Beaverton's 2016 ordinance "imposes a fee on Comcast's provision of broadband service, which the [2019 order] as upheld by the Sixth Circuit directly prohibits. The City's fee, therefore, is preempted under 47 U.S.C. § 556(c)." Also, the District Court rejected the City of Beaverton's argument the 2016 ordinance does not constitute a preempted fee on broadband services because the fee applies generally to all utilities using public rights of way. As the District Court recognized, the Sixth Circuit foreclosed LFA's from avoiding the Cable Act restrictions by using police powers or other sources of governmental authority to indirectly impose fees on non-cable services like broadband. The District Court wrote: "The City may not 'end-run' § 544(b)(1) by also applying the fee to other utilities that also use public rights-of-way."
The opinion in Comcast of Oregon II v. City of Beaverton addresses other issues, with a lengthy analysis accompanying the court's retroactive application of the 2019 order. In any event, what is most important is that the decision provides practical enforcement of the Commission's policy of prohibiting cost and other regulatory barriers to broadband Internet access services. The Commission's 2019 order rightly disallows the imposition of fees that would divert cable operator resources from next-generation broadband network upgrades and would put cable operators at a competitive disadvantage in the broadband services market.
In December 2018, Free State Foundation President Randolph May and I filed reply comments with the FCC in the proceeding for its 2019 order.
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