§542 Franchise Fees

Summary

Local governments that give a cable company a franchise can require the company to pay a franchise fee. For any 12‑month accounting period, the fee cannot be more than 5 percent of the cable company’s gross revenue from operating that cable system. The parties may agree to prepay or delay payments, but the total paid over the franchise term, including the time value of money, cannot be more than what could lawfully have been collected each year. Cable companies may show on a subscriber’s regular bill the franchise fee, the part of the bill that supports public, educational, or government channels, and other government charges, following rules made by the Federal Communications Commission. If there is a court dispute about billing, the local government must show the rates reflect the franchise fee costs. Any drop in the franchise fee must be passed on to subscribers. “Franchise fee” means taxes or charges imposed only because someone is a cable operator or subscriber. It does not include general taxes that apply broadly, certain PEG payments tied to franchises in effect on October 30, 1984, capital costs for franchises granted after that date, charges tied to getting or enforcing a franchise (like bonds or insurance), or fees under Title 17. Local governments may tax other providers who sell services over a cable system, subject to the same 5 percent cap, and federal agencies may not set or control franchise fee amounts or use except as this law allows.