Streaming Trends Seen as Big Blow to Cable Franchise Fees

States and localities hoping to protect their cable franchise fee revenue streams in a world increasingly switching to over-the-top streaming will face some big challenges, said government finance and communications regulation experts Monday in a NATOA webinar. The wave of litigation from localities seeking franchise fees from streaming services could prompt Congress to revisit legislative efforts to define digital goods and digital sales and create a uniform framework for how they're treated by taxing authorities, said Michael Belarmino, Government Finance Officers Association senior policy adviser. That could be to states' and localities' disadvantage if Congress reintroduces provisions of the Digital Goods and Services Tax Fairness Act, which tried to prohibit multiple taxes on digital sales of goods. The bill was last reintroduced in 2019 (see 1903130071). "It's not a sustainable path" to count on traditional franchise fee statutes as a route to getting revenue from online services, said Public Knowledge Legal Director John Bergmayer, noting court efforts to pursue streaming services for franchise fees haven't borne much fruit. The underlying purpose of cable franchise law is about physical buildout and physical access, but streaming services don't touch a town the way cable operators do, he said. He said an effort is needed to put public interest requirements on ISPs. He said one upside of NCTA's challenge of Maine's public, educational and government (PEG) access channel carriage provisions is the U.S. District Court deciding and 1st U.S. Circuit Court of Appeals upholding that channel placement and PEG picture quality requirements are consumer protections. Some members of Congress have been struggling for years with how to promote localism by streaming offerings, Bergmayer said. Newspapers and local broadcasters have an inherent local quality and there are mechanisms like promotion of local ownership, he said. Those issues and levers aren't as clear with online content, he said. Bergmayer said a cable operator offering fiber to customers in part of a community and traditional cable to customers in another part is "not good enough" and could be evidence of redlining.