Friday, June 20, 2008

Reforming Franchise Fees

Have you looked at your recent telephone or cable bill?

The residents of Port Richey, Florida have and are upset by the franchise fees on cable.

Franchise fees are the charges on your monthly utility bill that the local municipality charges to utility companies to use public rights of way (such as a telephone pole.) In his campaign for election, Vice-Mayor Michael Hashim called for lower franchise fees and apparently he's following through. Calling the excessive franchise fees, “a burden on our residents, especially when neighboring counties have lower rates with similar services,' Hashim is taking action. At his request, the city council is asking the municipal attorney to look at which fees the council can reform.

Franchise fees are a throw-back to another era, ill-suited for the new telecommunications landscape. Last year, a joint study by the Beacon Hill Institute and the Texas Public Policy Foundation found that consumers spend about 11% of their monthly cable television, wireline telephone, wireless telephone and internet bills in taxes related to franchise fees. The 11% is almost double most states’ sales taxes on regular goods.

Cities claim franchise fees are necessary to maintain the public right of ways, however, these funds are treated as general revenues and are used for spending unrelated to the provision of telecomm. Cities, towns and counties would be wise to disclose how these franchise fees revenues are spent. Better yet they should probably abolish them to the benefit of consumers.

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