The forgotten victim of cord-cutting: Municipal governments

[Commentary] What impact is cord-cutting having on municipal governments?

Cities typically grant franchises in exchange for numerous concessions by the cable company applicant, the most prominent of which is an annual franchise fee. Through this fee, the local government can demand up to 5% of the gross revenues that the cable company collects for cable service within the franchise area. This franchise fee is to compensate the government for the cable company’s use of the public rights-of-way (under city streets) to deliver cable to consumers. Because of this franchise fee, local governments have reaped huge windfalls as a result of the cable revolution. Typically, for every $100 you spend monthly on your cable bill, $5 goes directly to your city’s coffers. Over-the-top competition is unquestionably good for society. It allows consumers additional video choices and has increased the pathways by which content gets to consumers. But traditional pay television companies are not the only entities that will be disrupted by the new video revolution. Policymakers should be aware both of the difficulties that the transition may pose for municipalities and the positive and negative ways those municipalities may respond.

[Lyons is an associate professor at Boston College Law School]