City of Eugene v. Comcast of Oregon II, Inc.

Under 47 USC § 542(b), a state or local government may require fair and reasonable compensation from telecommunications providers, including cable operators, to the extent that they provide telecommunications services.

The City of Eugene, Oregon (City) brought an action attempting to collect a license fee from Comcast of Oregon II (defendant) for “telecommunication services” over the City’s rights of way. Defendant argued it had a preexisting right to the City’s rights of way, and therefore could not be charged the license fee. The trial court concluded that that City was entitled to judgment as a matter of law. The Court of Appeals affirmed the trial court’s grant of summary judgment. Defendant petitioned the Supreme Court to review the Court of Appeals decision only as to whether the license fee is a tax barred by ITFA § 1101(a)(1) (which bars state or local governments from imposing taxes on internet access), or a franchise fee barred by 47 USC § 542(b) (which caps the relevant fee imposed to five percent of revenue). The City argued the fee was imposed for the privilege of using the rights of way. Defendant argued it had a preexisting right to the City’s rights of way, and a fee may not qualify as “a fee imposed for a specific privilege . . . conferred” if the fee confers only a right already possessed by the party paying the fee. The Supreme Court rejected all of Defendant’s arguments, reasoning a fee is a franchise fee imposed on a cable operator solely because of its status as a cable operator. (Emphasis in original). The Supreme Court held that the fee was imposed for access to the City’s rights of way was not a tax on internet access, and that Defendant had no preexisting right which barred the City’s reasonable franchise fees. Affirmed.