Some Minnesota cities want to impose fees on internet providers, but customers could pay the price

Minnesota cities are asking the Legislature to give them the power to impose new fees on internet providers, an idea they say would lead to more broadband use in the state and help pay for basic government access programming such as video of council meetings. additional benefits.

But the idea has caused a stir in Congress, where telecom groups and Republicans argue the bill — which has strong support from the Twin Cities metro area — won’t actually help rural Minnesota bridge the digital divide at all. Instead, it will only bring more cash to local governments at the expense of broadband customers.

The tug-of-war has turned contentious at times, pitting cities and their media operations against internet providers large and small and sparking debate over whether the bill’s headline promise of equal access to broadband is false advertising.

Gov. Tim Walz’s broadband office declined to comment as officials there plan to allocate more than $750 million in state and federal funds to subsidize broadband infrastructure aimed at expanding high-speed Internet options.

“Additional charges on consumers’ bills will tip affordability in the wrong direction,” said Brent Christensen, president of the Minnesota Telecommunications Alliance. “This legislation is a partnership between the State of Minnesota, the Office of Broadband Development and my members It goes against everything we do to ensure all Minnesotans have access to quality broadband.”

Local governments have long negotiated franchise agreements with cable TV providers and utility companies to use public rights-of-way for infrastructure such as power lines.

These deals typically include a franchise fee and, for cable providers, a second fee earmarked for Public Education and Government (PEG). This is essential public media documenting local life and government.

The bill, sponsored by Rep. Mike Freiberg, DFL-Golden Valley, and Sen. Nicole Mitchell, DFL-Woodbury, would give cities and towns the option to enter into similar franchise agreements with and charge broadband providers a fee. House Democrats are advancing the policy as part of larger legislation in the Commerce, Finance and Policy Committee.

A tag on the existing franchise agreement will usually be passed on to the customer. Cities use cash in many ways, not just for government media.

Federal law limits cable franchise fees to 5 percent of the city’s annual gross revenue, but PEG fees are additional and uncapped. The latest version of the DFL legislation limits broadband franchise fees to 5% of gross revenue and PEG fees to 3%.

Supporters of the bill, which dubbed it the Broadband Equal Access Act, said cities could negotiate consumer protections through franchise agreements. Broadband groups argue this is a misnomer and the policy will slow the spread of quality internet.

Christensen said broadband providers can avoid moving into cities without having to face franchise fees or regulations, especially in rural areas where the business case is already shaky because of sparse housing or difficult terrain that pushes the cost of laying fiber optic cables. the cost of.

He said local regulations could conflict with a federal infrastructure bill that provides an unprecedented $652 million in grant funding to Minnesota, which provides fiber subsidies to hard-to-serve areas. Minnesota lawmakers also approved an additional $100 million last year.

The Telecommunications Alliance represents a range of the state’s smaller communications companies and cooperatives as well as some of the larger communications companies and cooperatives such as Lumen.

Another objection from the broadband industry is that these costs will be passed on to customers’ bills, reducing interest in buying internet.

“This puts the franchise fee on customers’ bills while we work to make broadband affordable,” Christensen said.

Opponents of the bill include several national trade groups representing broadband providers as well as heavyweights such as the Minnesota Chamber of Commerce and the Minnesota Cable Association. The latter represents Comcast and led an ad campaign opposing the legislation.

Republicans described the policy as a way for cities to raise money rather than promote broadband access.

“This is about government budget inflation,” Rep. Isaac Schultz, D-Elmdale Township, said during a hearing in March.

Public support for the bill is largely concentrated in the Twin Cities metro area, where basic internet service is more readily available than in much of greater Minnesota.

City leaders have not hidden that additional revenue is part of the equation, but many also insist they are focusing on consumer and broadband equity.

Mike Bradley, an attorney who works on telecommunications and cable TV cases who supported the bill, said cities could negotiate regulations on broadband providers to ensure more equal service across the city and provide other protections. The concern is that service providers can now cherry-pick communities that are likely to have more sophisticated potential customers, making the economics of expanding services more likely to be viable.

“There is nothing to protect residents right now,” Bradley said.

The FCC passed a rule last year aimed at preventing discrimination in broadband access based on income, race, ethnicity and other factors, prompting a lawsuit from the U.S. Chamber of Commerce and others.

Roseville Mayor Dan Roe has watched the cable company’s city fees decline over the past five years as people shift to streaming services and has invested in PEG money. He estimates franchise fees and PEG revenue have declined 20% over the past five or six years.

Roseville is part of the North Suburban Communications Commission’s Nine Cities consortium, which uses PEG fees to fund media group NineNorth. Roe said the nine cities will receive about $1.7 million from the cable companies through 2023 for both fees.

Concerns about PEG fees are not limited to metros. Itasca Community Television in Grand Rapids supported the new franchise fee in a letter to lawmakers, writing that it has suffered losses in recent quarters, which is a major concern for the public broadcaster that covers cities, towns, school districts and county meetings. Service is an issue.

With fewer community newspapers, such as the Lillie Suburban Newspapers chain, which closed in 2019, there are fewer local news sources that local residents can rely on.

“Everything from high school sports, performing arts shows to city festival parades in the summer,” Roy said.

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