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Comcast isn't exempt from $4M fee bill, Ore. city says

December 16, 2021

Nadia Dreid of Law360

An Oregon city is asking a federal court to declare it the winner in its fight with Comcast over $4.3 million in fees for the telecom's use of public rights-of-way, and reject the telecom's arguments that the city's attempt to collect the fees is preempted by federal law.

Comcast has been refusing to pay the portion of its fees related to its internet service since 2016, but the city of Beaverton, Oregon, told U.S. District Judge Michael H. Simon in a motion for summary judgment on Friday that the preemption arguments just don't hold water.

Judge Simon should disabuse Comcast of the notion that "federal law creates a special exemption for them, and only them" by ending the dispute in Beaverton's favor, the city argued in its filing seeking summary judgment on the telecom's original claims and the counterclaims filed by the city.

"Federal law does not insulate the Comcast Entities from compensating the City for their ever-increasing use of public property," the city said. "Like other rights-of-way users, the Comcast Entities must compensate the City for their use of valuable public property."

Comcast's argument is playing out in courts across the country. Many states, including Oregon, have laws requiring utility providers, including telecoms, to pay up to 5% of their revenue as a franchise tax or fee for use of public rights-of-way. In some cases, these laws specifically target video service.

But in the past couple of years, companies that provide nontraditional video services like streaming have started refusing to pay the fees, arguing that various state laws don't apply to them because their content is delivered over the internet.

In the current case, Comcast is taking a similar tack. Beaverton's suit claims that the company has paid only the portion of its fees related to its cable service, but has refused to pay anything based on the internet service it provides in the area.

That's because, in Comcast's view, the fees step on the toes of the federal Cable Act, which sets a 5% cap on franchise fees. The telecom has argued that the law only allows localities to seek the 5% fee for a company's cable services, and that the fee is paid "in exchange for the right to operate a cable system in the [right-of-way] for both cable and noncable services."

If it were to pay 5% on its internet and voice service too, Comcast says it would be paying more than the 5% cable service cap laid out in federal law.

But that's exactly what Beaverton expects the company to do, and it doesn't believe that its 2016 statute adding voice and internet to the list of services subject to franchise fees violates the Cable Act at all. And the Sixth Circuit agrees with the city, it says, pointing toward a recent ruling from a similar suit that disagreed with the interpretation that these types of fees are illegal cable franchise fees.

"Now Comcast has amended its complaint to posit a new, narrower theory," the city said.

In this one, the telecom points toward a specific provision of the Cable Act and argues that it bars these types of rights-of-way fees when it comes to information services, like the internet. But Beaverton believes "Comcast's new theory fares no better."

"No court or agency has ever said that a fee or law that applies broadly to all services is an exercise of cable franchising authority and therefore preempted by Section 624(b)(1) of the Cable Act," the city said. "Such a result would have staggering effects on a host of fees, regulations, and permitting requirements that were never discussed by the [Federal Communications Commission] or the Sixth Circuit."

Representatives for the parties did not immediately respond to a request for comment.

The city of Beaverton is represented by Anna Marie Joyce, Anthony Blake Jr. and Laura Salerno Owens of Markowitz Herbold PC.

Comcast is represented by Blake J. Robinson, John F. McGrory Jr. and Mark P. Trinchero of Davis Wright Tremaine LLP.

The case is City of Beaverton v. Comcast of Oregon II Inc., case number 3:20-cv-01528, in the U.S. District Court for the District of Oregon.

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