What is and the Purpose for a Cable Television Franchise Fee?

In the United States cable television industry, a cable television franchise fee is an annual fee charged by a local government to a private cable television company as compensation for using public property it owns as right-of-way for its cable lines. In the U.S., cable television services are provided by private for-profit companies, cable television providers, which sign a franchise agreement with cities and counties to provide cable television to its residents. The franchise fee is set during initial negotiation of the franchise agreement, usually by a process in which the government requests bids from cable providers to serve their community. It can be renegotiated when the franchise agreement comes up for renewal, usually at intervals of 10 to 12 years. Although it is paid to a government, it is not a tax.

Franchise fees are governed under Section 622 of the Cable Communications Act of 1984. Section 622, states that municipalities are entitled to a maximum of 5% of gross revenues derived from the operation of the cable system for the provision of cable services such as Public, educational, and government access (PEG) TV channels.