Some Minnesota cities want to impose fees on internet providers, but customers may pay for them

Minnesota cities are asking Congress for authority to impose new fees on internet providers. The proposal would increase broadband access in the state and would also include subsidies to pay for basic access government programming, such as video of legislative sessions.

But the proposal has caused a stir on Capitol Hill, with telecommunications groups and Republicans arguing that while the bill has significant support from the Twin Cities metropolitan area, it actually addresses the digital divide in rural Minnesota. They claim that it is completely useless in filling the gap. Instead, it just brings more cash to local governments at the expense of broadband customers.

This tug-of-war has at times been contentious, pitting cities and their media operations against Internet providers large and small, and sparking debate over whether the title of a bill promising equal access to broadband is false advertising.

The move comes as Gov. Tim Walz’s Broadband Authority plans to allocate more than $750 million in state and federal grants to build broadband infrastructure aimed at expanding high-speed internet options. The state broadband office declined to get involved.

“When fees are added to consumers’ bills, the affordability scale is tipped in the wrong direction,” said Brent Christensen, president of the Minnesota Telecom Alliance. “This law goes against everything the state of Minnesota, the Broadband Development Authority, and my members are trying to 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 right-of-way for infrastructure such as power lines.

These contracts typically include a franchise fee and, in the case of cable providers, a second fee specifically for what is known as public education and government (PEG). It is a basic public access medium that records 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 and charge fees to broadband providers. House Democrats are advancing the policy as part of a larger bill in the Commerce and Fiscal Policy Committee.

Existing franchise agreement tabs are typically carried over to the customer. Cities use cash in a variety of ways, not just government media.

Federal law limits cable franchise fees to 5% of a city’s annual gross revenue, but PEG fees are an additional fee and have no cap. The latest version of the DFL law limits broadband franchise fees to 5% of gross revenue and PEG fees to 3%.

Supporters called the bill the “Equal Broadband Access Act,” and said it would allow cities to negotiate consumer protections through franchise agreements. Broadband organizations say the policy is wrong because it will slow the spread of high-quality internet.

Christensen said there is a business case for broadband providers to avoid entering cities without facing franchise fees or regulations, especially because of sparse housing and difficult terrain where the cost of installing fiber optic cables is high. could do so in regions that are already unstable, he said.

He said local regulations would collide with requirements for an unprecedented $652 million subsidy headed to Minnesota from a federal infrastructure bill that would subsidize fiber in hard-to-reach areas. He said it was possible. The Minnesota Legislature also approved an additional $100 million last year.

The Telecom Alliance represents a variety of small carriers and cooperatives in the state, as well as some large carriers such as Lumen.

Another objection from the broadband industry is that the costs would be passed on to customers on their bills, which would dampen interest in purchasing the Internet.

“At a time when we are trying to make broadband affordable, this puts a franchise fee on customers’ bills,” Christensen said.

Opponents of the bill included several national trade groups representing broadband providers and influential figures such as the Minnesota Chamber of Commerce and the Minnesota Cable Communications Association. The latter has led an advertising campaign on behalf of Comcast against the bill.

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

“This is about a bloated government budget,” Rep. Isaac Schultz, R-Elmdale Township, said at a March hearing.

Public support for the bill is concentrated, although not limited, in the Twin Cities metropolitan area, where basic internet options are more readily available than in much of Minnesota.

And while city leaders have made no secret that additional revenue is part of the equation, many say they are concerned about consumer and broadband equity.

Mike Bradley, a telecommunications and cable lawyer who supports the bill, said cities should negotiate to impose regulations on broadband providers to ensure more equal service and other protections across cities. said that it can be done. The concern is that providers can now cherry-pick regions that are more mature for potential customers and therefore likely to make the economics of service expansion more viable.

“There is nothing to protect our residents at this time,” Bradley said.

Last year, the Federal Communications Commission adopted rules aimed at preventing discrimination in broadband access based on income, race or ethnicity, prompting lawsuits from the U.S. Chamber of Commerce and others.

Roseville Mayor Dan Roe has seen cable companies’ city rates drop over the past five years as people switch to streaming services, squeezing PEG funding. He estimated that franchise fees and PEG income have declined by 20% over the past five to six years.

Roseville is part of a nine-city consortium known as the North Suburban Communications Commission, whose PEG fees are used to fund media group Nine North. In 2023, the nine cities received about $1.7 million from cable companies between the two rates, Lowe said.

Concerns about PEG fares are not limited to subways. Itasca Community Television in Grand Rapids supports new franchise fees in a letter to lawmakers, saying it has been losing money in recent quarters and that its public service, which broadcasts city, township, school district and county meetings, has lost money in recent quarters. It is said that this is a problem for .

And with the decline of community newspapers, such as the Lilly Suburban Newspaper chain, which closed in 2019, local residents have fewer local sources to turn to for their news.

“It can be anything from high school sports and performing arts performances to summer city fair parades,” Roe said.