In the U.S. cable television industry, a cable franchise fee is an annual fee that a local government charges to a private cable television company as compensation for the use of public property as a priority right for its cable.  In the United States, cable television services are provided by private for-profit cable television operators, who sign a franchise agreement with cities and counties to make cable television available to its residents. Franchise fees are set during the initial negotiations on the franchise agreement, usually through a procedure in which the government requires offers from cable operators to serve their community. It can be renegotiated when the franchise agreement is renewed, usually at intervals of 10 to 12 years. Although it is paid to a government, it is not a tax. According to DoITT, the agency expects to verify whether Charter/Spectrum has met “essential franchise conditions,” including “other factors” when it comes to an extension. On the other hand, cable operators view the levy as an activity cost that they pass on to the customer.  By listing the royalty portion on their bill, customers may feel that it is the state that is responsible for that part, not the cable operator. Since customers can immediately notice a tax increase and interpret it as a “tax increase,” the list on the bill may deter governments from insisting on a tax increase if the franchise agreement is renewed.
Cable television franchise agreements and the OVS contract require companies to pay the city a 5% commission on video revenues. Contracts also require a high level of customer service. DoITT manages the telecommunications franchise for New York, including the class for cable television. Three companies are currently cable-free with the City: Altice USA, Spectrum and Verizon. A fourth company, RCN, holds an open video system (OVS) contract. “Imagine the impact on a community if you take 100 or 200 middle-class jobs? This is an economic inequity for these communities,” he said. “It`s not something we`ve taken lightly. The consequences should be that [charter/spectrum] should not receive a franchising agreement. In general, local authorities would prefer that this item not be on the bill.  Given that the levy is paid to the government when it is broken down on the invoice on a client-based basis, it appears to be a customer tax that could trigger an antipathy towards government officials.  If it appears only on the financial statements as a lump sum payment from the cable operator, it would be perceived by the public as compensation for services, as governments see it. However, the Communications Act provides transparency to the franchise fee so that cable company customers understand the fees the government imposes on the cable company. “Like all cable franchise agreements, Spectrum`s is subject to federal law, which has strict guidelines on when a franchise can be renewed and when it cannot be renewed,” Feyer said in a statement.
The justifications or justifications for the franchise fee can be categorized into six basic categories: Charter/Spectrum may continue to work in “Holdover” with its most recent franchise agreement, as stated in the existing agreement, to allow continuity of service to customer-ready customers during the renewal process, according to the mayor`s office.