Infrastructure Investment and Franchise Fee Abuse: A Theoretical Analysis

12 Pages Posted: 17 Jul 2019

See all articles by Thomas Randolph Beard

Thomas Randolph Beard

Auburn University - Department of Economics

George S. Ford

Phoenix Center for Advanced Legal & Economic Public Policy Studies

Michael Stern

Auburn University - Department of Economics

Date Written: July 15, 2019

Abstract

Fees levied by local franchise authorities on cable television operators are limited to a statutory five-percent cap, though franchise authorities often skirt that maximum levy by demanding additional monetary and in-kind concessions from cable operators. The Federal Communications Commission has recently formally proposed to subject all of a franchise authority’s monetary and in-kind demands to the five-percent (5%) cap subject to few statutory exceptions. In this BULLETIN, we analyze the investment effects of this proposal. Whether using simple economic and financial models or a more complex two-stage investment model that mimics the regular negotiations that occur between the cable operator and local authorities, we show that the Commission’s proposed limits on local franchise authorities’ extra-statutory exactions will promote infrastructure investment by both incumbents and new entrants.

Keywords: Franchise Fee, Cable Television, Federal Communications Commission, Regulation, Investment

JEL Classification: L86

Suggested Citation

Beard, Thomas Randolph and Ford, George S. and Stern, Michael, Infrastructure Investment and Franchise Fee Abuse: A Theoretical Analysis (July 15, 2019). Available at SSRN: https://ssrn.com/abstract=3420473 or http://dx.doi.org/10.2139/ssrn.3420473

Thomas Randolph Beard

Auburn University - Department of Economics ( email )

415 W. Magnolia
Auburn, AL 36849-5242
United States

George S. Ford (Contact Author)

Phoenix Center for Advanced Legal & Economic Public Policy Studies ( email )

5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
United States

Michael Stern

Auburn University - Department of Economics ( email )

Auburn, AL 36849
United States

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