House drops 'franchise fees' on internet providers that would have hiked bills

Minnesota cities won't impose fees on internet providers meant to help pay for some government programming and improve broadband access after legislation failed to clear the state House.

The Minnesota House DFL dropped the plan, which sparked heated debate with the telecom industry about whether this would help or hurt broadband efforts, from an omnibus bill earlier this week.

Democrats who control the House initially included the legislation in a package of bills the Commerce Finance and Policy Committee advanced. But DFLers cut the franchise fee policy before passing the bill on the House floor Monday.

Under the legislation, cities could have negotiated franchise agreements with internet providers to use public right of ways for infrastructure like they do now with cable TV providers and utility companies. Supporters said cities could have used that power to push for rules to ensure more equal access to the vital service. The fees could have also helped pay for basic government access programming like video of council meetings, which has struggled for funding as people have switched from cable to streaming services.

The proposal faced strident opposition from internet providers large and small. They said businesses would pass down fees to customers, making it a painful tax, and the fees were really meant as a way for government to raise money. They also contended it would deter wider rural broadband construction.

The measure did not receive a hearing in the DFL-controlled Senate, meaning its chances were uncertain even if it had passed the House.

Rep. Zack Stephenson, a Coon Rapids DFLer who chairs the Commerce committee, said Tuesday several goals of the legislation were admirable.

"A city can say if you're going to serve part of our community, you need to serve all of our community, you can't just pick and choose which neighborhoods you want to pursue," he said.

But Stephenson said enough DFL lawmakers had concerns and questions that weren't solvable with roughly a month left in the 2024 legislation session.

Stephenson said the plan would be the first of its kind in the country, meaning Minnesota does not have a model to follow from other states. He said it often takes legislation like that more than a year to pass the Legislature and can be taken up again in 2025.

The Commerce omnibus bill includes a policy aimed at implementing in Minnesota a version of federal "net neutrality" rules rescinded under Donald Trump but that federal regulators could reinstate later this month.