Why do cable operators have to pay taxes or fees to state and local governments?

The Cable Act allows a cable franchising authority (usually a state or local government) to collect franchise fees from cable operators providing service.  This franchise fee, typically five percent of each customer’s monthly bill, is payment by the cable operator as a condition of the franchising authority's permission to offer the cable service.

Have any states created a level playing field for all multichannel video providers?

Some states have sought to ensure that the overall level of taxation is equal among providers.  A few state and local governments have passed laws to equalize the burdens among video providers.  These states include Kentucky, North Carolina, Tennessee and Florida.  Providers of Direct Broadcast Satellite (DBS) service have been largely unsuccessful in challenging these states in court, and thus are looking to Congress to pass federal legislation overruling the states.

Why is it important to treat like services alike?

Federal telecommunications policy should not pick winners and losers in the marketplace; rather it should establish a broad framework that encourages investment in new technology and competition in new services.  Policymakers should consider what rights and responsibilities ought to apply to all providers, and then stand aside so the free market can work to provide the best solutions to consumers.