The Louisiana Court of Appeal, Second Circuit ruled that a city franchise fee imposed on a telecommunications company was discriminatory in violation of the federal Telecommunications Act of 1996 (the “Act”) where the fee was charged to a taxpayer pursuant to a bilateral contract but not charged to the taxpayer’s competitor.
The city brought a claim for breach of contract for failure by a telecommunications company to pay franchise fees that were imposed in exchange for the taxpayer’s use of public rights-of-way for cable, wire, fiber and other methods for telecommunications transmission. The taxpayer filed a counter claim that the franchise fee was discriminatory under Section 253 of the Act which authorizes state and local governments to require compensation for the use of rights of way. However, the federal law requires that the compensation must be reasonable and nondiscriminatory. The trial court found that the taxpayer was charged the franchise fee while its competitor was not. Based on this fact, the court of appeal found that the franchise fee was not applied on a competitively neutral and nondiscriminatory basis as required by Section 253 of the Act.