City of Eugene v. Comcast of Oregon II, Inc.

528 May 26, 2016 No. 31

IN THE SUPREME COURT OF THE

STATE OF OREGON

CITY OF EUGENE,

an Oregon municipal corporation,

Respondent on Review,

v.

COMCAST OF OREGON II, INC.,

an Oregon corporation,

Petitioner on Review.

(CC 160803280; CA A147114; SC S062816)

On review from the Court of Appeals.*

Argued and submitted June 16, 2015.

Peter Karanjia, Davis Wright Tremaine LLP, Washington

DC, argued the cause and filed the briefs for petitioner on

review. With him on the briefs were Gregory A. Chaimov

and Mark P. Trinchero, Portland.

Susan Marmaduke, Harrang Long Gary Rudnick PC,

Portland, argued the cause and filed the briefs for respon-

dent on review. With her on the brief were Jerome Lidz,

Sivhwa Go, Eugene, and the City of Eugene.

Lisa Rackner, McDowell Rackner & Gibson PC, Portland,

filed the brief for amici curiae Oregon Cable Telecommuni-

cations Association, American Cable Association, National

Cable & Telecommunications Association, Oregon Telecom-

munication Association, Washington Independent Telecom-

munications Association, Oregon Business Association, and

Associated Oregon Industries. With her on the brief were

Eric S. Tresh and Robert P. Merten, III, Sutherland Asbill

& Brennan LLP, Atlanta, Georgia, Richard A. Finnigan,

Olympia, Washington, and Thomas W. Brown, Cosgrave

Vergeer Kester, Portland.

______________

*  Appeal from Lane County Circuit Court, Karsten H. Rasmussen, Judge.

263 Or App 116, 333 P3d 1051 (2014).

Cite as 359 Or 528 (2016) 529

Nancy L. Werner, Beery, Elsner & Hammond LLP,

Portland, filed the brief on the merits for amicus curiae

League of Oregon Cities.

Christy K. Monson, Speer Hoyt LLC, Eugene, filed the

brief on the merits for amici curiae National Association of

Telecommunications Officers and Advisors and Washington

Association of Telecommunications Officers and Advisors.

With her on the brief was Joseph Van Eaton, Best Best &

Krieger LLP, Washington, DC.

Scott A. Shorr and Mark L. Friel, Stoll Stoll Berne

Lokting & Shlachter PC, Portland, filed the briefs on the

merits and in support of the petition for review for amicus

curiae Broadband Tax Institute.

Roy Pulvers, Holland & Knight LLP, Portland, filed the

brief in support of the petition for review for amici curiae

Oregon Cable Telecommunications Association, American

Cable Association and National Cable & Telecommunications

Association.

Richard A. Finnigan, Olympia Washington, filed the

brief in support of the petition for review for amici curiae

Oregon Telecommunications Association, NTCA The Rural

Broadband Association and Washington Independent Tele-

communications Association.

Before Balmer, Chief Justice, Kistler, Brewer, Baldwin

and Nakamoto, Justices.**

BALMER, C. J.

The decision of the Court of Appeals is affirmed. The

judgment of the circuit court is affirmed in part, reversed in

part, and remanded to the circuit court.

______________

**  Walters and Landau, JJ., did not participate in the consideration or deci-

sion of this case. Linder, J., retired December 31, 2015, and did not participate in

the decision of this case.

530 City of Eugene v. Comcast of Oregon II, Inc.

Case Summary: A cable operator with a franchise to build and operate a

cable system over public rights of way provided both cable services and cable

modem services through its cable system. City sought to enforce a municipal

ordinance to require the cable operator to pay a license fee for the right to pro-

vide cable modem services over public rights of way. Cable operator objected to

the license-fee requirement, arguing that it violated federal law governing cable

franchises. The trial court granted the city summary judgment. The Court of

Appeals affirmed that ruling. Held: (1) a municipal license fee imposed on rev-

enue derived from cable modem service is not a tax barred by the Internet Tax

Freedom Act, 47 USC § 151, note; and (2) a municipal license fee imposed on rev-

enue derived from cable modem service is not a franchise fee barred by the Cable

Communications and Policy Act of 1984.

The decision of the Court of Appeals is affirmed. The judgment of the circuit

court is affirmed in part, reversed in part, and remanded to the circuit court.

Cite as 359 Or 528 (2016) 531

BALMER, C. J.

Through this action, the City of Eugene (the

city) attempts to collect from Comcast of Oregon II, Inc.

(Comcast) a license fee that the city, acting under a munic-

ipal ordinance, imposes on companies providing “telecom-

munications services” over the city’s rights of way. Eugene

City Code (ECC) 3.410(1)(b). Comcast does not dispute that

it uses the city’s rights of way to operate a cable system

providing customers with a telecommunications service—

namely, broadband Internet access through cable modem

service. Comcast, however, objects to the city’s collection

effort and argues that the license fee is either a tax barred

by the Internet Tax Freedom Act (ITFA), 47 USC § 151,

note, ITFA §§ 1101-09, or a franchise fee barred by the Cable

Communications and Policy Act of 1984 (Cable Act), 47 USC

§§ 521-73. The city reads those federal laws more narrowly

and disputes Comcast’s contrary interpretation. The trial

court rejected Comcast’s arguments and granted summary

judgment in favor of the city. The Court of Appeals affirmed

the trial court’s grant of summary judgment. City of Eugene

v. Comcast of Oregon II, Inc., 263 Or App 116, 142, 148 n 16,

333 P3d 1051 (2014). For the reasons that follow, we affirm

those rulings.

I. BACKGROUND

Before the trial court, the parties filed cross-motions

for summary judgment on various grounds. On the issues

now before this court, the trial court concluded that there

was no genuine issue as to any material fact and that the

city, rather than Comcast, was entitled to judgment as a

matter of law. Id. at 124. The parties focus their arguments

in this court on whether either party is entitled to judgment

as a matter of law based on relevant local ordinances and

federal statutes. As a result, this case primarily presents

questions of statutory interpretation. The background facts,

although complex, are not materially disputed.

Since 1991, Comcast has operated a cable system

within the city under the terms of a franchise that remains

in effect today.1 The rights granted to Comcast under that

1

We use the name “Comcast” to refer to Comcast and its predecessors in

interest, TCI Cablevision of Oregon, Inc. and AT&T Broadband. The city codified

532 City of Eugene v. Comcast of Oregon II, Inc.

franchise are determined by both the franchise agreement

itself and federal law governing cable franchising—namely,

the Communications Act of 1934, as amended by the Cable

Act and the Telecommunications Act of 1996. The franchise

authorizes Comcast to construct and operate a cable system

over the city’s public rights of way in exchange for paying

the city a franchise fee. The city charges Comcast the max-

imum cable franchise fee that federal law allows: five per-

cent of Comcast’s gross revenue “derived * * * from the oper-

ation of the cable system to provide cable services.” 47 USC

§ 542(b). Thus, the city calculates Comcast’s cable franchise

fee based on revenue Comcast derives from its “cable ser-

vice,” and does not include revenue Comcast derives from

noncable services.

The term “cable service” generally refers to the one-

way transmission of a package of channels providing video

programming as well as any interactive components needed

for the subscriber to select from among the programming

options provided. See 47 USC § 522(6) (defining “cable ser-

vice”).2 Not every service offered over a “cable system” is a

“cable service.” A “cable system” is merely a type of commu-

nications facility—that is, the physical infrastructure used

to transmit certain communications signals. Federal law

defines the term “cable system” as “a facility * * * designed

to provide cable service.” 47 USC § 522(7). Nevertheless, a

facility designed to provide cable services may be physically

capable of providing other, noncable services. See HR Rep

No 934, 98th Cong, 2d Sess (1984), 44 (“A facility would be

a cable system if it were designed to include the provision

of cable services * * * along with communications services

other than cable services.”).

the 1991 franchise agreement as Ordinance No. 19775 (1991). In 2007, the par-

ties renewed the terms of the 1991 agreement, extending those terms until 2018.

The city codified the 2007 renewal as Ordinance No. 20397 (2007).

2

Under federal law, “cable service” is defined as “(A) the one-way transmis-

sion to subscribers of (i) video programming, or (ii) other programming service,

and (B) subscriber interaction, if any, which is required for the selection or use

of such video programming or other programming service[.]” 47 USC § 522(6).

“Video programming” is defined as “programming provided by, or generally con-

sidered comparable to programming provided by, a television broadcast station.”

47 USC § 522(20). “Other programming service” is defined as “information that a

cable operator makes available to all subscribers generally[.]” 47 USC § 522(14).

Cite as 359 Or 528 (2016) 533

Noncable communications services generally fall

into one of two categories: a “telecommunications service”

or an “information service.” See 47 USC § 153(53) (defin-

ing “telecommunications service”); 47 USC § 153(24) (defin-

ing “information service”).3 Distinguishing between “cable

services” and noncable services is important in this case

because revenue that a cable operator derives from telecom-

munications or information services is not included in the

revenue base used to calculate the cable franchise fee. 47

USC § 542(b).

In 1999, Comcast began offering subscribers in the

city a new service in addition to the video programming it

had been offering. The new service was a cable modem ser-

vice providing broadband access to the Internet. Comcast

offered its cable modem service over the same cable system

that it used to provide cable television video programming—

that is, the cable system that Comcast, through its cable

franchise rights, was authorized to build and operate over

the city’s public rights of way. The question arose of how to

categorize the cable modem service: whether the function

of a cable modem service is a cable, telecommunications, or

information service.

Initially, Comcast treated its cable modem service

as a cable service and included the revenue generated from

that service in the revenue base used to calculate the cable

franchise fee. In 2002, however, Comcast stopped doing so

after the FCC issued a declaratory order stating that, under

the Cable Act, cable modem service was neither a “cable ser-

vice” nor a “telecommunications service,” but was instead an

“information service.” In the Matter of Inquiry Concerning

High-Speed Access to the Internet Over Cable and Other

Facilities, 17 FCC Rcd 4798 (2002). Comcast reasoned that

because Congress limited the revenue base used to calcu-

late Comcast’s cable franchise fee to include only revenue

derived from “cable services,” 47 USC § 542(b), and because

3

“Telecommunications service” is generally “the offering of telecommunica-

tions for a fee directly to the public * * * regardless of the facilities used.” 47 USC

§ 153(53). And “information service” is defined as “the offering of a capability for

generating, acquiring, storing, transforming, processing, retrieving, utilizing, or

making available information via telecommunications, and includes electronic

publishing[.]” 47 USC § 153(24).

534 City of Eugene v. Comcast of Oregon II, Inc.

cable modem service is not a “cable service,” revenue derived

from cable modem service could not be included in the reve-

nue base used to calculate the cable franchise fee.

The FCC order and the status of cable modem ser-

vice as an information service were the subject of litigation,

resulting in a 2005 decision by the United States Supreme

Court that affirmed the FCC’s order, deferring to the FCC’s

reasonable interpretation of an ambiguous statute. National

Cable & Telecommunications v. Brand X, 545 US 967, 125

S Ct 2688, 162 L Ed 2d 820 (2005). By upholding the FCC’s

order, the Supreme Court confirmed that the city could not

include revenue derived from cable modem services in the

revenue base used to calculate Comcast’s cable franchise

fee. Although, beginning in 2002, Comcast stopped pay-

ing a cable franchise fee based at all on revenue from cable

modem services, Comcast continued to provide cable modem

services through its cable system and over the city’s public

rights of way.

In 2007, the parties renewed the terms of their

cable franchise agreement. Shortly after renewing the fran-

chise agreement, the city attempted to recapture fees based

on the revenue Comcast derived from its cable modem ser-

vice by imposing a municipal license-fee requirement on the

delivery of “telecommunications services” over the city’s pub-

lic rights of way. ECC 3.410. The city based that license-fee

requirement on Ordinance No. 20083 (1997) (the ordinance),

which the city had enacted in 1997 but had not previously

enforced on cable modem services. See ECC 3.400-3.430

(codifying Ordinance No. 20083).

The ordinance requires that companies obtain a

license before providing “telecommunications services” over

the city’s public rights of way. ECC 3.410. To obtain that

license, a company must pay the city a license fee equal to

seven percent of the revenue that the company generates

within the city from its “telecommunications activities,”

ECC 3.415(2), which includes “telecommunications service,”

ECC 3.005.

The ordinance defines “telecommunications ser-

vices” as “[t]he transmission for hire, of information in elec-

tromagnetic frequency, electronic or optical form, including,

Cite as 359 Or 528 (2016) 535

but not limited to, voice, video, or data.” ECC 3.005. That

broad definition “includes all forms of telephone services and

voice, data and video transport, but does not include * * *

cable service[.]” Id. The ordinance uses the same definition

of “cable service” that federal law uses, but it uses a slightly

different definition for “telecommunications services” and

does not include the term “information services.”

Like federal law, the ordinance does not treat all

communications services provided through a “cable system”

as a “cable service.”4 Instead, the ordinance anticipates that

telecommunications services may be provided over a cable

system and requires a license for telecommunications ser-

vices even when the telecommunications provider already

has a franchise to provide cable services over the cable sys-

tem. See ECC 3.410(3) (stating that a cable operator must

obtain a license “should it intend to provide telecommuni-

cations services over the same [cable system]”). Thus, tele-

communications services are treated as telecommunications

services regardless of the facility used to provide them. And,

to the extent that a cable operator provides both cable ser-

vices and telecommunications services, that cable operator

is treated as a cable operator with respect to its cable ser-

vices and is treated as a telecommunications provider with

respect to its telecommunications services.

The city maintained that Comcast’s cable modem

service was a “telecommunications service” under the ordi-

nance and was, therefore, subject to the ordinance’s license-

fee requirement. As a result, the city sought from Comcast

seven percent of the revenue Comcast derived from its cable

modem services within the city from 1999 through 2008.5

When the city did not receive the payment it sought, the city

brought this action against Comcast. Before the trial court,

the parties filed cross-motions for summary judgment on a

4

The ordinance’s definition of “cable system” tracks almost verbatim the fed-

eral definition of “cable system.” Compare ECC 3.005 (defining “cable system”)

with 47 USC § 522(7) (defining “cable system”).

5

As noted above, Comcast paid the city five percent of its revenue from cable

modem service as part of its franchise fee payments from 1999 until 2002, when

the FCC held that cable modem service was not a “cable service.” The city, how-

ever, maintains that Comcast should have been paying seven percent of its reve-

nue from cable modem service as part of its license fee payments, and the city now

seeks the difference between those payments for those years.

536 City of Eugene v. Comcast of Oregon II, Inc.

number of issues, including the two issues now before this

court: whether the license fee is a tax barred by ITFA or a

franchise fee barred by the Cable Act.6

ITFA bars state and local governments from impos-

ing “taxes on Internet access.” ITFA § 1101(a)(1). The par-

ties disputed whether the license fee is, in fact, a “tax.” ITFA

defines “tax” as “any charge imposed by any governmental

entity for the purpose of generating revenues for governmen-

tal purposes, and is not a fee imposed for a specific privilege,

service, or benefit conferred.” ITFA § 1105(8)(A)(i).

Comcast argued that the city imposes the license

fee to generate revenue for governmental purposes, thus

qualifying the fee as a tax. The city argued, however, that

the fee was imposed for a specific privilege—namely, the

right to provide cable modem services over the city’s rights

of way. Comcast countered that the license could not confer

that privilege on Comcast because Comcast had a preexist-

ing right under its cable franchise to provide cable modem

services over the city’s rights of way.

The trial court agreed with the city and held that

the license fee was not a tax on Internet access barred by

ITFA: “Comcast is paying the license fee for the privilege

of using the City’s right-of-way. Thus the license fee is a fee

imposed for a specific privilege, service, or benefit conferred

and not a tax under ITFA.” The trial court did not address

Comcast’s argument that it had a preexisting right to use

the city’s rights of way to provide cable modem services.

As to the Cable Act, Comcast argued that, although

the Cable Act authorizes local governments to charge fees to

a cable operator for the right to use public rights of way, the

Cable Act nevertheless caps those fees at five percent of the

revenue derived from “cable services,” which excludes cable

modem services. 47 USC § 542(b). According to Comcast, it

provides cable modem services as a “cable operator.” Comcast

therefore argued that the city’s fee was already at the fee

cap because the city was charging Comcast the five percent

6

The parties filed cross-motions for summary judgment on numerous other

issues as well, which are not part of this review. The complete procedural history

of the case is set out in the Court of Appeals decision. Comcast of Oregon II, Inc.,

263 Or App at 123-26.

Cite as 359 Or 528 (2016) 537

cable franchise fee based on its cable services. Thus, the city

exceeded the cap by charging the seven percent license fee

on its cable modem revenue.

In response, the city argued that the license fee did

not fit within the Cable Act’s definition of “franchise fee,”

which “includes any tax, fee, or assessment of any kind

imposed by a franchising authority or other governmen-

tal entity on a cable operator or cable subscriber, or both,

solely because of their status as such,” 47 USC § 542(g)(1)(A)

(emphasis added), and which excludes “any tax, fee, or

assessment of general applicability (including any such tax,

fee, or assessment imposed on both utilities and cable oper-

ators or their services but not including a tax, fee, or assess-

ment which is unduly discriminatory against cable opera-

tors or cable subscribers),” 47 USC § 542(g)(2). According to

the city, the license fee is not a “franchise fee” because the

city does not impose the license fee solely on cable operators.

The city argued that, instead, the license fee was a fee of

“general applicability” imposed on all telecommunications

providers using public rights of way.

The trial court again agreed with the city and held

that the license fee was not a franchise fee barred by the

Cable Act: “The Ordinance applies to all utilities that use

the City’s right of way, thus Comcast is not being charged

a license fee solely because of its status as a cable opera-

tor, and thus the license fee is not preempted.” (Emphasis in

original.)

The Court of Appeals agreed with those trial court

rulings on appeal. Without further discussion, the Court of

Appeals held, “ITFA does not bar the city’s license fee, which

is a fee imposed in exchange for using the city’s right-of-

way to provide a telecommunications service.” Comcast of

Oregon II, Inc., 263 Or App at 142. Further, in a footnote

at the end of its opinion, the Court of Appeals also rejected

without discussion Comcast’s argument that the license fee

is an improper franchise fee under the Cable Act. Id. at 148

n 16.7 Comcast petitioned this court to review the Court of

7

The brevity of the Court of Appeals’ analysis of the issues before us reflects

the fact that, although preserving those issues, the parties focused their argu-

ments on appeal on a different issue: whether Comcast’s cable modem services

538 City of Eugene v. Comcast of Oregon II, Inc.

Appeals decision only as to whether the license fee is a tax

barred by ITFA or a franchise fee barred by the Cable Act.

We allowed Comcast’s petition.

While this case was pending on review, the FCC

reconsidered its prior order that had concluded that cable

modem service is an “information service” under federal law.

In In the Matter of Protecting & Promoting the Open Internet,

30 FCC Rcd 5601 (2015), the FCC concluded instead that

cable modem service falls within the federal definition of

“telecommunications service.” Because that reclassification

does not change the FCC’s prior conclusion that cable modem

service is not a “cable service,” federal law continues to

exclude revenue derived from cable modem service from the

revenue base used to calculate the cable franchise fee. But

the FCC’s order subjects the provision of cable modem ser-

vices to certain telecommunications regulations that were

not previously applicable. We address those matters below.

II. ANALYSIS

On review, Comcast reprises its argument that the

city’s license fee is a tax barred by ITFA or a franchise fee

barred by the Cable Act. Comcast has not asked us to review

the Court of Appeals’ conclusion that the ordinance applies

to Comcast’s cable modem services nor has it raised ques-

tions about the city’s authority under state law to collect the

license fee at issue. Instead, Comcast argues that, even if

state and local law allow the city to collect a license fee on

Comcast’s cable modem service, either ITFA or the Cable Act

provide Comcast with a valid defense to the city’s collection

effort. We address those arguments in turn.

A.  ITFA

Congress enacted ITFA in 1998 as a temporary

moratorium on state and local taxation of Internet access.

fell within the ordinance’s definition of “telecommunications service.” The trial

court had held that Comcast’s cable modem services fell outside that definition

and therefore outside the license-fee requirement. The Court of Appeals reversed

the trial court’s ruling on that issue, agreeing with the city that Comcast’s cable

modem services fell within the ordinance’s definition of “telecommunications ser-

vices.” Id. at 141. Comcast did not seek review of that issue, so the interpreta-

tion and application of the ordinance itself is not before this court. Instead, we

address only whether the ordinance, as interpreted by the Court of Appeals and

applied to Comcast, conflicts with federal law.

Cite as 359 Or 528 (2016) 539

Congress has extended that moratorium numerous times,

including the entire time period at issue in this case. In

February 2016, that moratorium became permanent. Pub L

114-125 § 922 (2016).

As noted above, ITFA prohibits state and local gov-

ernments from imposing “taxes on Internet access,” ITFA

§ 1101(a)(1), and defines “tax” as “any charge imposed by

any governmental entity for the purpose of generating rev-

enues for governmental purposes, and is not a fee imposed

for a specific privilege, service, or benefit conferred.” ITFA

§ 1105(8)(i). Comcast contends that the trial court and Court

of Appeals erred in concluding that payment of the license

fee conferred on Comcast a specific privilege—namely, the

right to provide cable modem service over the city’s public

rights of way—and is therefore not a tax.

According to Comcast, a fee may not qualify as “a

fee imposed for a specific privilege * * * conferred” if the fee

confers only a right already possessed by the party pay-

ing the fee. And Comcast maintains that it already pos-

sessed the right to provide cable modem service over the

city’s public rights of way. Comcast finds that preexisting

right in both the franchise agreement itself and the federal

Communications Act.

Whether a fee conferring only preexisting rights

qualifies as “a fee imposed for a specific privilege * * * con-

ferred” under ITFA is a question of statutory construction.

But it is a question we need not reach in this case because

we reject the premise of Comcast’s argument—namely, that

either the franchise agreement or the Communications Act

provides it with a preexisting right to provide cable modem

services over the city’s public rights of way.

1.  Franchise agreement

Comcast first argues that the cable franchise agree-

ment gives it the right to provide cable modem services over

the city’s public rights of way. Comcast’s cable franchise

agreement, although codified in a city ordinance, is com-

prised of terms negotiated by Comcast and the city as a con-

tract and authorizes Comcast to engage in certain activities

540 City of Eugene v. Comcast of Oregon II, Inc.

using those rights of way. “A franchise allows the grantee to

exercise powers which, without the franchise, the grantee

could not exercise.” Northwest Natural Gas Co. v. City of

Portland, 300 Or 291, 308, 711 P2d 119 (1985).

In support of its claim that the cable franchise

agreement grants it the right to provide cable modem ser-

vices over the city’s public rights of way, Comcast principally

relies on a provision in the franchise agreement stating, “A

non-exclusive franchise is hereby granted to [Comcast] * * *

to install, construct, operate, maintain, reconstruct, and

expand a cable communications system within the public

streets, ways, alleys, public utility easements, and places of

the City of Eugene * * *.” Ordinance No. 19775, § 1.8

Comcast notes that the right conferred by the cable

franchise includes the right to “operate” a cable communica-

tions system. And Comcast argues that the right to operate

a cable communications system includes the right to provide

any services that the cable communications system is phys-

ically capable of providing, such as cable modem services.

According to Comcast, that right applies even to services,

like cable modem services, that it was not providing at the

time the franchise agreement was codified in 1991.

The proper construction of a municipal ordinance is

a question of law, which we resolve using the same rules of

construction that we use to interpret statutes. See Lincoln

Loan Co. v. City of Portland, 317 Or 192, 199, 855 P2d 151

(1993) (“The same rules that govern the construction of stat-

utes apply to the construction of municipal ordinances.”).

Therefore, “[w]e look primarily to the [ordinance]’s text,

context, and legislative history, although we may look also

8

In general, a “cable communications system” under the franchise agree-

ment is analogous to a “cable system” under the Cable Act—that is, a specific

type of communications facility that has a physical infrastructure designed to

provide cable communications services. The franchise agreement defines “cable

communications system” as

“a system of antennas, cable, amplifiers, towers, microwave links, wave-

guides, laser beams, earth stations, or any other conductors, converters,

equipment, or facilities, designed and constructed for the purpose of produc-

ing, receiving, amplifying, storing, processing or distributing audio, video,

digital, or other forms of electronic or electrical signals.”

Ordinance No. 19775, § 3.

Cite as 359 Or 528 (2016) 541

to general rules of statutory construction as helpful.” Alfieri

v. Solomon, 358 Or 383, 392, 365 P3d 99 (2015).

We reject Comcast’s interpretation. As an initial

matter, Comcast reads “operate” too broadly, conflicting

with how we normally understand that word. Webster’s

Third New International Dictionary (unabridged ed 2002)

most relevantly defines “operate” to mean “to cause to func-

tion usually by direct personal effort : WORK <[operate] a

car> <operating a drill press>.” Id. at 1581.9 Thus, a person

operates a car by causing the car to function. That will usu-

ally mean causing the car to drive. A person operates a car

whenever that person drives the car, even if the state limits

the speed at which the driver may travel or limits the types

of cargo or number of passengers that the car may contain.

We would not normally think that the right to “operate” a

car confers a right to operate it in any manner whatsoever.

In the same way, a company operates a cable com-

munications system by causing the system to function—that

is, to send or receive electronic or electrical signals over a

cable communications system. But we would not normally

think that the right to “operate” a cable communications

system confers a right to operate it in any manner whatso-

ever or to provide any services the operator chooses.

With respect to the services that Comcast is autho-

rized to provide, the franchise agreement itself limits the

scope of that right under the franchise. Immediately after

the sentence granting Comcast the right to operate a cable

communications system over the city’s public rights of way,

the franchise agreement states, “This franchise shall con-

stitute both a right and an obligation to provide the service

of a cable communications system as required by the provi-

sions of this ordinance.” Ordinance No. 19775, § 3.

The city reads that provision as granting Comcast

only the right to provide those services that Comcast is

required to provide under the agreement. The services

required by the franchise agreement largely appear in

9

The other definitions of “operate” as a transitive verb include, “to cause

to occur : bring about by or as if by the exertion of positive effort or influence

: INITIATE” and “to perform surgery on.” Id.

542 City of Eugene v. Comcast of Oregon II, Inc.

Section 5 and largely relate to cable television service, as

opposed to other types of communications services.10 The

franchise agreement does not mention cable modem ser-

vices, and Comcast makes no argument that cable modem

service is among those services that the franchise agree-

ment requires Comcast to provide.

Nevertheless, Comcast contends that the provision

need not be read so narrowly. Comcast compares the grant

of authority conferred through the franchise agreement to

the authority at issue in Comcast Corp. v. Dept. of Rev., 356

Or 282, 337 P3d 768 (2014), in which this court interpreted

the phrase “data transmission services” in a 1973 statute to

include internet access services even though internet access

services were not widely available at the time the statute

was enacted. In this case, the trial court gave the franchise

a similarly broad reading: “[E]ven if cable modem service

was not explicitly contemplated when the franchise was

enacted, the franchise was intended to authorize a broad

range of activities, including cable modem service.”

The city’s reading is more faithful to the plain

language of the provision. Comcast’s opposing argument

establishes, at most, that the provision may contain ambi-

guity. But establishing ambiguity does not help Comcast’s

argument. In this case, Comcast is the franchise grantee.

“In interpreting * * * franchises, ‘if the terms of the fran-

chise are doubtful, they are to be construed strictly against

the grantee and liberally in favor of the public.’ ” Northwest

Natural Gas, 300 Or at 308 (quoting City of Joseph v.

Joseph Water Works Co., 57 Or 586, 591, 111 P 864, 112 P

1083 (1911) (emphasis added)). Therefore, no rights are con-

ferred on a grantee by implication, and that which has not

been expressly granted has been withheld. See generally

Copeland v. City of Waldport, 147 Or 60, 68-70, 31 P2d 670

(1934) (discussing and relying on federal case law applying

10

The required services address, for example, the system’s channel capacity,

the inclusion of local broadcast channels in “basic service,” the provision of “pre-

mium programming service,” the availability of the system to public institutions,

the use of the system during an emergency or disaster, and the provision of chan-

nels “dedicated for public, educational, and local government access program-

ming.” Ordinance No. 19775, § 5.

Cite as 359 Or 528 (2016) 543

the principle that “public grants are to be construed strictly

and that nothing passes by implication”).11

Thus, under the franchise agreement itself, with-

out considering any additional rights or obligations based on

the federal Communications Act, Comcast’s service rights

extend only as far as Comcast’s service obligations. Because

the franchise does not require Comcast to provide cable

modem service, the franchise does not confer on Comcast

the right to provide cable modem service.

2.  Communications Act

Comcast also contends that, even if the franchise

agreement does not expressly include the right to provide

cable modem services, the Communications Act requires

reading the franchise agreement to include the right to

provide cable modem services. To the extent that the

Communications Act requires reading the franchise agree-

ment as conferring rights that the franchise agreement

reserves, the Communications Act controls. See 47 USC

§ 556(c) (“Except as provided in section 557 of this title, any

provision of law of any State, political subdivision, or agency

thereof, or franchising authority, or any provision of any fran-

chise granted by such authority, which is inconsistent with

this chapter shall be deemed to be preempted and super-

seded.”). Comcast therefore relies on the Communications

Act as a source of its claimed preexisting right to provide

cable modem services over the city’s public rights of way.

As enacted in 1934, the Communications Act cre-

ated the FCC to regulate the common carriage of broadcast

and telephone communications. See Nat’l Cable Television

Ass’n. v. FCC, 33 F3d 66, 68 (DC Cir 1994) (describing history

of the Communications Act). Although the Communications

Act did not expressly direct or authorize the FCC to regulate

cable services, the FCC began regulating cable services in

1960. The United States Supreme Court upheld the FCC’s

regulation of cable services as “reasonably ancillary to the

11

The fact that this case involves the interpretation of a franchise agree-

ment, coupled with the lack of legislative history suggesting a broader reading,

distinguish this case from Comcast Corp. and, therefore, undermines Comcast’s

reliance on that case.

544 City of Eugene v. Comcast of Oregon II, Inc.

effective performance of the Commission’s various responsi-

bilities for the regulation of television broadcasting.” United

States v. Southwest Cable Co., 392 US 157, 178, 88 S Ct 1994,

20 L Ed 2d 1001 (1968).

The FCC continued to regulate cable companies

without congressional direction until 1984, when Congress

enacted the Cable Act, which added a new subchapter to

the Communications Act specifically addressing the reg-

ulation of cable services. The Cable Act codified many of

the regulations that the FCC had developed. Nat’l Cable

Television Ass’n, 33 F3d at 69. Those included a ban on

telephone-cable cross-ownership “prohibit[ing] telephone

companies from directly providing cable television service

to subscribers.” Id. at 68. They also included preserving a

system of dual jurisdiction over cable services “whereby the

state or local government issued franchises while the FCC

exercised ‘exclusive authority over all operational aspects

of cable communication, including technical standards and

signal carriage.’ ” Id. at 69 (quotation omitted). Congress

later amended provisions created by the Cable Act when it

enacted the Telecommunications Act of 1996, which removed

the ban on telephone-cable cross-ownership and facilitated

greater competition in the market for telecommunication

services.

In an effort to establish a right under federal law

to provide cable modem services over the city’s public

rights of way, Comcast relies on numerous provisions of the

Communications Act, as amended by the Cable Act and the

Telecommunications Act. We address each in turn.

a.  Cable Act

Comcast first relies on a provision enacted as part of

the Cable Act ensuring that cable franchises grant franchi-

sees access to public rights of way. That provision, 47 USC

§ 541(a)(2), states that “[a]ny franchise shall be construed

to authorize the construction of a cable system over public

rights-of-way, and through easements, which is within the

area to be served by the cable system and which have been

dedicated for compatible uses[.]” Id. (emphasis added).

Cite as 359 Or 528 (2016) 545

Like the similar provision in the franchise agree-

ment that Comcast relied on, Comcast reads this provision

to authorize not only the right to construct a cable system,

but also the right to use the cable system to provide services

in addition to cable services that the cable system is physi-

cally capable of providing, including cable modem services.

In opposition to that reading, the city points out that the pro-

vision authorizes only the “construction” of a cable system,

id., but says nothing about the manner in which the cable

system may be used or what services a cable operator may

provide over that system once it is constructed. Comcast,

however, argues that the right to “construct” a cable system

would be illusory if it did not entail the right to use the cable

system.

We reject Comcast’s reading, which misidentifies

the nature of the dispute. The city concedes that Comcast

has a right to use the cable system. The city argues only

that Comcast’s right to use the cable system does not include

the right to use the cable system to provide cable modem

services. As a result, the question is not whether Comcast

has a right to use the cable system; the question is the scope

of that right.

Determining the scope of the rights required by

that federal statute is a matter of federal law. “When this

court construes a federal statute * * *, we follow the method-

ology prescribed by the federal courts. Federal courts gen-

erally determine the meaning of a statute by examining its

text and structure and, if necessary, its legislative history.”

Corp. of Presiding Bishop v. City of West Linn, 338 Or 453,

463, 111 P3d 1123 (2005) (internal citation omitted).

The text of the statute appears to support the city’s

narrower interpretation. The statute requires reading the

franchise agreement as granting Comcast a right to “con-

struct” a cable system. The franchise agreement, like most

cable franchise agreements, unambiguously grants that

right already. Ordinance No. 19775, § 1. Commentators

therefore have noted that, in most cases, such as this one,

47 USC § 541(a)(2) operates as a redundancy rather than as

a source of additional rights:

546 City of Eugene v. Comcast of Oregon II, Inc.

“It is difficult to understand what [47 USC § 541(a)(2)]

adds, in terms of a rule of construction, to what already is

the heart of a franchise grant. The 1984 Cable Act does not

provide for the use of rights-of-way in any manner inconsis-

tent with rights reserved by those who have the power to

reserve rights in the public rights-of-way.”

Daniel L. Brenner, et al., 1 Cable Television and Other

Nonbroadcast Video § 3:24 (2015). As a result, a plain read-

ing of the statute suggests that the scope of Comcast’s right

to use the cable system is determined by the franchise

agreement or other provisions of law.

Comcast attempts to buttress its statutory analysis

of 47 USC § 541(a)(2) with legislative history, relying on the

committee report that accompanied the Cable Act. Comcast

quotes the report as stating that “ ‘cable operators are per-

mitted under the provisions of the [Cable Act] to provide

any mixture of cable and non-cable service they choose,’ and

‘[a] facility would be a cable system if it were designed to

include the provision of cable services (including video pro-

gramming) along with communications services other than

cable service.’ ” Quoting HR Rep No 934, 98th Cong, 2d Sess

at 44.

Comcast, however, takes those quotes out of con-

text. The section of the report Comcast quotes from does not

purport to address the scope of the authorization described

in 47 USC § 541(a)(2). Instead, that section addresses the

definitions of “cable service” and “cable system.” HR Rep No

934, 98th Cong, 2d Sess at 44. When read in context, the

quoted sections of the report that Comcast relies on estab-

lish only that a cable system remains a cable system, for

the purposes of the Cable Act, even if it is used to provide

noncable services:

“While cable operators are permitted under the provisions

of [the Cable Act] to provide any mixture of cable and non-

cable service they cho[o]se, the manner in which a cable

service is marketed would not alter its status as a cable

service. For instance, the combined offering of a non-cable

shop-at-home service with service that by itself met all the

conditions for being a cable service would not transform the

shop-at-home service into a cable service, or transform the

cable service into a non-cable communications service.

Cite as 359 Or 528 (2016) 547

“* * * The term ‘cable system’ is not limited to a facility

that provides only cable service which includes video pro-

gramming. Quite the contrary, many cable systems provide

a wide variety of cable services and other communications

services as well. A facility would be a cable system if it were

designed to include the provision of cable services (includ-

ing video programming) along with communications ser-

vices other than cable services.”

Id.

The legislative history establishes, at most, that the

Cable Act does not prohibit a cable operator from providing

noncable services. In that sense, and only in that sense, the

1984 Cable Act “permit[s]” cable operators to provide non-

cable services. But the legislative history does not establish, as

Comcast contends, that the Cable Act grants cable operators

an affirmative right to provide noncable services, prohibiting

state or local authorities from regulating noncable services or

charging fees for the right to provide noncable services over

the cable system that occupies public rights of way.12

Other legislative history supports that reading. The

same committee report that Comcast quotes includes a sec-

tion actually addressing the statute that Comcast relies on,

47 USC § 541(a)(2). There, the report indicates that con-

gressional drafters were aware that cable systems could be

used to provide noncable communications services and that

the Cable Act was not intended to limit or affect the legal

treatment of those services:

“Several proceedings are underway now to determine the

regulatory treatment of non-cable communications services

provided over cable systems, such as data transmission and

private-line voice services. * * *

“The Committee does not intend to resolve or even address

the issue of the state or Federal treatment of non-cable

12

Comcast attempts to make the same point—that the Cable Act confers a

right protecting cable companies from the regulation of noncable services offered

over a franchised cable system—by relying on the FCC’s decision in In the Matter

of Heritage Cablevision Associates of Dallas, L.P., & Texas Cable TV Ass’n v. Texas

Utilities Elec. Co., 6 FCC Rcd 7099 (1991). But that decision, like the legislative

history, establishes only that a cable system does not cease to be a cable system

merely because the cable operator provides noncable services. Id. at 7104 (“[I]ts

facilities are a ‘cable system’ within the meaning of the Cable Act, even though

TCI also provides data transmission services over its system.”).

548 City of Eugene v. Comcast of Oregon II, Inc.

communications services offered over cable systems raised

in these proceedings. The Committee intends that state and

Federal authority over non-cable communications services

under the status quo shall be unaffected by the provisions of

[the Cable Act].

“* * * While the Committee recognizes that non-cable

communications services are subject to regulatory author-

ity, the Committee does not intend to suggest that these

services should be regulated or that they should be deregu-

lated. The Committee intends to leave the decision concern-

ing the exercise of regulatory authority over non-cable com-

munications services to the appropriate regulatory bodies.”

HR Rep No 934, 98th Cong, 2d Sess at 60 (internal citations

omitted; emphases added). Thus, the legislative history con-

firms our initial reading: 47 USC § 541(a)(2) ensures that

Comcast has the right to construct a cable system, but the

scope of Comcast’s right to use the cable system—including

the right to provide cable modem services—is determined by

other applicable laws.13

b.  Telecommunications Act

Even if provisions of the Cable Act do not provide

grounds for preemption, Comcast additionally argues that

provisions added in 1996 by the Telecommunications Act

provide it with rights to use the cable system that are incon-

sistent with, and therefore preempt, the city’s license-fee

requirement. See 47 USC § 556(c) (preempting state or local

laws inconsistent with the Communications Act).

As noted above, the Telecommunications Act removed

the prior ban on telephone-cable cross-ownership. Thus,

anticipating greater overlap between telecommunications

providers and cable operators, Congress added provisions to

13

Comcast also relies on 47 USC § 544(a), which provides, “Any franchising

authority may not regulate the services, facilities, and equipment provided by

a cable operator except to the extent consistent with this subchapter [govern-

ing cable services].” Even if the city’s license fee “regulate[s] the services, facili-

ties, and equipment provided by a cable operator,” that statute likewise requires

Comcast to demonstrate an inconsistency between the city’s license-fee require-

ment and some other provision of the Communications Act governing cable ser-

vices. See Storer Cable Communications v. City of Montgomery, 806 F Supp 1518,

1544-45 (MD Ala 1992) (“A local regulation which is governed by subsection (a)

* * * will be struck down if a challenger can show an inconsistency between the

local rule and federal regulation.”).

Cite as 359 Or 528 (2016) 549

the Communications Act to account for that change. Those

provisions provide:

“(A)  If a cable operator or affiliate thereof is engaged

in the provision of telecommunications services—

“(i)  such cable operator or affiliate shall not be

required to obtain a franchise under this subchapter for

the provision of telecommunications services; and

“(ii)  the provisions of this subchapter shall not apply

to such cable operator or affiliate for the provision of tele-

communications services.

“(B)  A franchising authority may not impose any

requirement under this subchapter that has the purpose or

effect of prohibiting, limiting, restricting, or conditioning

the provision of a telecommunications service by a cable

operator or an affiliate thereof.

“(C)  A franchising authority may not order a cable

operator or affiliate thereof—

“(i)  to discontinue the provision of a telecommunica-

tions service, or

“(ii)  to discontinue the operation of a cable system,

to the extent such cable system is used for the provision of

a telecommunications service, by reason of the failure of

such cable operator or affiliate thereof to obtain a franchise

or franchise renewal under this subchapter with respect to

the provision of such telecommunications service.”

47 USC § 541(b)(3). Comcast argues, based on those pro-

visions, that the Communications Act precludes the city

from imposing fees on Comcast, as a cable operator, for its

telecommunications services, including its cable modem

services.

There are, however, two ways to read those provi-

sions. On the one hand, as Comcast contends, the provisions

can be read to protect cable companies from burdens imposed

by state or local governments on offering telecommunica-

tions services over cable systems. Under that protection, the

cable companies could better compete with telecommunica-

tions companies in the market for telecommunications ser-

vices. A major purpose of the Telecommunications Act, after

550 City of Eugene v. Comcast of Oregon II, Inc.

all, was to introduce greater competition into the market for

telecommunications services.

On the other hand, as the city contends, the provi-

sions can be read as limitations only on the cable franchising

process and the terms that may be included in a cable fran-

chise agreement. Under that reading, the provisions would

not prevent the city from imposing fees on telecommunica-

tions services when it is acting outside the cable franchising

process and is otherwise entitled to do so.

We agree with the city’s reading of the provisions.

Although Congress intended the Telecommunications Act to

introduce competition into the market for telecommunica-

tions services, it did not do so by exempting cable compa-

nies from fees generally applicable to telecommunications

services.

The textual support for that reading starts with

the statutory framework within which Congress passed the

Telecommunications Act. Specifically, the Cable Act, in a

provision that has not been changed in any relevant respect

since its 1984 enactment, defines “cable system” to exclude

“a facility of a common carrier which is subject, in whole or

in part, to the provisions of title II of this chapter [relating

to common carrier regulation, 47 USC §§ 201-276], except

that such facility shall be considered a cable system * * * to

the extent such facility is used in the transmission of video

programming directly to subscribers[.]” 47 USC § 522(7)(C)

(emphasis added). The Telecommunications Act then added

that a telecommunications carrier is a common carrier pro-

viding telecommunications services, but “only to the extent

that it is engaged in providing telecommunications ser-

vices[.]” 47 USC § 153(51) (emphasis added). “Taken together,

a cable operator, when it is providing telecommunications

service, is not a cable system; and when it is providing cable

service, it is not subject to Title II as a common carrier.”

2 Cable Television and Other Nonbroadcast Video § 11:12;

see also Peter W. Huber, et al., The Telecommunications Act

of 1996 § 3.3.2 (1996) (“[C]ommon carriers providing ordi-

nary, wireline ‘cable services’ * * * are regulated in the same

manner as other cable operators, so far as their cable-like

operations are concerned.”).

Cite as 359 Or 528 (2016) 551

We find similar context in the manner in which

Congress distinguished between the regulatory classifi-

cations of communications services when it enacted the

Telecommunications Act. The FCC has recognized that, as

it relates to distinguishing cable, telecommunications, and

information services, none of those classifications “rests

on the particular types of facilities used. Rather, each

rests on the function that is made available.” In re Inquiry

Concerning High-Speed Access to the Internet, 17 FCC Rcd

4798 at 4821; see also 47 USC § 522(6) (defining “cable ser-

vices”); 47 USC § 153(53) (defining “telecommunications

service”); 47 USC § 153(24) (defining “information service”).

That is expressly the case for “telecommunications service,”

which the Act defines as “the offering of telecommunications

for a fee directly to the public, or to such classes of users as

to be effectively available directly to the public, regardless of

the facilities used.” 47 USC § 153(53) (emphasis added).

Thus, considering the Telecommunications Act in

context, we conclude that it created a regulatory scheme that

focuses on the function of the service provided rather than on

the communications facility used to provide it. Within that

scheme, telecommunications services are generally treated

as telecommunications services and cable services as cable

services, regardless of who provides the service or how.

Understanding that context reveals the narrow

scope of the limitations imposed by 47 USC § 541—limitations

that Comcast contends prevent the city from seeking com-

pensation for Comcast’s use of the public rights of way.

Congress directed those limitations to rights arising

under “this subchapter”—that is, under the section of the

Communications Act governing cable services. Most nota-

bly, “If a cable operator * * * is engaged in the provision of

telecommunications services, * * * the provisions of this sub-

chapter shall not apply to such cable operator or affiliate

for the provision of telecommunications services.” 47 USC

§ 541(b)(3)(A)(ii) (emphasis added). That provision is best

read as establishing that telecommunications services are

not to be regulated as cable services, and not subject to cable

franchising requirements, merely because those telecommu-

nications services are provided over a cable system.

552 City of Eugene v. Comcast of Oregon II, Inc.

Additionally, subparagraph (B) precludes a franchis-

ing authority from imposing “any requirement under this

subchapter” that “prohibit[s], limit[s], restrict[s], or condi-

tion[s] the provision of a telecommunications service by a

cable operator.” 47 USC § 541(b)(3)(B) (emphasis added).

Comcast plausibly argues that the city’s license-fee require-

ment, in practice and effect, limits, restricts, or conditions

Comcast’s ability to provide telecommunications services.

But Comcast makes no argument establishing that the

license-fee requirement is one imposed by the city under the

subchapter of the Communications Act regulating cable ser-

vices or cable franchising.

The meaning of “under this subchapter” is informed

by the fact that Congress framed the limitations contained in

those provisions as limitations on “franchising authorities,”

rather than on state or local governments generally. Under

the Communications Act, a “franchising authority” is the

governmental entity empowered to grant cable franchises.

See 47 USC § 522(10) (defining “franchise authority”); see

also 47 USC § 522(9) (defining “franchise”). It appears that

Congress intended to limit cable franchising authorities

functioning as cable franchising authorities—that is, in the

cable franchising process or in the enforcement of cable fran-

chising terms—but not to limit the rights that those govern-

mental entities otherwise have outside the cable franchising

process. If Congress intended to protect cable operators from

burdens generally imposed, rather than burdens imposed in

the cable franchising process or in the enforcement of cable

franchising terms, then Congress would have imposed those

limits on state or local governments generally, rather than

specifically on cable franchising authorities.

Comcast responds that such a narrow reading of

the limitation in subparagraph (B) would defeat its purpose

because franchising authorities could simply impose new

fees outside the franchising process. But Comcast misses

the point of the limitation. If the city attempted to impose

the license fee as part of its franchising authority, it could

use its position as gatekeeper to the cable-services market

to leverage Comcast’s agreement to fees that the city might

not otherwise be empowered to impose. The text and con-

text of the provision suggest that Congress intended only

Cite as 359 Or 528 (2016) 553

to avoid entangling telecommunications services and cable

services in that manner.

The legislative history confirms our reading that

the provisions Comcast relies on were not intended to

exempt telecommunications services offered by cable oper-

ators from fees that state or local governments are other-

wise allowed to impose on telecommunications services. The

conference report accompanying the Telecommunications

Act addresses the provisions now appearing at 47 USC

§ 541(b)(3)(A)-(C). The report does not directly offer an

interpretation of those provisions, but it states,

“The conferees intend that, to the extent permissible under

State and local law, telecommunications services, including

those provided by a cable company, shall be subject to the

authority of a local government to, in a nondiscriminatory

and competitively neutral way, manage its public rights-of-

way and charge fair and reasonable fees.”

HR Rep No 458, 104th Cong, 2d Sess (1996), 180. The stan-

dard described in the report—that local governments may

manage their public rights of way by imposing “fair and

reasonable” fees on telecommunications services in “a non-

discriminatory and competitively neutral way”—is the stan-

dard applied to local government management of its rights

of way taken from the section of the Communications Act

governing telecommunications services. Specifically, 47 USC

§ 253(c) provides:

“Nothing in this section affects the authority of a State

or local government to manage the public rights-of-way or

to require fair and reasonable compensation from telecom-

munications providers, on a competitively neutral and non-

discriminatory basis, for use of public rights-of-way on a

nondiscriminatory basis, if the compensation required is

publicly disclosed by such government.”14

14

That provision is an exception to a broader provision banning state-

imposed barriers to entry of the telecommunications market: “No State or local

statute or regulation, or other State or local legal requirement, may prohibit

or have the effect of prohibiting the ability of any entity to provide any inter-

state or intrastate telecommunications service.” 47 USC § 253(a); see also AT&T

Communications v. City of Eugene, 177 Or App 379, 403-05, 35 P3d 1029 (2001)

(discussing relationship between the ban on barriers to entry and the carve-out

for managing rights of way). In its supplemental brief to this court, Comcast

554 City of Eugene v. Comcast of Oregon II, Inc.

Thus, the best reading of the conference report is that,

despite the limitations imposed on franchising authorities

in 47 USC § 541(b)(3)(A)-(C), the conferees expected that

not only would local governments be able to impose fees on

telecommunications services provided over franchised cable

systems using public rights of way but also that those tele-

communications services would continue to be subject to

the limitations that generally apply to telecommunications

services.

Comcast’s final argument relies on a footnote in the

recent FCC order re-categorizing cable modem service from

being an information service to being a telecommunications

service. In that order, the FCC states,

“We note also that we do not believe that the classification

decision made herein would serve as justification for a state

or local franchising authority to require a party with a fran-

chise to operate a ‘cable system’ (as defined in Section 602

of the Act) to obtain an additional or modified franchise in

connection with the provision of broadband Internet access

service, or to pay any new franchising fees in connection

with the provision of such services.”

In the Matter of Protecting & Promoting the Open Internet,

30 FCC Rcd at 5804 n 1285.

Comcast argues that the FCC’s footnote is incon-

sistent with the city’s license-fee requirement and is bind-

ing on this court because FCC orders cannot be collaterally

attacked in this court. 47 USC § 402(b) (granting the United

States Court of Appeals for the District of Columbia exclu-

sive jurisdiction to hear appeals from FCC orders); 47 USC

§ 402(a) (granting federal courts of appeals exclusive juris-

diction to hear proceedings “to enjoin, set aside, annul, or

suspend any order” by the FCC).

noted that it “is not asserting—and has never asserted—a claim that the City’s

action in this case violates Section 253(a).” We therefore have not been asked, and

do not reach, the issue of how the city’s license-fee requirement would fare under

the standards of 47 USC § 253(a) and (c). In any event, at the time the parties

presented this case to the trial court, cable modem service was not treated as a

telecommunications service and thus fell beyond the reach of those provisions.

The parties, therefore, did not present arguments to the trial court on those

issues.

Cite as 359 Or 528 (2016) 555

Comcast’s argument, however, fails at the outset

because it is premised on a misreading of the order itself.

Like the provisions added by the Telecommunications Act,

the FCC’s footnote is directed at “franchising authorit[ies]”

and the payment of “franchising fees.” Within the statutory

scheme at issue, those terms refer specifically to cable fran-

chising authorities and cable franchising fees. Thus, we read

the FCC’s footnote as stating that its decision should have

no effect on the cable franchise rights of cable companies,

which merely reaffirms the proposition that telecommuni-

cations services should not be regulated through the cable

franchising process.

In conclusion, Comcast’s argument that the city’s

license fee is a tax prohibited by ITFA therefore fails.

Comcast’s argument depended on establishing that it had

a preexisting right to provide cable modem services over

the city’s public rights of way. It has failed to establish that

either the franchise agreement or the Communications Act

provides it with such a right. We therefore hold that ITFA

provides Comcast with no defense to the city’s license-fee

requirement.

B.  Cable Act

Comcast alternatively attempts to establish another

defense to the city’s license-fee requirement—this one based

directly on the Cable Act rather than ITFA. As described

above, the Cable Act authorizes local governments to impose

a “franchise fee” on a cable operator for the right to use pub-

lic rights of way and caps those fees at five percent of the

revenue derived from “cable services.” 47 USC § 542(b). And,

as also described above, Comcast’s cable modem services

are telecommunications services and not cable services. The

city imposes both a five percent franchise fee on revenue

that Comcast derives from cable services and a seven per-

cent license fee on revenue that Comcast derives from cable

modem services. Comcast argues that the city’s license fee

is, in fact, a second “franchise fee” exceeding, and therefore

preempted by, the Cable Act’s statutory cap.

As framed by the parties, determining whether the

license fee is an improper franchise fee turns on the defini-

tion of the term “franchise fee” under the Cable Act:

556 City of Eugene v. Comcast of Oregon II, Inc.

“For the purposes of this section—

“(1)  the term ‘franchise fee’ includes any tax, fee, or

assessment of any kind imposed by a franchising authority

or other governmental entity on a cable operator or cable

subscriber, or both, solely because of their status as such;

“(2)  the term ‘franchise fee’ does not include—

“(A)  any tax, fee, or assessment of general applicability

(including any such tax, fee, or assessment imposed on both

utilities and cable operators or their services but not includ-

ing a tax, fee, or assessment which is unduly discrimina-

tory against cable operators or cable subscribers)[.]”

47 USC § 542(g).

Comcast then focuses on the definition of the term

“cable operator.” The Cable Act defines that term to mean:

“[A]ny person or group of persons (A) who provides cable

service over a cable system and directly or through one or

more affiliates owns a significant interest in such cable

system, or (B) who otherwise controls or is responsible for,

through any arrangement, the management and operation

of such a cable system.”

47 USC § 522(5). Comcast argues that its provision of cable

modem services was part of its management and operation

of its cable system. According to Comcast, a fee imposed on

its cable modem services is therefore a fee imposed because

of its status as the manager or operator of a cable system

and therefore its status as a “cable operator.” At least one

court has adopted Comcast’s argument. See Comcast Cable

of Plano, Inc. v. City of Plano, 315 SW3d 673, 681 (Tex App

2010) (“There is no dispute that Comcast provided cable ser-

vice over its cable system, in addition to cable modem ser-

vice. Thus, we conclude that Comcast’s provision of cable

modem service over that system was part of its management

and operation of the cable system, and therefore part of its

activity as a ‘cable operator.’ ”).15

15

In addition to Comcast Cable of Plano, Comcast also cites to City of Chicago

v. Comcast Cable Holdings, L.L.C., 231 Ill 2d 399, 900 NE2d 256 (2008). In that

case, a city argued that cable operators breached their cable franchise agree-

ments by failing to pay five percent of the revenue derived from cable modem

services. The court held that, following the FCC’s classification of cable modem

services as noncable services, federal law preempted the enforcement of cable

franchise agreements that required paying a portion of revenue derived from

cable modem services. In attempting to avoid that conclusion, the city argued

Cite as 359 Or 528 (2016) 557

The problem with Comcast’s argument—like the

analysis in Comcast Cable of Plano—is that it fails to account

for the phrase “solely because of” in 47 USC § 542(g)(1).

Comcast argues only that the license fee is imposed on it

for activity it performs as a cable operator. At most, that

argument establishes that Comcast is a cable operator and

that some applications of the license fee reach cable opera-

tors. But the statute requires more. Not all fees imposed on

a cable operator are franchise fees. Instead, a fee is a fran-

chise fee if it is imposed on a cable operator solely because

of its status as a cable operator. Whether the fee is imposed

on a cable operator is a different question from whether the

fee is imposed solely because of a company’s status as a cable

operator.

Comcast errs by focusing on its status as a cable

operator rather than focusing on the scope of the license fee.

The phrase “solely because of” is used to identify the reason

that the fee is imposed on one company rather than another.

See Webster’s at 2168 (defining “solely” as “to the exclusion

of alternate or competing things (such as persons, purposes,

duties) <done solely for money> <a privilege granted solely to

him> <rely solely on oneself>”); id. at 194 (defining “because

of” as “by reason of : on account of”). A fee is a franchise fee

if it is imposed on a company because it is a cable operator

and not for any other reason.

The city’s license fee does not meet that standard.

The license fee is imposed on Comcast because it provides

telecommunications services over the city’s public rights of

way. The relationship between that reason and Comcast’s

status as a cable operator is only incidental. Although one

type of company that may provide telecommunications ser-

vices is a cable operator, cable operators do not necessarily

provide telecommunications services and noncable operators

that the fee—despite being in the franchise agreement—was not a “franchise

fee,” as that term is defined by 47 USC § 542(g)(1), because it was imposed on

cable modem services rather than cable services. The court rejected that argu-

ment because the definition of “franchise fee” did not turn on what services it

applied to, and instead turned on whether it applied to cable operators “ ‘solely

because of their status as such.’ ” Comcast Cable Holdings, L.L.C., 231 Ill 2d at

412 (quoting 47 USC § 542(g)(1)). The court, however, never addressed whether

the fees applied to the cable operator solely because of their status as cable oper-

ators, because the city failed to make that argument.

558 City of Eugene v. Comcast of Oregon II, Inc.

may provide telecommunications services. Whether a com-

pany is a cable operator is therefore neither necessary nor

sufficient to trigger the license-fee requirement.16

We therefore reject Comcast’s argument that the

license fee is a franchise fee barred by the Cable Act.

III. CONCLUSION

The decision of the Court of Appeals is affirmed.

The judgment of the circuit court is affirmed in part and

reversed in part, and the case is remanded to the circuit

court.

16

Commentators have agreed with this interpretation. See, e.g., 1 Cable

Television and Other Nonbroadcast Video § 10:25 (“A state or local government

may, however, require fair and reasonable compensation from telecommunica-

tions providers, including cable operators to the extent that they provide telecom-

munications services. This compensation power, which is not limited to, say, 5%

of revenues, emanates from the authority to manage public rights-of-way.”).