City of Eugene v. Comcast of Oregon II, Inc. , 359 Or. 528 ( 2016 )

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 Maramaduke, 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 cur-
iae Oregon Telecommunications Association, NTCA The
Rural Broadband Association and Washington Independent
Telecommunications 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 materi-
ally disputed.
Since 1991, Comcast has operated a cable system
within the city under the terms of a franchise that remains
532 City of Eugene v. Comcast of Oregon II, Inc.
in effect today.1 The rights granted to Comcast under that
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
non-cable 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, non-cable 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
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
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
of cable services * * * along with communications services
other than cable services.”).
Non-cable 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 non-cable 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
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.
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
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.
Cite as 359 Or 528 (2016) 535
The ordinance defines “telecommunications ser-
vices” as “[t]he transmission for hire, of information in elec-
tromagnetic frequency, electronic or optical form, including,
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 telecommunication
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
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.
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
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 qual-
ifying 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 pre-existing
right under its cable franchise to provide cable modem ser-
vices 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 privi-
lege 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 pre-existing
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
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
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
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
538 City of Eugene v. Comcast of Oregon II, Inc.
n 16.7 Comcast petitioned this court to review the Court of
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.
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
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
A.  ITFA
Congress enacted ITFA in 1998 as a temporary
moratorium on state and local taxation of Internet access.
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 pre-existing
right in both the franchise agreement itself and the federal
Communications Act.
Whether a fee conferring only pre-existing 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 pre-existing 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
540 City of Eugene v. Comcast of Oregon II, Inc.
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
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
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
statutes 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
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> .” Id. at 1581.9 Thus, a person
operates a car by causing the car to function. That will
usually 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.
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.
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
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
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
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
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 pre-existing 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
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.
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
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
Cite as 359 Or 528 (2016) 545
area to be served by the cable system and which have been
dedicated for compatible uses[.]” Id. (emphasis added).
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 statue 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,
546 City of Eugene v. Comcast of Oregon II, Inc.
47 USC § 541(a)(2) operates as a redundancy rather than as
a source of additional rights:
“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 non-
cable 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
Cite as 359 Or 528 (2016) 547
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.
“* * * 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
non-cable 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 non-cable services, prohibiting
state or local authorities from regulating non-cable services or
charging fees for the right to provide non-cable 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 congres-
sional drafters were aware that cable systems could be used
to provide non-cable communications services and that the
Cable Act was not intended to limit or affect the legal treat-
ment of those services:
“Several proceedings are underway now to determine the
regulatory treatment of non-cable communications services
12
Comcast attempts to make the same point—that the Cable Act confers a
right protecting cable companies from the regulation of non-cable 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 non-cable 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.
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
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).
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
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
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
550 City of Eugene v. Comcast of Oregon II, Inc.
cable companies could better compete with telecommunica-
tions companies in the market for telecommunications ser-
vices. A major purpose of the Telecommunications Act, after
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
Cite as 359 Or 528 (2016) 551
ordinary, wireline ‘cable services’ * * * are regulated in the
same manner as other cable operators, so far as their cable-
like operations are concerned.”).
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—limita-
tions that Comcast contends prevent the city from seek-
ing compensation 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
552 City of Eugene v. Comcast of Oregon II, Inc.
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.
Additionally, subparagraph (B) precludes a fran-
chising authority from imposing “any requirement under
this subchapter” that “prohibit[s], limit[s], restrict[s], or
condition[s] the provision of a telecommunications ser-
vice by a cable operator.” 47 USC § 541(b)(3)(B) (emphasis
added). Comcast plausibly argues that the city’s license-fee
requirement, in practice and effect, limits, restricts, or con-
ditions Comcast’s ability to provide telecommunications ser-
vices. 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
services 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
Cite as 359 Or 528 (2016) 553
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
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
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 collater-
ally attacked in this court. 47 USC § 402(b) (granting the
United States Court of Appeals for the District of Columbia
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
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
exclusive jurisdiction to hear appeals from FCC orders); 47
USC § 402(a) (granting federal courts of appeals exclusive
jurisdiction to hear proceedings “to enjoin, set aside, annul,
or suspend any order” by the FCC).
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
556 City of Eugene v. Comcast of Oregon II, Inc.
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:
“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 applica-
bility (including any such tax, fee, or assessment imposed
on both utilities and cable operators or their services but
not including a tax, fee, or assessment which is unduly
discriminatory against cable operators or cable subscrib-
ers)[.]”
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
Cite as 359 Or 528 (2016) 557
and operation of the cable system, and therefore part of its
activity as a ‘cable operator.’ ”).15
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 operators. But the statute requires more. Not all fees
imposed on a cable operator are franchise fees. Instead, a
fee is a franchise 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 compa-
ny’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) ”); 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.
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 non-cable services, federal law pre-empted 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
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.
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 non-cable opera-
tors may provide telecommunications services. Whether a
company 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.”).