Does Mississippi law require an electric co-op's broadband affiliate to pay a separate city franchise fee?

Plain-English summary

Starkville's mayor wrote in to ask whether a city can charge an electric cooperative (or its broadband subsidiary) a franchise fee for delivering broadband internet inside the city's electric service area. The general municipal franchise authority statute (Section 21-27-5) lets cities grant franchises for the use of streets and public grounds for utility infrastructure, and Section 77-3-17 imposes a 2% franchise fee on a public utility company's revenue from sales to municipal customers. The question was whether broadband by an electric cooperative's affiliate fits within that fee.

The AG said no. The reason is the definition of "public utility" in Chapter 77. Miss. Code Ann. § 77-3-3(d)(iii) explicitly excludes broadband services from "public utility." So when an electric cooperative delivers broadband through a "broadband affiliate" under the Mississippi Broadband Enabling Act, that broadband activity is not a public-utility activity, and the 2% franchise fee in Section 77-3-17 (which only reaches public-utility revenue) does not apply.

The Mississippi Broadband Enabling Act authorizes electric cooperatives to establish broadband affiliates and to allow those affiliates to use the cooperative's electric delivery system to provide broadband. The AG concluded that the Act does not require an additional municipal fee or separate franchise agreement for that activity. It did not decide whether Starkville could require either under a different source of authority.

The opinion limits itself to state law and explicitly does not interpret the existing electric franchise contract or any local ordinance.

What this means for you

For mayors and city attorneys

The opinion holds that the 2% franchise fee under Section 77-3-17 does not reach broadband revenue from an electric cooperative's broadband affiliate, and that Mississippi law does not require an additional payment or a separate franchise agreement for the broadband services. The opinion expressly does not interpret any existing electric franchise contract or local ordinance, and it notes the Broadband Enabling Act sets no statutory fee for the broadband activity.

For electric cooperatives and their broadband affiliates

The opinion states two things. First, broadband services are excluded from the "public utility" definition in Chapter 77 (Miss. Code Ann. § 77-3-3(d)(iii)), so the 2% franchise fee in Section 77-3-17 does not apply to broadband revenue. Second, the Broadband Enabling Act authorizes cooperatives to establish broadband affiliates that operate on the electric delivery system and imposes no statutorily mandated municipal fee for that activity.

For state legislators

The opinion holds that Chapter 77 excludes broadband from the "public utility" category and that the Broadband Enabling Act sets no statutory fee for an electric cooperative's broadband services. It identifies no fee mechanism for municipalities; it does not recommend any.

For broadband providers other than electric cooperatives

The opinion notes that Miss. Code Ann. § 77-3-3(d)(iii) excludes broadband services from the "public utility" definition in Chapter 77. Its specific conclusion about the 2% fee concerns broadband provided by electric cooperatives or their affiliates.

Common questions

Can a Mississippi city charge a franchise fee on broadband revenue?

Not under Section 77-3-17. That statute imposes a 2% fee on revenue from public-utility sales to municipal customers. Broadband services are excluded from the "public utility" definition in Miss. Code Ann. § 77-3-3(d)(iii).

Does the Broadband Enabling Act create a municipal fee mechanism?

The Mississippi Broadband Enabling Act authorizes electric cooperatives to establish broadband affiliates and to use the cooperative's electric delivery system to provide broadband. There is no statutorily mandated fee for that activity. There is no statutory requirement that the cooperative or its broadband affiliate pay an additional fee to a municipality for providing broadband services on the cooperative's electric delivery system.

Does the city need to grant a separate franchise for the broadband activity?

The opinion says Mississippi law does not require a separate franchise agreement for broadband on the cooperative's electric delivery system. It does not decide whether a city may require one under its own authority or an existing agreement.

Can the city's existing electric franchise contract address broadband fees?

The AG expressly declined to interpret contracts, franchise agreements, or local ordinances. It therefore did not decide whether an existing electric franchise addresses broadband fees.

What does Section 77-3-17 say about cooperatives?

Section 77-3-17 says: "Any co-operative which shall operate within any area of a municipality shall likewise pay such municipality two percent (2%) of the co-operative's gross revenue from sales to residential and commercial customers within said municipality." But this provision sits in Chapter 77, where "public utility" excludes broadband. So the 2% fee on co-op revenue covers electric service and other public-utility activities, not broadband.

Does the AG address federal law?

No. Miss. Code Ann. § 7-5-25 limits AG opinions to state law. Federal law applicable to broadband regulation, including any federal preemption issues, is outside the scope of this opinion.

Background and statutory framework

Section 21-27-5 authorizes municipalities to grant franchises for the use of streets, alleys, and public grounds for utility infrastructure (gas, water, sewer, steam pipes; electric/telegraph/telephone conduits; pipelines for transportable commodities). Maximum franchise term is 25 years; franchises cannot be exclusive.

Section 77-3-17 imposes a 2% franchise fee on public utility revenue from municipal customers, including a 2% fee on cooperative revenue from sales to residential and commercial customers within the municipality. The fee runs on public-utility revenue.

Miss. Code Ann. § 77-3-3(d)(iii) explicitly excludes broadband services from the definition of "public utility" in Chapter 77.

Mississippi Broadband Enabling Act. Section 77-17-3(a) defines "broadband affiliate." Miss. Code Ann. § 77-17-5(1) and (2) authorize electric cooperatives to establish, acquire, and own one or more broadband affiliates and to allow those affiliates (or unaffiliated broadband operators) to own, lease, construct, maintain, and operate a broadband system on the cooperative's electric delivery system to provide broadband services to the public.

Miss. Code Ann. § 7-5-25. Limits AG opinions to questions of state law and prevents the AG from interpreting contracts, franchise agreements, or local ordinances or opining on federal law.

Citations

• Miss. Code Ann. § 77-17-3
• Miss. Code Ann. § 77-17-5
• Miss. Code Ann. § 77-3-3(d)(iii)
• Miss. Code Ann. § 77-3-17
• Miss. Code Ann. § 21-27-5
• Miss. Code Ann. § 7-5-25

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2024/12/L.-Spruill-November-8-2024-Mississippi-Broadband-Enabling-Act.pdf

Original opinion text

November 8, 2024
The Honorable Lynn Spruill
Mayor, City of Starkville
110 W. Main Street
Starkville, Mississippi 39759
Re:

The Mississippi Broadband Enabling Act

Dear Mayor Spruill:
The Office of the Attorney General has received your request for an official opinion. Background According to your request, an electric cooperative has an electric service area inside the city limits of Starkville and has recently established the additional service of broadband internet inside that electric service area through a subsidiary company (a "broadband affiliate" as defined in Mississippi Code Annotated Section 77-17-3(a)). Questions Presented Is an electric cooperative using a broadband affiliate for the provision of high-speed broadband services exempt from a municipality's franchise and permitting requirements? Brief Response Mississippi law does not require additional payment or a separate franchise agreement between a municipality and an electric cooperative or its broadband affiliate for broadband services to municipal residents. The two percent franchise fee in Section 77-3-17 for utilities does not apply to broadband services provided by electric cooperatives or their broadband affiliates. Applicable Law and Discussion As an initial matter, this office can opine on prospective questions of state law only. Miss. Code Ann. § 7-5-25. This office cannot by official opinion interpret contracts, franchise agreements, or local ordinances, nor can we opine on any federal law or regulation applicable to your situation.

Municipalities have the authority to grant franchises to electric cooperatives pursuant to Section 21-27-5, which provides: The governing authorities of municipalities shall have the power to grant to any person, corporation, or association, on such terms and conditions as the governing authorities may prescribe, the use of the streets, alleys and other public grounds for the purpose of laying, constructing, repairing and maintaining gas, water, sewer, or steam pipes, or conduits for electric light, telegraph and telephone lines, and pipe lines for the purpose of transporting crude oil, crude petroleum, kerosene, gasoline, and other commodities transportable by pipe line. However, such franchise, right-of-way or privilege of any character whatsoever shall not be granted for a longer period than twenty-five years, and such privilege shall not be exclusive. Section 77-3-17 requires a public utility company that holds a certificate of public convenience and necessity to pay a franchise fee to the municipality. This section further provides: "Any co-operative which shall operate within any area of a municipality shall likewise pay such municipality two percent (2%) of the co-operative's gross revenue from sales to residential and commercial customers within said municipality." Id. As used in Mississippi Code Annotated, Chapter 77 (Regulation of Public Utilities), broadband services are excluded from the definition of "public utility." Miss. Code Ann. § 77-3-3(d)(iii) ("[N]othing in this chapter shall be construed to apply to . . . broadband services[.]"). Thus, while much of what an electric cooperative provides to its customers are public utilities, any broadband services provided by an electric cooperative are not considered public utilities. With respect to broadband services, pursuant to the Mississippi Broadband Enabling Act, electric cooperatives are "authorized to establish, acquire, and wholly or partially own one or more broadband affiliates" and "may allow its broadband affiliate(s) or an unaffiliated broadband operator to own, lease, construct, maintain and operate a broadband system on the electric cooperative's electric delivery system and to provide broadband services to the public utilizing the electric cooperative's broadband system or other parts of its electric delivery system." Miss. Code Ann. § 77-17-5(1), (2). There is no statutorily mandated fee for an electric cooperative or its broadband affiliates to provide broadband services on the cooperative's electric delivery system under the Mississippi Broadband Enabling Act Pursuant to the above-cited authority, it is the opinion of this office that because broadband services are not considered public utilities under Chapter 77, the two percent franchise fee in Section 77-3-17 does not apply to broadband services provided by electric cooperatives or their broadband affiliates pursuant to the Mississippi Broadband Enabling Act. Further, there is no requirement under the Mississippi Broadband Enabling Act that an electric cooperative or its broadband affiliates must pay an additional fee to the municipality for providing broadband services on the cooperative's electric delivery system. If this office may be of any further assistance to you, please do not hesitate to contact us. Sincerely, LYNN FITCH, ATTORNEY GENERAL By:

/s/ Beebe Garrard
Beebe Garrard
Special Assistant Attorney General