MS 2024-12-L-Spruill-November-8-2024-Mississippi-Broadband-Enabling-Act November 8, 2024

Can a Mississippi city charge a franchise fee on an electric co-op's broadband affiliate?

Short answer: No. Mississippi's 2% franchise fee under Section 77-3-17 covers public utility services, but broadband is excluded from the definition of 'public utility' under Section 77-3-3(d)(iii). The Mississippi Broadband Enabling Act sets no statutory fee for broadband services delivered through an electric cooperative's broadband affiliate. So the city cannot collect an additional franchise fee or require a separate franchise agreement for those broadband services.

Disclaimer: This is an official Mississippi Attorney General opinion. AG opinions are persuasive authority but not binding precedent. This summary is for informational purposes only and is not legal advice. Consult a licensed Mississippi attorney for advice on your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official AG opinion. The original opinion (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original AG opinion (PDF)

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. Section 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, Section 77-17-1 et seq., authorizes electric cooperatives to establish broadband affiliates and to allow those affiliates to use the cooperative's electric delivery system to provide broadband. The Act does not impose any statutory fee for that activity, and it does not condition the broadband provision on a separate municipal franchise. So Starkville cannot require an additional payment or a separate franchise agreement for the broadband services.

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 2% franchise fee under Section 77-3-17 does not apply to broadband revenue from an electric cooperative's broadband affiliate. The city cannot impose an additional fee on that broadband revenue or require a separate franchise agreement on top of the existing electric franchise to authorize the broadband activity. If you have an existing franchise agreement with the electric cooperative and the contract speaks to fees on broadband revenue specifically, the AG opinion does not interpret that contract; whether a contractual claim exists turns on the contract's terms, not on Section 77-3-17.

If your city is interested in capturing some broadband revenue, the Broadband Enabling Act does not provide a statutory mechanism. Legislative change would be needed.

For electric cooperatives and their broadband affiliates

Confirms two things you likely already understood. First, broadband services are excluded from the "public utility" definition in Chapter 77, so the 2% franchise fee in Section 77-3-17 does not reach your broadband revenue. Second, the Broadband Enabling Act does not require a separate franchise from the city for the broadband activity on top of the electric franchise. Practical takeaway: ensure your operations stay clearly within the Broadband Enabling Act's authorization and within whatever electric franchise terms you already have with the city.

For state legislators

The opinion exposes the gap. As broadband becomes more economically significant for electric cooperatives in Mississippi, cities may push for some form of revenue participation. Today the statutory architecture explicitly excludes broadband from the public-utility category and from the 2% fee mechanism. If the legislature wants cities to share in broadband revenue, the path is a new statutory fee mechanism specific to broadband.

For broadband providers other than electric cooperatives

The 2% franchise fee in Section 77-3-17 applies to "public utility" revenue, and Section 77-3-3(d)(iii) excludes broadband from that category. The exclusion is not specific to electric cooperatives; it applies to broadband services generally. So the same exclusion runs in favor of any broadband provider whose business does not otherwise sweep them into the "public utility" category.

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 Section 77-3-3(d)(iii).

Does the Broadband Enabling Act create a municipal fee mechanism?

No. The Act, Section 77-17-1 et seq., 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 Broadband Enabling Act does not require a separate municipal franchise for broadband on top of the electric franchise. The municipal franchise authority in Section 21-27-5 lets the city grant franchises for utility infrastructure on streets and public grounds, but the Act treats broadband on the electric delivery system as ancillary to the existing electric infrastructure.

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

That depends on the contract's terms. The AG opinion explicitly does not interpret contracts, franchise agreements, or local ordinances. If the existing electric franchise contains specific language addressing broadband revenue or related fees, that is a contract question for litigation or negotiation, not a state-law question for an AG opinion.

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. Section 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.

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

Mississippi Broadband Enabling Act, Section 77-17-1 et seq. Section 77-17-3(a) defines "broadband affiliate." Section 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.

Section 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

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