Cable modem ruling elicits protest
- By Dibya Sarkar
- May 15, 2002
Five national associations filed suit May 13 against the Federal Communications
Commission over a recent decision exempting cable modem service from local
authority and franchise fees, which they allege could cost cities and counties
upwards to $300 million this year in lost revenues.
"On March 14 the FCC was brazen enough to rewrite existing federal law
and to issue a ruling that cable modem service is not a cable service,"
said Larry Naake, executive director of the National Association of Counties
(NACo) at a Washington, D.C. press conference, including representatives
from the other groups.
"The FCC ruling robs local government of their constitutional rights
to charge cable companies a franchise fee for the use of public property
and rights of way," he said, adding it violated the Telecommunications Act
of 1996. "No monopoly should get a federal order to subsidize their rent,
while local property taxpayers foot the bill."
NACo, the National League of Cities, the United States Conference of
Mayors (USCM), the National Association of Telecommunications Officers and
Advisors (NATOA), and the International Municipal Lawyers Association have
formed an alliance, called the Alliance of Local Organizations Against Preemption,
and retained counsel to fight the FCC ruling.
The alliance filed a petition in the U.S. Circuit Court of Appeals for
the District of Columbia — which will be consolidated with other similar
petitions filed earlier in the 9th Circuit Court of Appeals in San Francisco
— asking the court to toss out the FCC ruling.
In its decision, the FCC concluded that cable modem service is "properly
classified as an interstate information service," not a telecommunications
service. The ruling effectively denied local governments from collecting
franchise fees on cable modem service. The FCC said the ruling would help
promote broadband deployment as well as provide better and cheaper service
But municipal representatives said the opposite would happen.
"The cable modem subscriber will be out in the cold," said NATOA executive
director Libby Beaty, adding that homeowners or small business owners will
experience increased service problems and have no where to turn. She also
said that any savings cable companies get by not paying franchise fees would
not be passed on to the consumer.
Tom Cochran, USCM executive director, said the decision would "put bigger
holes in our budgets," adversely affecting municipal services and at a time
when mayors are shifting resources toward homeland security measures.
"This is a bad decision. This is a bad policy and it's bad timing,"
he said. "This is a serious financial situation that has come from a bunch
of bureaucrats in Washington that did not watch the World Trade Center blow
A preliminary survey released by the alliance showed that Las Vegas
would lose $1 million this year, while Houston would lose $624,000. In all,
the alliance estimated $300 million in lost collective franchise fees.
After the March ruling, the nation's six largest cable companies —
AT&T, AOL Time Warner Cable, Charter Communications, Adelphia Communications,
Cox Communications Inc., and Comcast Corp. — sent letters to local franchise
authorities indicating they would immediately stop paying such fees on cable
Representatives said that the FCC could also rule other
cable services as "interstate information services," resulting in further
losses of revenues and rights to municipalities. They also said they would
solicit the help of congressional lawmakers.
A call to the FCC was not returned, however, the National Cable and Telecommunications Association (NCTA), the principal trade association of the cable TV industry and that had previously supported the FCC decision, released a prepared statement:
"Although municipalities view the FCC action as a lost revenue opportunity, cable companies continue to pay cities more than $2 billion annually in franchise fees, and the FCC's action will result in savings of $1.50 to $2.50 per month for cable modem customers," said Dan Brenner, NCTA's senior vice president and general counsel. "The FCC's ruling treats Internet service provided by cable operators the same as that offered by other Internet service providers for franchise fee purposes."