Cable Operators to Contest Cable Modem Tax Ruling
Three cable broadband providers likely will appeal a ruling (WID May 23 p10) letting Chicago charge a 5% franchise fee on cable modem service. Last week, a 3-judge Ill. Court of Appeal panel decided that neither FCC rules nor federal law bar cities from collecting a 5% fee on cable broadband revenue - the same cap the Commission put on municipal video service fees. Defendants Comcast, RCN and WideOpenWest unsuccessfully argued that cities can’t collect Web surcharges under the Telecom Act, Internet Tax Freedom Act, FCC orders and a handful of other courts’ rulings. Judge Calvin Campbell disagreed, saying federal rules don’t preempt state contract law and the companies’ 15-year franchise agreements, made in 2000.
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Comcast and WideOpenWest officials told us they will appeal the ruling; RCN said it probably will. The companies slammed the ruling as flying in the face of FCC Title I rules removing cable modem and other broadband services from local authority. The appeal of Chicago v. Comcast will be filed at the Ill. Supreme Court, said RCN Senior Vp Richard Ramlall: “Other courts around the country have clearly understood the limits of local franchise authority over broadband services and the overriding federal policy to encourage the deployment” of broadband.
Cable operators would raise prices to collect the fee, said WideOpenWest Gen. Counsel Craig Martin. Customer bills would rise $1.35-$3.50 monthly if the Chicago decision isn’t overturned, Ramlall said. Broadband deployment -- a White House and FCC goal -- would be stymied if cities charged a 5% cable modem fee, he added: “Consumers in Chicago will also clearly be harmed… If this decision stands they will pay more for broadband than consumers in other cities.”
Prices won’t rise immediately, since the ruling probably will be overturned, said lawyers involved in the case and watching it. The Ill. Supreme Court likely will hear oral arguments on the cable operators’ appeal, which Martin said has a good chance of succeeding because Campbell’s ruling “ignores established congressional and FCC policy… that has been recognized by multiple courts.” Four federal courts have sided with cable, said a Comcast spokeswoman. Campbell called that argument “unavailing.” Judges Patrick Quinn and Scott Neville concurred in reversing a ruling in favor of Comcast by Cook County Circuit Court, Chicago.
The Ill. court said that state’s constitution authorizes cities to control cable franchise contracts. That power wasn’t taken away by federal legislation including the Act or by the Supreme Court’s 2005 Brand X decision upholding FCC classification of cable modem as an information service, it said. Campbell said Sec. 542 of the Act doesn’t limit city authority over broadband. And Sec. 541 “expressly preserves that authority,” Calvin wrote: “The FCC has set forth no stated limit on the franchise fee the city can collect on revenues generated from cable modem service.”