Franchise fees on cable broadband service aren’t banned by the Te...

collect 5% of cable modem revenue from companies including Comcast, RCN and WideOpenWest as a city franchise fee capped at that level, Judge Calvin Campbell wrote in a ruling last week. It reversed a ruling by the Circuit Court of Cook County, Chicago, that had found the city couldn’t charge the fee. Judges Patrick Quinn and Scott Neville concurred in Chicago v. Comcast, finding the city’s franchise deal with the 3 cable operators lawfully included a tax on broadband service. Campbell wrote that the Brand X ruling allowing the FCC to treat cable broadband as a data service didn’t deal with whether cable modem service comes under franchise fees. Brand X simply upheld an FCC decision to treat cable modem as a Title 1 service, Campbell wrote: “No court ruled on the interplay between the FCC declaratory ruling and the Communications Act and entered a definitive order resolving the applicability of franchise fees to cable modem service. This court does not stand in the shoes of our federal government and cannot amend a federal act. We are, however, in a position to apply our own state law to a valid contractual agreement.” The Ill. Constitution empowered the city to enforce its franchise agreement, which Sect. 542(b) of the Communications Act doesn’t preempt, the appeal court ruled: “The 5% fee is neither a toll nor a tax, but a franchise fee agreed to be paid by defendants in a valid contract in exchange for the use of the city’s right of way.” Since the franchise fee isn’t a tax, it’s not barred by the Internet Tax Freedom Act, either, the court said. The 3 cable operators violated their video franchise agreements by refusing since April 2002 to pay the 5% cable modem service fee, it said. The pay-TV providers said they couldn’t be charged municipal fees for broadband because the FCC said cable broadband isn’t a cable service. The defendants also said previous rulings by federal appeals courts found fees like the cable modem franchise charge were impermissible. RCN signaled it’s likely to appeal. “We are still reviewing the decision,” Senior Vp Richard Ramlall told us, “but are certainly likely to seek review of a decision that so completely eviscerates the federal law and the FCC decisions that have implemented that federal law.” A former FCC lawyer agreed with RCN. “The Illinois state court bends over backwards to ignore what seems to be a pretty clear congressional intent that localities not be allowed to impose franchise fees on noncable services such as Internet access,” Free State Foundation Pres. Randolph May said: “Its position is not likely to be ultimately sustained.” Comcast will appeal the ruling, which a spokeswoman termed “contrary to the opinions of 4 federal district courts that have previously ruled on nearly the identical question before the Illinois Court.” The ruling also goes against FCC rulemakings, including the March franchise order, she said. Officials at WideOpenWest didn’t immediately comment.