By Ron Thaniel
October 20, 2003

The 9th Circuit of the U.S. Court of Appeals rejected an appeal led by the U.S. Conference of Mayors to a Federal Communications Commission (FCC) ruling, which declared cable modem service to be an interstate "information service," as opposed to a "cable service."

In doing so, the 9th Circuit has remanded the matter back to the FCC, and has effectively discounted the arguments made by the U.S. Conference of Mayors (USCM), the National League of Cities (NLC), the National Association of Counties (NACo) and the National Association of Telecommunications Officers and Advisors (NATOA) that cable modem is a cable service and should be subject to franchise fees.

Dearborn Mayor Michael A. Guido, Vice Chair of the Conference of Mayors Transportation and Communications Committee said, "I am disappointed with the ruling of the 9th Circuit because it does not take into consideration the direct economic impact of cities losing the 5 percent franchise fee."

"Many cities used this fee for maintaining and repairing the local rights of way where cable companies have their infrastructure. Now we are forced to subsidize this cable operation with resources that we don't have," said Guido.

The FCC's March 2002 "Declaratory Ruling" became the basis for cable companies to stop paying franchise fees on the portion of revenue generated by cable modem service. The ruling is that cable modem service is neither a telecommunications service subject to state or federal telecommunications regulations, nor a cable service subject to local cable franchise requirements. This action is costing cities well over a half a billion dollars in lost franchise fees annually.

The Conference of Mayors is considering an appeal of the 9th Circuits decision.