News

Cities Strike Out at Supreme Court

12/06/2004 5:21 AM Eastern

The Supreme Court Monday rejected an appeal that could have resulted in cable operators paying 5% of their high-speed-data revenue to local franchising authorities.

The high court dismissed without comment an appeal by the National League of Cities, which was attempting to extend local taxing authority to cable-modem service after it had effectively been removed by the Federal Communications Commission in March 2002.

The FCC determined that cable-modem service was not a cable service. Before that ruling, cable operators and cities assumed that it was a cable service and cable companies paid the 5% fee.

Cable was willing to go along with the cable-service classification because cable services are not subject to telephone-type open-access requirements.

But the ground shifted in that March 2002 ruling because the FCC further held that cable-modem service was an interstate information service to be left unregulated. Cable operators stopped paying franchise fees, claiming that cities did not have authority to collect them on noncable services.

The U.S. Court of Appeals for the Ninth Circuit affirmed the FCC’s ruling on the cable-service classification but rejected the ruling that cable-modem service was solely an information service.

The court held that cable-modem service was not only an information service but also a telecommunications service -- a designation that would require cable to lease capacity to competing Internet-service providers at regulated rates.

The Department of Justice and the National Cable & Telecommunications Association appealed the telecommunications-service holding by the Ninth Circuit. Last Friday, the Supreme Court agreed to hear those appeals in a consolidated case, tentatively set for oral argument March 23.

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