News

Time Warner to Refund Data Fees

3/16/2003 7:00 PM Eastern

Washington— Time Warner Cable said last Friday that it's using the next billing cycle to refund $1.8 million in franchise fees to about 81,000 subscribers who were cable-modem customers in various southern California communities from April 2001 through May 2002.

According to the MSO, a customer could receive a bill credit of up to $40, but the average credit is expected to be closer to $22. Former customers will be sent a check.

In the wake of litigation and uncertainty over the regulatory status of cable-modem service, Time Warner withheld cable- modem franchise fees from nearly all local governments in Los Angeles and Orange County, starting in April 2001.

Over the next 13 months, the MSO placed the collected fees in an interest-bearing escrow account.

In May 2002, Time Warner stopped collecting modem fees after the Federal Communications Commission ruled two months earlier that cable modem service was not a cable service subject to the five percent local tax. The move was copied by nearly all of the major MSOs.

A number of cable operators refused to collect modem franchise fees after the FCC ruling, because they feared class-action suits alleging that franchise fees on non-cable services were unlawful.

At the FCC, franchise fees on cable-modem revenue are a political jump ball. The FCC is exploring whether local governments can collect the revenue under laws not related to cable franchising.

It's possible that Time Warner may have jumped the gun on the rebates in southern California, because the FCC has not decided whether franchise fee rebates are owed either modem subscribers or cable companies for the period of time prior to the March 2002 classification.

Last Tuesday, House Energy and Commerce Committee chairman Rep. Billy Tauzin (R-La.) wrote FCC chairman Michael Powell, urging the agency to protect cities from having to return modem-fee revenue going back several years.

In his short, two-paragraph letter, Tauzin urged Powell to spare cities "significant risk" in court by clarifying that only modem fees collected after the FCC's decision are subject to potential rebate.

Tauzin said he wanted the FCC to "clarify that its decision is prospective and affects only contracts signed after the issuance of its ruling. Otherwise, local governments will be exposed to future claims and significant risk."

It was unclear from his letter whether the "its decision" Tauzin referred to was the FCC's March 2002 ruling, or some future ruling.

The congressman added that he agreed with the FCC's decision to classify cable-modem service as an interstate information service and not as a cable service within the meaning of federal law.

Tauzin said he also agreed that franchise fees normally collected on video-programming revenue should not apply to broadband-data revenue as a result of the reclassification.

March