News

Time Warner to Refund Modem Fees

3/14/2003 8:31 AM Eastern

Time Warner Cable said 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, customers could receive bill credits of up to $40, but
the average credit is expected to be closer to $22. Former customers will be
sent checks.

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, Calif., 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 5 percent local tax. The move was copied by
nearly all of the major MSOs.

Many cable operators refused to collect modem-franchise fees after the FCC
ruling because they feared class-action suits alleging that franchise fees on
noncable services were unlawful.

At the FCC, franchise fees on cable-modem revenue are a political jump ball.
The agency 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 to either modem subscribers or cable companies for the period
of time prior to the March 2002 classification.

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