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Local Officials Want Internet Authority

2/17/2002 7:00 PM Eastern

An advisory panel of local officials has urged the Federal Communications Commission to retain local regulation of Internet services provided by cable-system operators.

The recommendation — which comes as the FCC nears a decision on the regulatory classification of high-speed data service — was prepared in a Feb. 5 communication by the agency's Local and State Government Advisory Committee.

Committee members include Boston Mayor Thomas Menino, Dearborn (Mich.) Mayor Michael Guido and Arvada (Colo.) Mayor Kenneth S. Fellman, who signed the recommendation in his capacity as LSGAC chairman.

In the three-page document, the committee urged the FCC to classify cable-delivered Internet access as a cable service. That classification would continue the tradition of local oversight for cable operators, the panel said.

"Local communities and the capital markets need the predictability and certainty of established legal precedent to understand the various rights and responsibilities of a cable-modem service provider," the LSGAC said.

When the FCC began studying the regulation of cable-modem service in September of 2000, the National Cable & Telecommunications Association agreed with cities' stance on classification.

The NCTA based its approach on federal law that barred cities from requiring cable operators to carry unaffiliated Internet-service providers.

In its FCC recommendation, the committee indicated that if cable-modem service is a cable service, local governments might have the authority to require operators to carry unaffiliated ISPs.

Federal cable law "provides the FCC and local franchising authorities with sufficient authority to ensure that cable operators do not restrain competition between affiliated and unaffiliated content providers," the LSGAC said.

Cable-industry sources and other observers expect the FCC in March to rule that cable-modem service is an information service. Such services have not been subjected to FCC regulations as far back as 1966.

The pending move to classify cable-modem access as an information service, and not a cable service, has triggered a dispute between cable operators and local governments over the latter's authority to apply traditional forms of cable regulation — such as franchising mandates and franchise fees — to information services offered over cable.

The committee's letter maintained that cable services and any information services offered by cable operators are not mutually exclusive. They are effectively the same, so a local government may regulate either type of service, the LSGAC argued.

But the letter indicated that local governments fear the FCC might permit local regulators to continue to oversee cable operators' video services, but pre-empt them from regulating information services, on the grounds that information services fall within the agency's jurisdiction.

That division of authority, the LSGAC warned, would "generate litigation, delay and further investment uncertainty."

The cable industry's position — assuming the FCC adopts the information-services classification — is that local governments would be barred from requiring cable operators to obtain franchises to provide information services or to pay franchise fees on cable-modem revenue.

Cable operators typically pay 5 percent of cable-service revenues to local governments.

Operators claimed it would be discriminatory to levy a franchise fee on their information services because cable's competitors do not pay such fees.

On Feb. 8, the NCTA filed a letter with the FCC detailing the industry's concerns about regulatory uncertainties that could arise from the information-service classification, including possible ISP-carriage mandates.

The NCTA recommended that if the FCC ruled Internet access was an information service but postponed a ruling on ISP-carriage requirements, then the agency should state that no mandatory carriage rules presently apply to cable.

"This is the central question of the [cable-access proceeding], and failure to provide a clear answer as to current requirements will cause continued uncertainty in the marketplace and the courts," the cable trade group said.

In other comments, the NCTA said cable operators should not be required to refund subscribers who paid franchise fees on cable-modem service when cable operators and local governments assumed that cable-modem service was a cable service, not an information service.

In the future, the trade group said, cable operators should not be required to pay franchise fees when other information-service providers are exempt from such levies.

More broadly, the NCTA said, there should be no regulation of cable-modem service below the federal level, to be consistent with the congressional objective of avoiding Internet regulation.

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