AT&T Fears Court Battles Over Modems

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AT&T Corp. is warning the Federal Communications Commission that
classifying cable-modem service solely as an 'information service' could spark
litigation with cities, perhaps causing cable operators to slow down broadband
deployment.

The cable industry is hoping that the FCC will rule that cable-modem service
is a 'cable service' under federal law.

But the agency is also debating internally whether cable-modem service is an
unregulated information service or a telecommunications service that may face
access requirements imposed on local phone companies.

In a Dec. 18 letter reporting on a recent meeting at the FCC, AT&T said
it told the FCC officials present that classifying cable-modem service solely as
an information service could ensnare cable operators in litigation with local
governments.

By way of example, AT&T said it was possible that cable operators may not
be allowed to offer an information service under current local franchise
agreements that authorized only the provision of cable services.

In such a case, a local government might insist that the cable company obtain
a new franchise, despite no additional burden on the public rights of way,
AT&T said.

In addition, AT&T said, it was unclear whether local governments would
face any constraints in taxing cable-modem-service revenue if the service is not
considered a cable service.

Under FCC rules, cities are generally barred from collecting more than 5
percent of revenue derived from cable services.

'We expressed concern that these issues could all prove controversial and
become bogged down in litigation, encumbering and thereby impeding the continued
rollout of cable-modem services,' AT&T said in a two-page letter signed by
vice president of federal government affairs Betsy Brady.

AT&T's letter did not mention another possible drawback to the
information-service classification.

Under a decision last year by the U.S. Court of Appeals for the 11th Circuit,
cable operators are not entitled to pay regulated rates to utility pole owners
when MSOs are not offering either cable or telecommunications services.

The U.S. Supreme Court is reviewing the 11th Circuit's decision in an appeal
filed by the FCC and the National Cable & Telecommunications Association.
Both the FCC and the NCTA claimed that the FCC has the right to regulate pole
fees for any cable attachment.

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