Chicago Sues for Cable-Modem Revenue


The city of Chicago has filed a state court suit to compel its three cable
operators to pay franchise fees on cable-modem revenue.

Assistant corporation counsel Jack Pace said the suit -- filed Wednesday in
Circuit Court of Cook County -- asserted that the operators voluntarily entered
into franchise agreements that require fee payments on all revenue 'regardless
of what the Federal Communications Commission says.'

'The contracts cover modem service. It's a question of contract law,' Pace
said of the suit.

Cable operators ceased modem-fee payments after the FCC issued a March
declaratory ruling defining high-speed-data service as an interstate information
service, and not a cable service.

The Chicago suit seeks a declaratory ruling enforcing its franchises. If the
city prevails, the ruling would impact AT&T Broadband, RCN Corp. and
WideOpenWest LLC.

The suit was filed despite ongoing federal challenges to modem-service
classification both in court and before the FCC.

The municipal suit demonstrates the frustration of municipal authorities, who
believe governments will lose millions of dollars if modem service is
permanently eliminated from the franchise-fee pool.