Comcast to Stop Collecting Modem Fees

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Comcast Corp. is notifying local governments that it will no longer collect
cable-modem franchise fees in response to a recent ruling by the Federal
Communications Commission.

'Cable-modem customers will be notified of this change on their next bill,'
according to Comcast's March 22 draft letter, which was obtained by
Multichannel News.

Comcast spokesman Tim Fitzpatrick confirmed that the company has begun
notifying cities of its decision.

The MSO said in the letter that it would not ask cities for reimbursement of
past modem-fee payments and would not issue refunds to subscribers who had been
paying modem fees.

On March 15, the FCC ruled that cable-modem service is an interstate
information service, and not a cable service. Local governments may collect
franchise fees on cable services of up to 5 percent of gross revenue.

Cable operators are concerned about lawsuits if they continue to collect
cable-modem fees when the service is not classified as a cable service.

'Generally, I don't find [Comcast's] notification surprising in the least
given the FCC's decision,' said Libby Beaty, president of the National
Association of Regulatory Officers and Advisors. 'I understand that cable
operators are concerned about their liability in this particular area.'

Comcast, based in Philadelphia, serves about 1 million high-speed-data
customers. The service is available to about 10 million homes in the MSO's
service territories.

In the letter, Comcast noted the FCC's classification decision. But the MSO
appeared to base its decision to halt further collection of cable-modem fees not
on potential litigation risks, but on a statement about franchise fees the
commission made in the notice of proposed rulemaking that accompanied the
classification decision.

In the NPRM, the FCC stated, 'Revenue from cable-modem service would not be
included in the calculation of gross revenue from which the franchise fee
ceiling is determined.'

However, the agency is not saying whether it is appropriate for cable
operators to stop paying cable-modem-franchise fees because fee issues are teed
up for consideration in the NPRM.

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