Cox Responds to Modem-Fee Critics

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Washington -- Cox Communications Inc. has at least one local government
backing its decision to cease collection of cable-modem franchise fees in
Western states within the jurisdiction of the U.S. Court of Appeals for the
Ninth Circuit.

Cox told the Federal Communications Commission recently that Kern County in
California -- home of Edwards Air Force Base -- has agreed to waive a franchise
provision requiring Cox to collect fees on high-speed Internet-access revenue
for two years.

In Jan. 10 comments, Cox informed the FCC that Kern County officials decided
to take that step in recognition of the legal and regulatory uncertainty
surrounding the classification of cable-modem service.

In June, the Ninth Circuit ruled that cable's provision of Internet access
was not a cable service. Cox feared lawsuits if it continued to collect
cable-modem fees on a service that had no legal status as a cable service within
the Ninth Circuit.

Yet Cox's policy to stop collecting cable-modem franchise fees came under
assault from a local regulatory organization and from the local phone industry,
which claimed that Cox was relying on the Ninth Circuit to avoid paying
franchise fees as a cable operator and paying into a phone-subsidy fund as a
telecommunications provider.

Responding to those charges, the operator said it continues to pay
cable-modem fees in markets not located within the Ninth Circuit's nine-state
territory, which shows that the MSO tailored its decision to legal circumstances
in one part of the country.

Regarding phone-subsidy contributions, Cox said it pays into the fund in
connection with local phone service it provides to about 100,000 residential
customers in California. Moreover, the MSO said, because the state has
designated the company a 'carrier of last resort,' Cox 'actually receives
payments from the state's universal-service fund to provide telecommunications
services to certain customers.'

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