FCC Backs Cable on Fee Pass-Throughs


Washington -- Over the objections of various cities, the
Federal Communications Commission last week gave cable operators a break on a contentious
franchise-fee issue.

Under the FCC's ruling, cable operators will be
allowed to recover from their subscribers' franchise-fee underpayments, if any, for
the 27-month period ending July 31, 1997.

Cities from Texas, Iowa, Michigan and Ohio urged the FCC to
force cable operators to pay out of their own pockets, but the FCC rejected the
cities' legal arguments.

The FCC, in an action by the Cable Services Bureau, ruled
that cable operators were following the agency's rules in effect for the period in
question, and that they should not be penalized for the underpayments.

The FCC's order did not indicate the amount of money
involved in the decision.

In April 1995, the FCC held that franchise fees were not a
component of a cable operator's gross revenue. By excluding franchise fees from gross
revenue, an operator effectively reduced its franchise-fee payment to a city.

In July, the Fifth Circuit Court of Appeals overruled the
FCC, which prompted some cities to recover underpayments from cable operators that had
followed the FCC's April 1995 ruling.

Four months later, the National Cable Television
Association asked the FCC to rule that the underpayments that cities were seeking to
recover could be passed through to subscribers as an external cost.

In urging the FCC to reject the NCTA's request, Dallas
and other cities said the commission should not allow pass-throughs because the recovery
of underpayments did not represent an "increase" in franchise fees. The cities
also argued that cable operators should have known that the FCC's ruling was headed
to court on appeal.

The FCC decision does not cover cases prior to April 6,
1995, nor does it touch upon the legal right of franchising authorities to recover
underpayments for the 27-month period. The cities may appeal the bureau's ruling to
the five FCC commissioners.

"We're looking into that right now," said
Washington, D.C.-based lawyer Joe Van Eaton, who represented numerous cities and counties
in the case.