Virginia Subs Sue Cox Over Modem Fee

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Another court now gets the chance to weigh in on the legal definition of cable-modem service, this time in a potential class-action lawsuit that challenges the franchise fee Cox Communications Inc. assesses on cable-modem revenue.

Customers Kimberly and William Bova filed the suit last week in the Roanoke division of U.S. District Court for the Western District of Virginia.

The Cox@Home users pay franchise fees based on the cost of the high-speed-data service. Their lawsuit asserts data delivery is a telecommunications service.

They also claimed Cox failed to file tariffs for its data-over-cable product, as federal law requires for telecommunications services.

The lawsuit also contended that Cox discriminates against some consumers in collecting the franchise fee. Late last year, Cox stopped collecting franchise fees from modem customers in California, Nevada, Arizona and Idaho.

Cox halted collecting franchise fees in those states because they fall under the jurisdiction of the 9th U.S. Circuit Court of Appeals. That court-in a case that pitted AT&T Broadband against local regulators in Oregon-determined data delivery was not a cable service.

Cox cited that decision when it notified local regulators of its intent to drop the franchise fee. The operator warned officials that they and the MSO could be liable to class-action litigation over collecting a cable-based fee for a non-cable service.

"As it stands today, Cox acknowledges that cable-modem service is a telecommunications service in certain geographic areas.but refuses to comply with telecommunications laws protecting consumers.and continues to charge franchise fees that may not be imposed upon telecommunications customers outside of those states that comprise the 9th Circuit," the Virginia lawsuit states.

Cox contests how the suit characterizes its stance on the modem issue.

"The complaint misrepresents Cox's position," said vice president and general counsel John Spalding. "We never contended modem is a telecommunications service. Nothing could be further from the truth."

Cox is trying to comply with applicable laws throughout the country, he added, which means consumers in the West are treated differently because of the 9th Circuit's decision.

The company has not been officially served with the suit, but executives have seen a copy. Spalding said the suit was meritless.

The 9th Circuit's ruling-which only applies to states in its jurisdiction-is hardly the last word on the subject of how to classify cable-modem service.

Lawyers that specialize in cable-related cases noted the court specified that data delivery was not a cable service-but left it unclear as to whether the service is a telecommunications service or an information service.

And a federal judge in Virginia, ruling on an open-access regulatory challenge in Henrico County, contradicted the 9th Circuit's conclusion. In the Henrico case (which also involved AT&T Broadband), Senior U.S. District Court Judge Richard L. Williams ruled last May that data delivery is a cable service.

An appeal of the Henrico case is pending before the 4th U.S. Circuit Court of Appeals. Barring an appeal to the U.S. Supreme Court, that decision would be binding in the jurisdiction where this latest action was filed.

Yet another case-this one before the U.S. Supreme Court-could also redefine data delivery.

The high court has agreed to review The FCC and the National Cable Television Association v. Gulf Power Inc.
In that case, the 11th U.S. Circuit Court of Appeals also concluded data delivery was not a cable service.

If the Supreme Court agrees with that conclusion, pole-attachment fees could be increased throughout the U.S. The court ruled that as a telecommunications provider, cable operators could be assessed "market-based rates" and not regulated pole-attachment fees for their utility-pole connections.

John Fishwick, the plaintiffs' lawyer in the potential Virginia class action, said he thinks the best outcome for consumers would be to have data delivery defined as a telecommunications service.

"The lawsuit seeks consistency," he said. "It is our belief the 9th Circuit got it right."

Fishwick said he does not contemplate a similar action against AT&T Broadband, which is also dropping franchise-fee collections from cable-modem users. But he noted other lawyers have contacted him about the issue.

If the Roanoke-based court approves, the lawsuit would represent all Cox cable-modem consumers that live in states outside of the 9th Circuit.

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