Municipal groups sue FCC over cable modem ruling

Municipal groups sue FCC over cable modem ruling
WASHINGTON — An alliance of local and county groups is suing the Federal Communications Commission over its March 14 ruling that cable modems are no longer telecommunications services subject to state and local regulations.

In announcing the lawsuit Tuesday (May 14), the group argued that the FCC decision could cost municipalities at least $300 million in lost cable franchise fees over the next fiscal year unless the order is reversed. Local officials also said the FCC had usurped local authority over rights-of-way and other public property.

The FCC has "preempted the authority of local governments to be stewards of our . . . valuable public rights-of-way," said Donald Borut, executive director of the National League of Cities.

In the March 14 ruling that the FCC said was designed to promote widespread deployment of broadband technologies, the agency declared that cable modems would be considered "information services" that are exempt from a range of regulations.

FCC chairman Michael Powell said the action was not an exercise in "regulatory free will." The FCC, he said, "must attempt to faithfully apply the statutory definition to a service, based on the nature of the service, including the technology used and its capabilities and the nature of the interactive experience for the consumer."

FCC commissioner Michael Copps, a Democratic appointee, dissented from the decision, which he said created "dangerous uncertainty in the growing market for cable broadband services." Copps also said he sympathized "with the concerns of cable system operators, local franchising authorities and others about the lack of regulatory clarity in this area."

The six largest U.S. cable operators nevertheless responded to the FCC ruling by notifying local franchise authorities that they would immediately halt payments of cable franchise fees on cable modem revenues.

Joining forces

The coalition fighting the ruling combines five national organizations, including the National League of Cities and the U.S. Conference of Mayors. The group said it is joining forces with Internet service providers to fight the cable modem ruling in court. Its petition, which will be consolidated with others, is scheduled to be heard by a federal appeals court in San Francisco.

The group will argue that the FCC's cable modem ruling violates the 1996 Telecommunications Act, which classified cable modems as a partially regulated cable service. Moreover, it maintains that the FCC's action is a "clear preemption of local authority," said Larry Naake, executive director of the National Association of Counties.

Budget shortfalls

The alliance also worries that the FCC ruling will encourage cable operators to shift new services like interactive TV onto the unregulated cable modem platform. Naake said such a shift would result in cable operators paying even more in lost fees to local government to rent rights-of-way and other public infrastructure.

Straining under budget shortfalls, state and local governments are increasingly sensitive to new federal regulations that reduce their revenues or force them to spend more as a result of so-called "unfunded federal mandates." Thomas Cochran, executive director of the U.S. Conference of Mayors, called the FCC ruling "bad policy and bad timing." Since the Sept. 11 terror attacks, Cochran said, new security costs have been shifted to local governments with little or no federal compensation. The loss of cable fees makes the budget shortfall worse, he added.

The five local-government groups have formed a coalition called Alliance of Local Organizations Against Preemption to fight the FCC ruling.

"Far from advancing the purported goal of speeding the deployment of high-speed services to consumers, the FCC has created uncertainty for everyone," said alliance leader Libby Beaty.

The U.S. cable industry has remained largely silent on the legal challenges to the FCC's cable modem ruling.