AT&T Cable Franchise Fee Issue

MRSC, January 2001

In December AT&T sent letters to some cities and counties that have granted CATV franchises to the company. The letter alleges that a 9th circuit federal court decision supports the company's view that franchise fees are not due on revenue earned on cable modem services because the court ruled that such services are a "telecommunications service" rather than a "cable service."

AT&T says that, effective January 2001, it will no longer remit franchise fees on these revenues unless requested to do so by the municipality. (See AT&T letter ( 261kb)). If AT&T is not currently offering cable modem services in your city or county, your franchise fee revenue will not be affected. Those jurisdictions that have been imposing their cable franchise fees on cable modem services will see a drop in revenue.

Cities that have been imposing a utility tax on revenues from cable modem fees can probably no longer do so, but they can tax these same revenues under the section of their codes that provide for a utility tax on telephone or telecommunications services. If the tax rates are the same for both utilities, there will be no net loss in utility tax revenue. Contact Jim Doherty, Legal Consultant, at MRSC for more information.