[Council Communication]  [Attachments]

Council Communication

Title:	An Ordinance Amending the Definition of Gross Revenues to Exclude Revenue from Cable Modems under the Telecommunications Chapter of the Ashland Municipal Code
Dept:	Legal Department
Date:	May 4, 2004
Submitted By:	Paul Nolte
Approved By:	Gino Grimaldi, City Administrator

Synopsis:	Telecommunication providers within the public right of way are now required to pay a 5% franchise fee on all telecommunication gross revenues generated within the city. This ordinance amends section 16.04.040.L of the Ashland Municipal Code to remove cable modem fees from the calculation of gross revenue.
Recommendation:	Adopt the amendment.
Fiscal Impact:	Since the inception of AFN, one of the two telecommunication providers receiving revenue generate by cable modems, approximately $185,000 have been paid to the city as a result of this fee.  The fee raises approximately $50,000 per year.  The city would no longer receive this fee from AFN if the amendment is adopted. The other provider is Charter Cable Television who has never paid the fee citing federal law preemption.  Charter owes approximately $250,000 for fees never paid but an exact figure is not possible as Charter refuses to report any revenues generated by cable modem.  Charter would no longer be required to pay the fee, which is estimated to be approximately $50,000 per year if Charter complied with the ordinance, for revenues generated after June 2004.  This amendment does not forgive any fees Charter has failed to pay prior to July 2004.
Background:	The provision of cable modem services is a telecommunication service under the city's telecommunication code (Title 16 of the Ashland Municipal Code).  AFN was granted a telecommunications franchise in 1999 and has paid all fees due under the franchise.   Charter has refused to obtain a telecommunications franchise for cable modem services and refuses to pay a franchise fee for such service under its cable television franchise.  The issue of cable modem services under the 1996 Federal Telecommunication Act is the subject of much litigation at the federal level.  The FCC adopted a regulation in 2002 defining cable modem service as an information service, not a cable service or a telecommunication service.  (Under its cable franchise Charter is required to pay 5% of gross revenue derived from cable services.) AFN's compliance with the city's code for the payment of franchise fees on cable modem fees puts it at a competitive disadvantage in light of Charter's refusal to comply.  This amendment will level the playing field until the litigation over these issues is resolved at the federal level.
Attachments:	• Proposed Ordinance

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