Copyright 2002 Gannett Company, Inc.

USA TODAY…03/15/2002

From LexisNexis

Consumers can expect a cut of up to $3 in their monthly bills for cable high-speed Internet service under a federal ruling Thursday that frees the cable company service from heavy regulation.

The Federal Communications Commission action also is likely to lead to a controversial but widely anticipated move to relieve the cable giants of requirements to open cable broadband service to rival Internet service providers (ISPs).

The FCC ruled Thursday that cable-modem broadband is an "information" service, not a "telecommunications" or "cable" service.

The immediate result is that the majority of cities that charge cable operators a 5 percent franchise fee on all cable-related revenue must now exempt cable-modem income from the tax. About 7.2 million households have cable-modem service.

Spokespeople for the USA's big cable companies — AT&T Broadband, Comcast, AOL Time Warner and Cox Communications — all said they would pass those savings to consumers. Most list franchise fees as a separate item on the bill.

"If there were no franchise fee, it would simply come off the bill," says Time Warner Cable spokesman Michael Luftman.

Monthly savings would range from $ 1.50 for a customer paying $ 30, to $ 3 for the high-end cable-modem household with a $ 60 tab.

Some cable companies in Western states — including California, Washington, Oregon and Arizona — already had eliminated the fee under a 2000 court ruling in that region that similarly labeled cable broadband a non-cable service.

The FCC must still determine whether cities owe cable companies, and in turn consumers, rebates for fees already paid.

Joseph Van Eaton, a lawyer for several cities, says governments need the franchise fees to defray the costs of maintaining cable-modem equipment on their rights-of-way. "This decision further erodes the ability of communities to get compensated fairly," he says.

The ruling is also expected to prompt an FCC decision later this year that would continue to free cable titans from mandates to open their networks to rival ISPs.

The FCC "has struck a deadly blow to the future health of the Internet," says Jeff Chester of Center for Digital Democracy.

The cable giants say they have voluntarily struck deals with one or two competing ISPs because it's good business. And Time Warner is giving access to several ISPs as a condition of its merger with AOL.

"That's not real competition," Chester says.

The regional Bells must open their DSL, or digital subscriber lines, to rivals. But analysts expect the FCC to ease those rules, too.