ATLANTA--(BUSINESS WIRE)--Jan. 10, 2001--Cox Communications, Inc. (NYSE:COX) filed reply comments with the Federal Communications Commission today describing its decision to stop collecting and paying cable franchise fees on high-speed Internet access services in states affected by the Ninth Circuit Court of Appeals' ruling in the Portland case.
The filing will become part of the record in the FCC's inquiry concerning the classification of high-speed Internet access over cable and other broadband facilities.
In its comments, Cox said it stopped collecting cable franchise fees on high-speed data services from its subscribers this fall, following the Portland decision, which ruled that high-speed Internet access over cable is not a cable service. That decision was not appealed and is now final. Under federal law, Cox may not collect and pay cable franchise fees on services that are not defined as "cable services," within the meaning of Title VI of the Federal Communications Act.
The filing states, "In the wake of the court's ruling that two-way high-speed Internet access provided over a cable network is not a 'cable service,' Cox concluded--in good faith and after great deliberation--that it had no choice but to suspend its collection and payment of cable franchise fees on the revenues generated by its broadband data services in the Ninth Circuit states, pending further clarification of the classification issue by the FCC."
"However, Cox recognizes that this required change may have an adverse financial impact on some local franchising authorities, and it continues to engage in discussions with those local franchising authorities who have expressed concerns in hopes of reaching a mutually satisfactory resolution."
The filing continues, "Indeed, when Cox voluntarily began paying cable franchise fees on its cable modem services in 1997, it notified its local franchising authorities in writing that the regulatory classification of those services was subject to change, and that the payment of cable franchise fees on high-speed data service was also subject to change in the wake of a binding court decision or legislative or regulatory developments. Cox has numerous cable systems in California, Nevada, Arizona and Idaho that are governed by the Ninth Circuit's ruling. Those systems would be subjected to significant litigation risk if they were to continue collecting a cable franchise fee on high-speed data services."
Cox continues to collect and pay cable franchise fees on high-speed data services in every state except those in the Ninth Circuit, and on all cable services that have been deemed to be Title VI cable services, including traditional video programming services and its new digital cable offerings. These fees generated more than $52 million of revenue in the last year alone for local governments in the Ninth Circuit states served by Cox.
Today's FCC filing by Cox responds to recent statements by both the United States Telephone Association and the National Association of Telecommunications Officers and Advisors that Cox's actions in the wake of the Portland ruling are somehow inappropriate. Cox does not agree that the Portland decision requires compliance with Title II obligations when providing cable data services. The Portland decision holds only that high-speed data is not a cable service, and the court's discussion of the high-speed data service in that case as including a "telecommunications service" is neither binding on nor applicable to Cox. Far from "reasoning" that its cable data services are "telecommunications services," as USTA claims, Cox has vigorously-- and repeatedly--disputed such a conclusion.
"USTA's and NATOA's concerns are based on a misunderstanding of the relevant facts," said Alexander Netchvolodoff, Vice President of Public Policy for Cox. "They claim that Cox has concluded that cable data services are telecommunications services beyond the reach of local cable regulators; we have asserted no such thing. In fact, we believe that cable data services are properly classified as information services and/or cable services, but in no event do they qualify as telecommunications services or common carrier services."
NATOA and USTA also complain that Cox has failed to pay into the Universal Service Fund; has not obtained the necessary certificates required under Section 253; and has not interconnected nor made its facilities available to others under Section 251.
"None of these statements is true," Mr. Netchvolodoff said. "Cox's telephone subsidiaries have received all state and local authorizations needed to provide local telecommunications services, and comply with all obligations imposed on common carriers, including all interconnection requirements. Further, Cox pays a significant portion of the revenues generated by these telecommunications services into state and federal universal service funds."
In conclusion, the Cox filing notes that the Ninth Circuit recognized the authority of the FCC to determine the proper classification of high-speed data services, stating that the Court would not "impinge on its authority over these matters." The filing states, "Because the Commission may well conclude that cable modem services are not telecommunications services (or, even if they are, that they should not be subjected to telecommunications service regulation), it is premature at best to insist that Cox's provision of high-speed Internet access comply with Title II."
Cox Communications serves approximately 6.2 million customers nationwide, making it the nation's fifth largest cable television company. A full-service provider of telecommunications products, Cox offers an array of services, including Cox Cable; local and long distance telephone services under the Cox Digital Telephone brand; high-speed Internet access under the brands Cox@Home, Road Runner and Cox Express; advanced digital video programming services under the Cox Digital Cable brand; and commercial voice and data services via Cox Business Services. Cox is an investor in telecommunications companies including Sprint PCS and Excite@Home, as well as programming networks including Discovery Channel, The Learning Channel, Outdoor Life and Speedvision. More information about Cox Communications can be accessed on the Internet at www.cox.com.
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