Copyright 2002 Journal Sentinel Inc.  
Milwaukee Journal Sentinel (Wisconsin)
April 18, 2002 Thursday FINAL EDITION 
Correction Appended
SECTION: BUSINESS; Pg. 03D

LENGTH: 696 words

HEADLINE: Ruling on cable modems could cost local governments millions

BYLINE: ANNYSA JOHNSON of the Journal Sentinel staff

BODY:
A ruling by the Federal Communications Commission that changes the way it defines cable modems has unleashed a torrent of criticism from a broad spectrum of interests in Wisconsin and the nation.

From local governments that stand to lose millions in franchise fees to Internet advocates worried about the future of the medium, critics are lining up to be heard in a debate that might make its way to the U.S. Supreme Court.

After years of discussion, the FCC issued a ruling in March redefining cable modems -- the high-speed technology that connects cable customers to the Internet -- as an "information service" rather than a cable or telecommunications service.

As part of that ruling, it began soliciting public comment on a number of related questions.

But the move, essentially de-regulating cable modem service, carries far-reaching implications for consumers and competitors, industry observers say.

"This essentially takes cable modem service and puts it into an area that nobody regulates," said Barry Orton, a telecommunications professor at the University of Wisconsin-Madison and a consultant to local governments on telecommunications issues.

"And that's a problem for consumers because it means they have nowhere to go for recourse," he said.

Communities to take a hit

At the national level, consumer groups and two competitors have appealed the FCC ruling in a case now before the 9th Circuit Court of Appeals in San Francisco.

That could take years to resolve, but in the meantime, local governments will feel the pinch.

Time Warner Cable, which serves residents in southeastern Wisconsin and the Green Bay area, has notified municipalities that it will no longer collect from customers and pass along to municipalities franchise fees based on its Road Runner high-speed Internet service.

Mark Harrad, a spokesman for the $1.4 billion provider based in Stamford, Conn., called the decision positive for consumers, saying they should see their bills drop accordingly.

But Wisconsin municipalities, already bracing for massive state funding cuts, say it will be difficult to weather.

Milwaukee alone stands to lose $345,000 in 2003 and millions over the next decade as demand for cable-based Internet service grows, City Clerk Ron Leonhardt said.

Brookfield would lose about $24,000 over the next year, Wauwatosa $30,000 -- some of that already budgeted for the current year, officials in those cities said.

Brookfield has registered a complaint with the FCC and has asked Time Warner to maintain its records during the appeals process in a way that will let cities collect what they're due should the courts set aside the federal agency's ruling, City Clerk Chris Schmidt said.

Lack of competition

Though the loss of revenue is significant, particularly as high-speed Internet use spreads, that's hardly the most important issue, critics said.

"The money is important. But the real issue here is the lack of competition," said Bob Chernow, chairman of the Regional Telecommunications Commission, which represents 28 communities in southeastern Wisconsin.

"And we've seen what happens when there's no competition in an area," he said.

In its statement announcing the ruling, the FCC said the decision would promote the spread of "broadband," or high-speed Internet services.

But opponents say the ruling will do just the opposite.

By declaring cable modems an information service, they say, the FCC exempts cable companies from the open-access requirements that force telecommunication providers to open their platforms to competitors.

That, they say, gives cable companies an unfair advantage over telephone companies and small Internet service providers that offer similar services, and strengthens their ability to control Internet access and content.

"Without non-discriminatory open access, cable operators retain the legal right to censor messages, to limit the size and nature of files . . . and to favor content provided by their commercial partners and preferred vendors," Andrew Jay Schwartzman, president of the Washington-based Media Access Project, said in a statement.



CORRECTION-DATE: April 20, 2002

CORRECTION:
Because of incorrect information supplied by Time Warner Cable, the company's annual revenue for 2001 was misstated Thursday in the Business section. The revenue for 2001 was $7 billion, not $1.4 billion.



LOAD-DATE: April 21, 2002