Counties face loss of millions in revenue

Cable giant to halt modem franchise fee

April 05, 2002|By Larry Carson | Larry Carson,SUN STAFF

A preliminary decision by federal regulators on cable modem franchise fees could deny local governments millions of dollars in revenue that was used to pay for schools, trash collection and other services.

Comcast, the cable giant that serves 800,000 customers in Maryland, told county governments recently that it will no longer collect franchise fees from cable modem customers after a March 14 announcement by the Federal Communications Commission.

The FCC said the fees were meant to be collected on cable television service, not on information utilities such as cable Internet connections.

The move would deny badly needed revenue to six of Maryland's largest jurisdictions - Anne Arundel, Baltimore, Harford, Howard, Montgomery and Prince George's counties - as they struggle to cope with the recession and prepare their budgets for next year. Baltimore City, which has yet to receive high-speed cable modem service, is not affected by the action.

Baltimore County would lose more than $800,000 in revenue next year, and Howard would be out more than $500,000, officials said.

Montgomery collects about $400,000 now, but the service was expected to be worth $1 million in franchise fees in a few years, said Jane Lawton, the county's cable television administrator.

John Lyons, Anne Arundel's cable administrator, said Comcast's move will cost the county $132,000. Anne Arundel will also lose $153,000 from the county's other cable company, Millennium Digital Media, which has also decided not to collect the fees, a spokesman said.

"That money goes to schools, so it's [money] we'll have to get somewhere else," said Lyons, who said the county will contest the action before the FCC.

"We're looking at a maintenance budget," said Alonza Williams, a spokesman for Baltimore County Executive C.A. Dutch Ruppersberger. "Revenues are tight."

Comcast says its move will benefit consumers.

"I'm sure our customers will be thrilled. They'll be paying less," said Kirstie Durr, a Comcast spokeswoman. The company, which won't disclose how many modem customers it has in Maryland, charges $39.95 a month for the high-speed service plus a monthly franchise fee of $2.09.

"We are proceeding as our attorneys have told us to," Durr said.

Mark Cooper, director of research for the Consumer Federation of America, was skeptical.

"Clearly, we'd like the bill to go down, but we actually think $40 a month is an outrage anyway," he said.

The FCC announcement stated that "cable modem service is ... an interstate information service" and "not a cable service." It noted that the franchise fees are based on cable service, which led to Comcast's decision to stop collecting the fees for modem hookups.

But FCC spokeswoman Michelle Russo said that the cable franchise fee issue is "one question under review" and that a final decision has not been made.

Mark Smith, a spokesman for the National Cable and Telecommunications Association, said his Washington-based trade group "has advised members that unless they have some type of previous arrangement, there are serious liability issues if they continue to collect franchise fees on a system that is not a cable service."

Thomas J. Peddicord Jr., Baltimore County's cable administrator, challenged Comcast's action.

"They have contractually agreed with us to pay this," said Peddicord, who is also the County Council's secretary. "We anticipated this. They agreed that gross revenue would include cable modem services."

The county will press for payment, he said.

Harford officials said they were unsure how much Comcast's move will cost them or what action they might take. County Treasurer Jim Jewell said the county collected $842,000 in total cable franchise fees last year.

Carroll County, the only jurisdiction in the Baltimore metropolitan area not served by Comcast, collected $400,000 in total cable fees from Adelphia Cable. Adelphia could not be reached yesterday for comment about its plans for the franchise fees.

In Howard County, severe revenue shortfalls have been a concern to officials for months.

"We're obviously working to save money," said Howard Budget Director Raymond S. Wacks, noting that the county is looking at an $18 million shortfall in the current fiscal year.

In addition to concerns about lost revenue, local officials say that if the service isn't covered by franchises, cable modem customers will be without county government protection if anything goes wrong.

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