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Ms. Coralie A. Wilson January 10, 2003 Page 2 • 5%: The Notice is, in effect, asking that we rescind that decrease, which would mean higher prices for all cable modem service customers. Moreover, unless the pending challenges to the Declaratory Rulinq are successful, the fees the Notice seeks to assess will remain unlawful,. resulting in the amounts charged to subscribers being changed-yet again and,- quite likely, the member cities having to refund the amounts of such fees. Given these consequences, we do not see how subscriber interests are served by the Notice. . OTHER PENDING ACTIONS As you know, there are two federal court actions already addressing the matters raised in the Notice. In the 9th Circuit Court of Appeals, local governments have challenged the Declaratory Ruling regarding the status of cable modem services and seek to have it overturned. In the 7th Circuit Court of Appeals, local governments have challenged the applicability of the Declaratory Rulinq to language in private franchises that would otherwise require the payment of franchise fees on cable modem services. Given the likelihood that these actions will dispose. of the issues raised in the Notice, and the overwhelming subscriber confusion that would result from any interim increase in the amounts charged to subscribers, we feel the public interest would be far better served if the status - quo were maintained at least until the conclusion of these court proceedings. In any event, we would .welcome the opportunity to discuss this matter and its • impact on subscribers outside the context of a violation proceeding. FRANCHISEE ACTED AS REQUIRED As demonstrated below, our decision to cease paying franchise fees on cable modem services was compelled by federal law and the Franchise.. The bases for this conclusion. are summarized as follows: ^ The FCC's Declaratory Ruling that. cable modem services are interstate information services and not cable services is conclusive and binding on the Franchisee, the Commission and its member cities. Section 622 of the Communications Act flatly prohibits the assessment of franchise fees on anything other than cable services. Under the express terms of the _ Communications Act, Section 622., preempts any contrary Franchise language and cannot be waived by the Franchisee. ^ In the Franchise negotiated between the Franchisee and member cities .(through the Commission), the parties expressly provided that all franchise fee payments shall conform to the payments permitted under federal law. Under the Franchise, the parties further agreed that both the City and the Franchisee .must conform their performance to the requisites of federal law as it becomes effective. Thus, even if the Declaratory Rulinq and Section • 622 did not control over the Franchise language by virtue of preemption, our Franchise negotiated in the North Suburbs would still re uire that