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David Seykora/William Wright Notice of Franchise Violations December 12, 2002 Page 2. As you can see, the definition of gross revenues includes all revenue on cable modem service fees /Internet access fees. AT &T Broadband is, therefore, clearly required by the franchise ordinances to pay franchise fees on the gross revenues derived from the provision of cable modem service /Internet access. It is important to note that the obligation to pay franchise fees on cable modem service /Internet access revenues is not dependent on how the Federal Communications Commission or federal law defines cable modem service. AT &T Broadband has failed to pay franchise fees to the Member Cities on cable modem service /Internet access revenues for the second and third quarters of 2002. This failure to pay franchise fees is a violation of the individual franchises with the Member Cities. Therefore, you are hereby notified that the Commission, on behalf of its Member Cities, has found AT &T Broadband in violation of the Member Cities' franchises, as outlined herein. This letter serves as official written notification that AT &T Broadband is in violation of those franchise provisions requiring the payment of franchise fees on cable modem service /Internet access revenues. In addition, Section 8.5.a of the Member Cities' franchises requires AT &T Broadband to file a complete gross revenues report with the Member Cities at the time franchise fees are paid. As discussed above, "gross revenues" include cable modem service fees and Internet access fees. Because AT &T Broadband has unilaterally determined that it is no longer required to pay franchise fees on cable modem service revenues, it did not include cable modem service fees and Internet access fees in its quarterly gross revenues reports for the second and third quarters of 2002. The failure to include revenues derived from cable modem service fees and Internet access fees in the requisite gross revenues reports is a violation of the individual franchises with the Member Cities. Therefore, you are hereby notified that the Commission, on behalf of its Member Cities, has found that AT &T Broadband is in violation of the Member Cities' franchise ordinances, as outlined herein. This letter serves as official written notification that AT &T Broadband is in violation of § 8.5.a of the franchises. Under the terms of the franchise ordinances, AT &T Broadband has thirty (30) calendar days from the above date to permanently cure the outstanding franchise violations specified in this notice. The Commission believes AT &T Broadband's failure in past quarters to comply fully with the franchise fee requirement may only be cured by a full accounting of monies owed and the payment of amounts properly due under the franchise ordinances. AT &T Broadband's failure to comply with the franchises' gross revenue reporting requirement can be rectified by submitting reports that detail all cable modem service /Internet access revenues that were received (directly or indirectly) during the second and third quarters of 2002. A report describing (i) the specific steps AT &T Broadband has taken to bring itself into compliance for the second and third quarters of 2002 and (ii) the specific steps the company will take to ensure that it will be in