Re: WATPA: Taxing the Internet, Quietly

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From: DDeBar (
Date: Tue Jun 27 2000 - 16:57:43 EDT

The thing is, the municipalities do have a point, in that the CATV wire is
strung over their real estate, i.e., the public rights-of-way. It isn't
much of a leap to argue that a "larger and deeper" use of the original
grant, i.e., transmission of internet and/or telephone servies, may not be
appurtenant to said grant.

I'd be interested in seeing the granting language and the Schedule "A" in a
"standard" agreement (to the extent a standard agreement exists - many of
the franchise agreements in this area have hold-over elements of the
previous period of balkanized industry).

Also, consider that, given the approvals that are required for the coming
transfer of Media One franchises to Cablevision, it is possible now,
perhaps, to deal with the issue in a way more favorable to the

> From: YTdave@AOL.COM
> To:
> Subject: WATPA: Taxing the Internet, Quietly
> Date: Tuesday, June 27, 2000 4:36 PM
> I think one of the biggest "sleeper" issues of the recent Internet wars
> been localities taxing the Internet . . . with nobody protesting and none
> those mass e mails "to the ramparts."
> The Internet is being taxed right now, by many municipalities under the
> so-called "Franchise Fee," which by federal law is limited to 5% of the
> operator's gross revenues generated within the municipality. So cable
> companies, such as Time Warner / Adelphia, have been paying the fees
based in
> Internet access, without too much fuss. They just figure it's a cost of
> doing business, and the price of getting a quick contract.
> Locally, Cablevision refuses to pay franchise fees based on Internet
> Since they are rolling out their Cable Modems in Westchester this month
> megabits per second), they expect to make big bucks on Internet.
> more than on cable video programming.
> Which raises the question, should localities tax the Internet, by
> on a Franchise Fee based not only on traditional video but also Internet
> revenues? My own opinion is no. I would prefer to see the technology
> flourish and evolve as quickly as possible. Taxing something isn't
> the best way to encourage it to be provided on a widespread basis.
> Local politicians, however, often see the additional revenues -- which
> easily amount to $100,000 per year for a town of 20,000 people -- as a
> way to generate "non-tax revenues." That means bring money into the
> government without raising taxes.
> Problem is, every dollar of the Franchise Fee is passed on to the
> by federal law. Just look at your cable bill, and the little line item
> "franchise fee."
> Legally, the issue has been in doubt for years. The law says franchise
> may be collected on "cable services," but not "telecommunications." But
> the heck is the Internet? Who';s the famous judge who said he couldn't
> define it, but he knew it when he saw it...
> On June 22, 2000, the US Court of Appeals for the Ninth Circuit, in ATT
v. Cit
> y of Portland, answered the legal question. Local government cannot
> franchise fees on Internet, since it is not a "cable service." I'll bet
> money, that case is going to the Supremes, and fast.
> Any comments?
> Dave Wright

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