Franchise fee isn’t surcharge or tax and is owed by cable operato...

allowing operators to pass through to subscribers franchise fees on non-subscriber-related revenue (CD Oct 5 p8). Franchise fee is expense and part of operator’s cost of doing business, they said. Contending cable industry was increasing rates based on FCC order, cities said customers could be overcharged $100 million annually if practice were allowed to continue. FCC order gives cable operator discretion to cross-subsidize its ad and home shopping business through itemized surcharge on subscriber’s bill, it said, and order “simply ignores” plain meaning of statute. “The more successful the advertising and home shopping business, the more ordinary subscribers must pay, and the greater the cross-subsidy,” petitioners said. Such cross- subsidy is inconsistent with congressionally mandated market approach to rates and allocation requirements, they said. Commission acknowledges “perverse” effect of its order that the more cable system can support itself through nonsubscriber revenue, the more subscribers must pay, petitioners said. FCC order also concedes that line itemization on subscriber bills now will be “inaccurate,” cities said: “There is no relationship between the amount of the subscriber bill and the amount an operator owes as a franchise fee on nonsubscriber revenue. It appears that operators intend to go through an imprecise process of estimating nonsubscriber revenues.” Commission also hasn’t set mechanism for calculating amount of passthrough of nonsubscriber franchise fees on subscriber bills, coalition said.