next on our call this morning our cases agenda number sixteen cases number one zero five three four two one zero five three four eight one zero five three four nine consolidated the city of chicago versus wide open west illinois at all speak today also on behalf of our c n n and wide open west the circuit court judge in this case got it absolutely correct he said i cannot read either section five forty two or the f c c ruling other than as clearly stating the franchise fees are allowable only to the extent but they do not exceed five percent of gross revenue derived from cable service which means excluding any component of that relevant of that revenue that is imposed upon cable and subscribers and as a matter of fact to have passed legislation and rules which are designed to ensure the growth and spread of the internet legislation placed a five percent cap on gross revenues from the operation of the cable system it reads as follows for any twelve month period the franchise fees paid by a cable operator a defined term with respect to any cable system another defined term shall not exceed five percent of such cable operators gross revenues derived in such period from the operation of the cable system four words meant that french franchise fees are excluded from revenue from cable modem service and that was made clear on march fifteenth two thousand two when the f c c issued a declaratory ruling saying that cable modem service is properly classified as an internet interstate information service not as a cable service and then when under say given that we were found cable modem service to be an information service revenue from cable modem service would not be included in the calculation of gross revenues from which the franchise ceiling is determined that ruling has been upheld by the us supreme court in national cable and telecommunications association where says brand x internet service and finally on march fifth two thousand and seven two years after the circuit court's ruling in this case the f c c sad we clarify that a cable operator is not required to pay franchise fees and revenues from nine cable services the circuit court judge certainly anticipated that and certainly had the act's the act of congress and a prior f c c ruling when he  communications act and from the f c c interpretation the f c c issued this order in order to remove any uncertainty if  provide any wiggle room for this court of the fine but it's unclear on the contrary for reasons we have provided in our place and i hope to be able to supply today i hope to convince the court that there is no lack of clarity here and one of the bases for the clear showing of no lack of clarity is the the rulings of all of the federal courts in this country better ruled on this precise issue at the time the circuit court issued its ruling there were a total of four federal district court judges who had issued rulings consistent with what the circuit court issued in this case the this very case judge corps and the federal district court for the northern district of illinois had issued the first ruling right on point consistent with what the circuit court judge did in regard to this case involving the city chicago subsequent cases involved jefferson parish louisiana city of rochester city of minneapolis all those federal district court judges faced essentially with the same issues confronting this court ruled in similar fashion we had  circuit court of appeals in liberty cablevision of puerto rico versus the municipality of congress the first circuit court of appeals decision which  case it was a right of way feet and finally the case that we submitted to your honor's just recently handed down and sure i first eight city of cincinnati versus time warner cable and a from the southern district of ohio a western division and again consistent in that court by the way was well aware of the appellate court holding cited it and notwithstanding that properly ruled cable modem service is based on state law authority and thus not subject to the cable communications act but neither the statute nor the agreements the city rise upon in this case separates out cable modem service from cable systems which is the key phrase in five forty two and if it did if it did do so the explicit preemption language in the communications act found at fide section five fifty seven addresses the very argument the city makes them language is any provision of the law of any state political subdivision agency there  franchise authority all of those terms capture with the city of chicago was in this case where any vision of any franchise granted by such authority which is inconsistent with this chapter shall be deemed to be preempted and superseded in view of that language i find it impossible to understand how the city can insist that the fees  seeks to impose in this case which they claim are based on state law for the home rule with already if you will is not preempted by the communications of the term franchise fee found in section five forty two g one the target and that is simply this the term franchise fee includes cable operator cable subscriber both slowly be cause of their status as such every word of that definition is important i'll speak to them in a little bit more depth the cable operator one of the words defined in five section five fifty t five the term cable operator means any person or group of persons eight who provides cable service over a cable system and directly or through one or more affiliates owns a significant interest in such cable system or b who otherwise controls or is responsible for through any arrangement the management and operation of such a cable system the city wants to ignore or be but under either definition any or b the defendants in this case qualify as cable operators and it's upon cable operators that the that the  franchise fit feet is in polls because of their status as cable operators but the city does is it alters the definitions i've just provided this court the city distorts the definition of franchise fee in section five forty two g one instead of any feat of any kind imposed by a franchising opposing our effort to have this court consider the city of cincinnati the most recent federal district court case and page nineteen of its brief this is what the city road to this case section five forty two speak cap applies only to fees in only to feed these impose soley because a company provides cable services and limits those fees to five percent of gross revenues derived from such cable services those words solely because in the definition that i read to your honor which refers solely because the franchise he is a copy of a cable operator now becomes soley because a company provides cable services and then in the next pearl raff here's what the city says the feed young robin used to ride from cut cable modem service is not imposed solely because these entities provide cable services instead so as a city it is imposed because these entities provide cable service if they offer cable modem service perverse the land which they did always from the fact that that these fees are imposed on cable operators because of their status as cable operators and they preferred  o they substitute for cable operators the provision of cable services that's not what the statute says it's plain and quit it's simple it's clear one of the city's principal arguments is a section five forty two b petain only two franchise fees for cable services the city argues that because cable modem service is not a cable service section five forty two b has nothing to do with franchise fees for cable modem service but that argument directly conflicts with the specific language of section five forty two b the franchise fees provided by section five forty two b represent a percentage of gross revenue quote didn't rise from the operation of the cable system defendants all the defendants here comcast r c n wide open west provide cable service to their customers through verkaik bull systems just as the statute requires therefore to the extent the city charges fees related to defendants cable modem cable modem service those fees are to use the language of the statute imposed with respect to the defendant's cable system for your honour's it says this nothing in this subchapter shall be construed to affect the authority of any state to regulate any cable operator to the extent that such operator operator provides any communication service which of the phrase around are used other than cable service whether offered on a common carrier or a private contract basis my time is limited i'll make a few points concerns that first of all the statute refers to a state not a subdivision not the city of chicago not a political subdivision in five zero zero five forty one d three that is clear that the  refers the reader to the definition of state in section one fifty three that definition is simply this the term state includes the district of columbia columbia in the territories and possessions unlike many other provisions of the communications act including the explicit preemption provision that i called your honor's attention political subdivisions such as the complete your answer no there's a few other points to be made no no no the specific question about the question you take a minute do there i think you're if in fact section five forty one d forty two b there was absolutely no reason to do that so that that argument is bogus for all the reasons i give given the definition of state the  please the court donna solomon for the city of chicago this is a case of statutory construction to which both the state and federal courts agree language is the best guide the statute issue here section five forty two provides you've heard it before i'll quote some of it again the franchise fee paid by a cable operator with respect to a cable system so not exceed five percent of the cable operators gross revenues drive for operation of the cable system to provide cable services defendants agreed to pay and in fact for years did pay franchise fees on their revenues from cable modem services since the c is two thousand and two ruling that cable modem service is not a cable service defendants read section five forty two to preempt the franchise fee on cable modem s fee cap imposed by section five forty two on fees paid by a cable operator to provide cable service does not preempt the fifty on cable modem service which is an issue here franchise fee is a defined term in the statute we do not alter distort or prefer that definition we are very comfortable with the definition as  they are not persuasive at least in this case because none of them addresses the argument that we make none of them focuses on the definition of franchise faith as we do franchise fee is a defined term and i will walk the court with permission through our reading of the definition which is extremely faithful to the definition you can track what my argument against the language of the statute and there will be no perversion or distortion or anything else it's those cases there may be four or five of them depending on whether you count the one that's been vacated or not but they are absolutely not talismanic and they're not persuasive because none of them is on point and this court has the independent obligation to review even questions of federal law the court is well aware those decisions are not binding and we submit they are not even vaguely o it is not in the act your honor our authority to charge a franchise on cable modem service derives from state law and home rule farty in the lower courts the defendants challenge that authority they do not make that argument in this court they make exactly one argument and it's preemption under two statutes to be sure but that's the only argument they make there are a few stray phrases that crop up in the reply paid under the contract because they use the public ways of the city of chicago to conduct their business and to make a profit every business that uses the public ways to conduct its business and make a profit pays a franchise fee or some other compensation of some kind to the city of chicago we charge it pursuant to state law and home rule of thora to we entered into the contracts they agreed to the contracts they paid pursuant to the contracts until two thousand and two they read federal law now that the f c c has ruled that in five forty two the phrase cable services just not include cable modem service they read that to vi subject of other case whut have you cited a single case to this court that has has considered the presiding precise issue here in decided that the way that you are asking this court is other than the appellate court decision in this case right now ok it the to our knowledge and i thank the defendants do not agree for whatever reason the precise issue that we make has not been litigated someplace traditional television signals you know for a b c c b s right well it's a system not a signal and the service provided here to the franchise authority given to the city in addition to home roll assuming we need the franchise fee as any service using a cable television system and as i indicated the state law issues are gone from this case as the case comes to this court there is a preamp question and a preemption question on like you see it your position that federal law that i forty two has no application to the situation it is our position that five forty two does not preempt the city's ability to obtain a franchise fee on cable modem service we readily admit that that section has some preemptive effect with the city could the city impose a ten percent fee on cable modem service if we could get that through brought a bargain negotiation and the reason i say that is because you know this is not this was not  imposed unilaterally by the city of chicago this is a contract is bargain for on both sides the five percent fee reflects that the same percentage is taken from all across revenues we could not take percent on cable service revenues because that would actually conflict with an express feet cap in section five forty two to that extent that has preemptive refract to the extent of any conflict of course the city's authority would be preempted but because section five forty two does not address cable modem service at all and it and it doesn't it deals with cable service and the f c c itself says cable service does not include cable modem service so although some of the words are the same cable service does not include cable modem service and the fee cap does not preempt the section does have some preemptive effect but not on what is an issue in this case and that is because franchise fee is a defined term the franchise fee as defined by the cable act is a fee imposed on a cable operator soley because of its status as a cable operator the fee at issue here is not imposed so really because the defendants are cable operators it is imposed because in addition to being cable operators they also provide cable modem service we readily agree that they are cable operators under one or both sections of the definition that is not dispositive here we also agree that they provide cable modem service over the cable system but that is also not dispositive here the operative words in the definition is a fate imposed on a cable operator sole because of its status as a cable operator the defendants could be cable operators without offering cable modem service and they could offer a cable modem surface without being cable operators that is why we know the franchise fee and cable modem service is not imposed so leave because they are cable operators and for that reason turn it is not kept it is not even regulated by section five forty two defendants have made their position clear they read the feet cap on cable services to be a pro him bishan of even a penny on any other kind of revenue but they can't get there through the preemption doctrine is a disfavored doctrine comcast criticizes the appellate court for that statement but it is absolutely correct comcast provides no citation when it criticizes the appellate court for that statement and not just because the cases are it will particularly not be implied when the police power of state and local governments is an issue and that is true even where there is an express preemption provision we cite at least three cases in our brief in each of those the court first undertakes to determine the scope of the express preemption provision and then it determines whether there is preemption or not there's nothing magical about an express preemption provision in this case this is not even if you can call it an express preemption provision if it pleases you to call it that but what it says is that anything that is actually in conflict with the cable act will be preempted that kind of provision codified as the supremacy clause the act would have the same preemptive effect if that clause were not in it it doesn't actually help figure out what is preempted and what isn't the way to figure that out is by whether there is a conflict or not and for the reasons that i have given there is not a conflict the statutory language on which the defendants rely does not come close to meeting the high threshold necessary for implied preemption it does not express lane or imply a preempt a franchise fee on cable modem service it does not even mention cable modem service and as i indicated a minute ago the cable service to which it does refer does not include cable modem service this is not express preemption if there is preemption here it would be by silence and that is not permissible as the supreme court in ited states repeatedly reminds us the statute does cap the franchise from operation of the system to provide cable service but conflict preemption does not read that kind of a fee cap on some other kind of service to preempt a fee on a wholly different service namely cable modem service if congress had intended to preempt a fee and cable modem service it would have and indeed it needed to be considerably more explicit than this in fact in addition we cite in our brief four sections of the statute that make clear why this particular clause should not be read as preemptive i'm going to go through them extremely quickly and by section number which in general one never does because they are all in our brief but these are very quickly section five forty one d two which expressly preserves the power of any state to regulate to the extent that something other than cable is is being provided and answer to the question here we think the reason that that section refers to the word state not because it doesn't include local governments as well but to make clear that there's an intermediate step necessary before local governments could take advantage of the authority that is preserved in that section so in other words in many states and as in illinois the state regulates cable and other communication services by delegating it to local governments all congress wanted to make clear in that section is that if that state law authorities is not present section five forty two excuse me five forty one d two is not hundred six amendment says quote no implied preemption number three section five forty two age one again referring to cable or other communication communication services and finally section two fifty three see this provision was added at the same time as the ninety six amendment adding the words to provide cable service to section five forty two it provides that a reasonable compensation may be obtained from telecommunications that's why five forty two was was now road because at the same time that congress was amending five forty two to limit it to cable services it was adding to title two to require a fee on telecommunications services and that's all that congress had in mind internet services were not available at all or certainly not widely available the last time congress looked at the statute there is no statement by congress congress never even thought about cable modem service the f c c which has thought about cable modem service does not preempt the authority at issue here either first of all matter of interest law with all these references to federal communication there there is a reference in the cable ordinance to interpret ing they were ordinance and the definitions in accordance with the section five forty two again that simply cut a five's conflict preemption that means we cannot be inconsistent it does not say and we're going to go down walk step with the f c c sort of concept at number two thing we have independent regulatory authority under the state statute under home rule so reason to tire horse to that way and we did it just says we won't be inconsistent and it's not inconsistent because the federal statute doesn't address it so so we can do what we do and interpret it as we do as long as we're not inconsistent with the federal statute and i have attempted to provide the court a clear road map with how to get from here to there without being inconsistent the f c c rulings actually deal they're very very lengthy and but they do deal with a different issue whether cable modem service should be regulated as either a cable service or telecommunications c said no to both instead cable modem should be regulated as as an information service that means it's under title one of the communications act it is absolutely a communication service it is just not a cable service or a telecommunications service in closing i want to stress only one thing the parties have been at this a very long time and it may seem like inside baseball but there is a very easy way to resolve the issue here and the answer lies in the requirements of preemption it requires as i indicated at the onset a clear and manifest intent we think it is clear and clear in our favor that there is no conflict if the court's is uncertain that however ties go to the party urging no preemption implied preemption cannot be done on the considering this to be even close we have expressed preemption i've read it to a preps more forcibly than the needed to be done which takes into just respond to a couple of things that consul said she said in addition to being cable operators they these cable operators provided cable modem service and that's why we are justified in imposing a franchise fee but the the direct response to that statement is that under the statute under five forty two b the reason they can impose a franchise fee on cable operators is because of their status as cable operators not because they're providing modem service because that's exactly what's preempted by five forty two and the proof of that is the reality that there are over internet providers communication telecommunications entities such as a t n t and others who provide d s l internet access those people are not subject to this they're not subject to the franchises  that the franchise fees that the city is seeking in this case why because the basis for obtaining franchise fees is because these defendants are cable operators and it's tied to their status as cable operators the same rule does not apply to the telecommunication companies so  fact that comcast and the others provide cable modem service is not as a city would have a sufficient justification to impose a franchise fee because the only justification is to do it against cable operators because of their status  the city would have you believe that there are numerous franchise franchises here there's only one franchise only one franchise and it's connected to cable to the provision of a cable system of which cable modem is one result cable services is another it's a system and again relying upon the the language of the of the relevant statute we're talking about the cable system so that there's only one provision for the franchise for the franchise fee the statutes state statutes that they rely upon don't separate out modem service the contract that they're relying upon does not separate out modem service these are franchise fees based upon provision of cable systems so you can look to the state statutes you can look to the contracts that they are endeavoring to invoke in their case their argument simply doesn't hold water if taken enough of your honors time but if you have any questions i'll be happy to try to redress it but just maybe follow up question about you take the position that if it's a cable service that's with the french is correct yes right and basically television programs are that's what you say as part of  watching a television program does that begin to muddy the water of what is a cable service i think it's clear what is a internet or a modem justice garmin asked about could a ten percent fee be imposed upon the provision of cable modem service and the answer is in  i know that the city says well if they'll agree to it but the answer is yes twenty percent of fifty percent fifty so one must question why did congress amend five forty two in the way it did to take cable modem service out they tell you that cable modem service is even addressed by five forty two b but the addition of those four words clearly product that's received or the load of how it's delivered it's a good question around the not sure i can answer it but i would think that the the latter would be the answer