Opinion ID: 2048638
Heading Depth: 3
Heading Rank: 2

Heading: Franchise Renewal Agreement Provisions

Text: In its complaint, the City alleges that the defendants violated section 4.1 of the franchise renewal agreement, entitled Franchise Fee. That section states: [p]ursuant to Section 4-280-170(A) and (B) of the Cable Ordinance, the [franchisee] shall pay to the City a franchise fee of five percent (5%) of the annual gross revenues received by the [franchisee] during the period of its operation under this Agreement. (Emphasis added.) This language expressly requires the franchisee to pay a single franchise fee of 5% of its yearly gross revenues. The agreement does not, however, define the key phrase gross revenues. Instead, it states that all terms, phrases, words or their derivations shall be defined as set forth in Section 4-280-030 of the Cable Ordinance whenever possible, [u]nless the context clearly indicates that a different meaning is intended. In the Chicago Cable Communications Ordinance, section 4-280-030(N) defines [g]ross revenues as revenue derived directly or indirectly from the operation or use of all or part of a cable television system    including, but not limited to, revenue from regular subscriber service fees, [and] auxiliary service fees.  (Emphasis added.) Chicago Municipal Code § 4-280-030(N) (2001). `Regular subscriber service' means the distribution to subscribers of signals over the cable television system on all channels except    those intended for reception by equipment other than a television broadcast receiver.  (Emphasis added.) Chicago Municipal Code § 4-280-030(T) (2001). Because cable modem service is not intended to be received by a television broadcast receiver, it is not a regular subscriber service, and the parties do not argue that it falls within that category. Accordingly, fees from cable modem service are not regular subscriber service revenues included in the franchisee's annual gross revenues used to calculate its section 4.1 franchise fees. Section 4-280-030(N)'s definition of [g]ross revenues, however, also includes revenue from auxiliary services. Chicago Municipal Code § 4-280-030(N) (2001). Section 4-280-030(A) of the Cable Ordinance defines [a]uxiliary services as: any communications services in addition to `regular subscriber services' including, but not limited to    data or other electronic transmission services,    home shopping services, interactive two-way services and any other service utilizing any facility or equipment of a cable television system operating pursuant to a franchise granted under this chapter. (Emphasis added.) Chicago Municipal Code § 4-280-030(A) (2001). Applying this definition, cable modem service revenues would constitute auxiliary service fees because cable modem service falls within the Cable Ordinance's broad classification of an auxiliary service as any other service using any cable system facilities or equipment. Thus, under the terms of the parties' agreement and the Cable Ordinance, revenue from cable modem services is included in the annual gross revenues used to calculate the franchise fees due under section 4.1. Two other Cable Ordinance provisions are also relevant to this dispute. The agreement provides that [t]he terms and conditions set forth in    Section 4 are pursuant to the terms and conditions set forth in Sections 4-280-050(C) and 4-280-170 of the Cable Ordinance. Section 4-280-050(C) discusses the required fees in the franchise approval process and therefore is not relevant to the issues presented in this appeal. Chicago Municipal Code § 4-280-050(C) (2001). Section 4-280-170 is relevant, however, because its paragraph A mandates that a franchisee pay to the city a franchise fee of not less than five percent of its annual gross revenues during the period of its operation under the franchise. (Emphasis added.) Chicago Municipal Code § 4-280-170(A) (1993). Thus, both the language of section 4.1 and section 4-280-170(A) of the Cable Ordinance authorizes the imposition of a 5% single franchise fee. Section 4 then specifies the details of that one franchise fee. Notably, the agreement expressly states all terms and conditions in both section 4 and section 4-280-170 are to be understood as interpreted and applied in accordance with Section 542 of the Communications Act. Therefore, we next examine section 542 and its interaction with section 4 of the parties' agreement.