City of Chicago v. Comcast Cable Holdings, L.L.C.

Summary

The Illinois Supreme Court held that federal law preempted Chicago franchise-agreement provisions requiring cable operators to include cable modem service revenues in calculating a 5% franchise fee. The court concluded that section 542 of the Communications Act, as interpreted by the FCC, excluded cable modem revenues from the franchise-fee calculation and rejected the City's home-rule and savings-clause arguments. The court reversed the appellate court and affirmed dismissal of the City's complaint.

Holdings

1. Section 542(b), as interpreted by the FCC in its 2002 ruling, preempts the portion of the parties' franchise agreement that includes cable modem service revenues in calculating Chicago's five-percent franchise fee.
2. Chicago had no authority, home-rule or otherwise, to require payment of a five-percent fee on cable modem service revenues because the agreement contained no separate provision authorizing that fee and expressly required interpretation consistent with section 542.

Questions Presented

1. Whether section 542(b) of the Communications Act preempts the portion of Chicago's contractual franchise-fee provision that includes cable modem service revenues in the five-percent fee calculation.
2. Whether Chicago could impose the disputed fee under its independent state-law home-rule authority despite federal preemption and the absence of a separate contractual provision authorizing a fee on cable modem revenues.
3. Whether the Communications Act's savings clause in section 541(d)(2) preserved Chicago's authority to impose the disputed fee.

Disposition

reversed