CITY OF CHICAGO v. AT&T BROADBAND, INC. ET AL, NO. 02 C 7517 (2003)

The United States District Court for the Northern District of Illinois, Eastern Division 2003 U.S. Dist. LEXIS 15453 (No. 02 C 7517) (2003) granted the Defendant cable operators’ motion to dismiss, holding that 47 U.S.C. § 542 preempts city statutes requiring the Defendants to pay taxes on the revenue obtained from cable-modem service Pursuant to franchise agreements with the city of Chicago (the “City”), the Plaintiffs were required to pay 5% of their revenue generated from their services to Chicago residents, including cable modem services to the City. Subsequently, the Federal Communications Commission’s ruling excluded the cable modem services from the payment of fees based on the calculation of gross revenues, and Cable operators stopped paying tax to the City on those services . The City sued the cable operators demanding that they comply with franchise agreements entered into by and between the operators and the City and that were governed by local ordinances. The District Court held that Federal law preempted the local law.

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