A recent ruling by the Federal Communications Commission will save local cable customers with a cable modem $2.25 a month — but will cost the city of Cincinnati about $200,000 a year.

        The ruling defines cable modem services as an “interstate information service,” rather than a “cable service.”

        That seemingly minor definitional change makes cable modems exempt from local franchise fees, cable companies say.

        Time Warner Cable stopped billing customers for the franchise fee April 22.

        The city of Cincinnati, which imposes a 5 percent tax on cable services in the city, collected $135,000 in taxes on cable modems last year. The service is growing so quickly, the city's projecting that income to grow to $200,000 this year.

        The city's lawyers say the franchise fees are governed not by the FCC, but by the local franchise agreement, which expires in 2011.

        Time Warner's decision to stop withholding taxes from cable modem customers is a breach of contract, said Assistant City Solicitor James S. Ginocchio.

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