As anyone unfortunate to be delinquent in their monthly cable bill knows, if you fail to pay that bill, the cable company will suspend your service. The City of Los Angeles claims that Time Warner Cable Co. owes millions of dollars in unpaid franchise fees, charged by the City. On March 14, 2014, the City sued Time Warner for just under $10 million seeking to recover those fees. While the cable company can use disruption of service to induce customers to become current on their cable or satellite accounts, the City has no such recourse; instead it must resort to a lawsuit to gain such recompense.
The City noted in the suit that Time Warner collects about a half billion dollars from Los Angeles customers every year. Los Angeles possesses legal authority to charge cable companies franchise fees of 5% of a cable operators’ gross revenues, in lieu of rent for the public right-of-way to install and maintain the company’s wires and cable boxes. It can also charge fees for public, educational and governmental channels. According to the LA Times, the City has been in negotiations with Time Warner for years and the Company both in 2008 and 2011 withheld approximately $5 million in fees while reducing some of its arrearage. Now the City Attorney Michael Feuer says the City had no choice but to file suit as these negotiations have failed to resolve the matter.
While Time Warner criticizes the city for suing a company which creates many jobs in the metropolitan area, the City of Los Angeles may have decided to proceed with litigation for two major reasons. Time Warner has recently hiked its rates to those subscribers who are not taking part in a new promotional package by about 6%. Furthermore, the company now is seeking to charge other cable and satellite providers in the area higher fees for their right to show certain content to which Time Warner has exclusive rights including Dodger baseball games which, for the first time, will no longer be regularly available via a local television channel.
It appears the City cannot just suspend Time Warner’s access to provide cable service to its residents. Even if it could, that would hardly be a politically palatable move. But it does have the right to seek redress in the judicial system. It will be interesting to see how fast that gets Time Warner to now pay its bill.
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