The Breakdown

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LA sues Time Warner Cable for $9.7M over franchise fees

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The City of Los Angeles is suing Time Warner Cable for about $9.7 million, claiming the company withheld years of franchise fees.
The suit, filed Friday, contends that Time Warner holds a virtual monopoly on cable TV service in Los Angeles and has made billions of dollars while refusing to pay the city what it owes in fees from 2008 to 2011.

"We have to stand up for the taxpayers of Los Angeles and demand that Time Warner provide the to the taxpayers of Los Angeles the money that they owe for the privilege of having an extremely lucrative mutibillion-dollar franchise here in the city," Los Angeles City Attorney Mike Feuer said at a news conference Friday in City Hall.

In the case of Time Warner Cable, a franchise fee is like rent, not paid for a building, but for the use of city infrastructure like streets and telephone poles for its cables and boxes.  Before 2008, Los Angeles had no problem collecting those fees from Time Warner Cable as well requiring the company to support public, educational and governmental (PEG) programming by operating public access  studios.  But in 2008, a state law took effect that moved California to a state-wide  cable franchising system from a local system and required Time Warner Cable to pay new PEG fee. 

Feuer says in 2011, Time Warner Cable paid "a portion" of the PEG fees it owed the city, but then subtracted the same amount from what it paid in franchise fees. 

"They protested that since they’d been providing previous services to the City of Los Angeles, those had value, the value was at least the amount of money that they were shorting the city in franchise fees and they weren’t going to pay it," Feuer said. 

Los Angeles-based franchise attorney Al Mohajerian says franchise fees are common ways that cities generate revenues.  He compares them to what a driver might pay to park a car in a lot.

"Here they are saying the same thing: you come to our town, you use our poles, you use our roads, you know, we need to keep an eye on you, that costs money, and we decide to bill you for it," Mohajerian said.

RELATED: Comcast to buy Time Warner Cable for $45 billion

The lawsuit says the money is insignificant to Time Warner but important to the city budget, helping to fund police and fire protection, parks, sanitation and other services.

In a statement, Time Warner Cable says it has behaved as a good corporate citizen, and  disappointed by the lawsuit and believes it's without merit.

The lawsuit comes at a time when Time Warner Cable is facing down other pay TV provider over how much they'll pay to carry its new Los Angeles Dodgers channel. Feuer said the matters are unrelated and that the city has been trying to resolve the franchise fee issue out of court for years, since before he became City Attorney. 

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